Notes

The Benefits of 3PL Outsourcing

3PL is an abbreviation for "third-party logistics". The three-letter term, however, has come to mean more than just outsourcing. In actuality, it refers to a business that contracts with a third party to complete tasks that are outside the company's primary range of operation. An example would be a doctor who outsources lab work to a hospital lab. While this may be performed at a low cost to the doctor, the cost to the hospital is the main motivation for the contract.


Third-party logistics in supply chain management and logistics is the use of third-party vendors to fulfill aspects of a company's distribution, warehouse, and shipping functions. A prime example of a 3PL in the retail sector would be a furniture retailer that utilizes warehouse space to store large numbers of goods. While the furniture retailer may have its own in-house inventory, much of the work is performed by third-party logistics experts. Instead of renting or leasing warehouse space to store merchandise, they rent warehouse space on their own property. Another example would be a manufacturer that purchases raw materials from a supplier and then subcontracts tasks such as packaging and labelling to a third party.


The use of 3PL services is becoming more common in all types of industries. Freight forwarding and warehousing businesses are no exception. Warehouses are the heart of any type of logistics business because it is here that goods are stored until they can be transported to their destination. This "loading" of goods directly affects the supply chain. If there are delays in loading, production can be affected and the entire process can be slowed down.


Finding a successful 3PL provider for your warehousing needs requires a comprehensive analysis of what each individual part in your warehouse actually does. Some companies may focus on simply storing pallets of goods and do little else. Other companies handle all aspects of warehousing including picking, packing, shipping and receiving. Still others focus on just one aspect such as only shipping or only pick and pack. Knowing exactly which aspect of 3PL or logistics is your strongest area of specialization will help you determine the right provider for your needs.


Another important factor that you should take into consideration when selecting the right 3PL provider is their level of expertise. A good logistics expert should be experienced in all facets of the industry. They should be familiar with the type of consumer you have and understand how to best leverage that knowledge to optimize return on investment. The more experience that a 3PL has the easier it is to achieve cost savings because they will be able to apply the right techniques and models for reducing overhead costs and labor. Not every 3PL provider is a specialist and sometimes the best approach is to select a provider who can fill a variety of functions. Make sure that you not only understand how your particular 3PL functions but also that they are capable of handling additional functions such as order processing and fulfillment .


Once you've selected a few top providers, you'll want to carefully review their 3PL contract and verify that they're offering the services that you need at an affordable price. Most providers have several contract plans with existing clients and if yours are being outsourced to a third party logistics expert, you'll need to determine if their contract is flexible enough to meet your needs. As 3PL contracts are typically customized to the company's unique needs, be sure that you are discussing your needs openly with your 3PL provider. You may find that some aspects of your business require additional attention to detail. Be sure to address these issues so that your outsourced provider can take care of them.


One aspect of 3PL that can be especially useful for new markets or growing companies is digital asset management. In this scenario, 3PL providers act as digital asset managers that manage the entire supply chain from logistics to customer service. This way, customers are able to easily identify products and services by category, brand, or date. Because 3PLs often maintain close relationships with their clients, this capability can significantly cut down on the amount of time it takes the average customer to order from the warehouse. As a result, the customer experience is greatly enhanced.


Lastly, 3PLs are also invaluable in the transportation sector. In the automotive or trucking industry, an auto dealer may need to quickly dispatch cars to dealerships or vice versa, but shipping goods by hand is extremely inefficient. Trucking companies use 3PLs to keep tabs on their fleet of trucks, which often results in fewer lost pickup opportunities. At the same time, in the airline industry, 3PLs help with unloading of airplane passengers, as well as overseeing the transportation of baggage. These three areas all have the potential to save money and time, two factors that should be a part of every business strategy.

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