When third-party logistics is right for your business

What is third-party logistics?

Third-party logistics (3PL) are companies that offer outsourced logistics and supply chain management to other companies. 3PL companies can provide a single service like delivery or warehousing; or a complete service system.

Types of 3PL services

• Transportation: Mainly focus on delivering your product, locally or internationally.
• Warehousing: Store and manage your stocks
• Distribution: Allocate your stocked goods to customers
• Forwarder: Middlemen who connect their customers to the most suitable carrier provider
• Shipper/Management: Manage the shipping process from beginning to end, provide information, managing system, data and report for better control of logistics outcomes
• Financial: Handle all money-related issues such as freight payment and auditing, cost accounting and control, and inventory management
• Information: Provide industry insights, new technologies and advancements of the logistics landscape

 Advantages of using 3PL

• Cost & time saving: Specializing in logistics, 3PL is able to establish a network more extensive than your own company’s supply chain. Within the industry, they will be able to provide different options and negotiate better prices for clients. By using 3PL, you will save a lot on infrastructure investments.
• Expertise and experience: In the global market, it is difficult for a single company to max out its ability in all regions. 3PL can be an informative source regarding transportation procedures, international regulations, etc due to their expertise in the logistics industry. 
• Business growth: Not having to worry about logistics matters will give businesses more room to focus on their core competencies.
• Market expansion: 3PL can gain access to new markets for businesses without having to establish a local presence.
• Scalability & flexibility: 3PL can cater to any volumes or requirements upon customers’ request. Therefore, companies facing low and high seasons don’t have to worry about fixed logistics costs or unutilized resources.
• Increase customer satisfaction: a good 3PL service provider will make your customer satisfied by improved services, constant communication and timely delivery. 

Disadvantages

• Loss of control: Outsourcing all logistics tasks to a 3PL also means you have no control over your delivery status. When a problem arises, you won’t be notified immediately, yet you are still being held responsible by the customers. 
• Upfront costs: Hiring a 3PL definitely will benefit your business in the long run, but the initial cost might be costly for some business.
• Confidential information: When you cooperate with a 3PL firm, chances are you have to share some of your business information with them. If your company is highly private, you might have to reconsider letting a third party into the system.

->> See also: Shocking numbers from the logistics industry

When should you consider using 3PL

No longer burdened by the logistics aspect, you can wholly focus on growing your business. However, you should carefully examine these following questions:

• What is the maximum amount of order that you can fulfill in-house daily?
• Are you expecting a spike in order volume as a result of expanding the business?
• Are you running out of manpower and warehouse space?

Choosing the right 3PL provider

If you decide that 3PL is the right path to take, choosing a reliable provider is the next step. Does your business need logistics support from one or multiple segments? Which logistical responsibilities should be outsourced and which one should remain in-house? Decide on these factors, and then you can pick a 3PL that meet these requirements:

• Extensive logistics network
• Capacity to upscale operations if necessary
• Customizations according to client’s characteristics
• Good feedback from old or existing clients
• Strong financial health 

->> You might be interested in: Delivery continues to be a challenge for Southeast Asian E-commerce