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All About Third Party Logistics: The 3PL Facts You Need to Know

All About Third Party Logistics: The 3PL Facts You Need to Know

Posted by: makomako
Category: 3PL

The modern supply chain is complex and not an easy undertaking. Where one could offer end-to-end logistics before, now there is a need for a party between. This spawned the age of third party logistics.

At its core: 3PL lessens the weight and chaos of business growth.

You’ll learn what 3PL does, what it offers, its benefits, negatives, and more in this guide. You’ll also learn how to begin working with a 3PL company to make your supply chain management a walk in the park.

What is Third Party Logistics (3PL)?

Third-Party Logistics, or 3PL, are services made to ease the stress found in the supply chain. These services include everything from warehousing to fulfillment.

Let’s consider the forms of logistics:

  • 1PL – Your business delivers products directly to the consumer
  • 2PL – Your business relies on shipping providers to deliver products
  • 3PL – Your business uses a warehouse for storage, handling, and delivery
  • 4PL – Your business essentially hands-off everything supply chain

So many choices! But, we’re here for the 3PL and in this is the introduction of a warehouse giving room to scale operations.

Here, let the people at Lumi break it down:

3PL handles everything from warehousing, transportation, fulfillment, packaging, returns, and more. These warehouses are hub-like locations. Products get to customers fast by removing the physical distance.

Can’t afford to invest in a warehouse for 3PL? No worries, that’s where outsourcing to 3PL services comes into play.

Third Party Logistics: Functions and Types

3PL providers group into four main functions:

  • Shipping/Receiving
  • Transportation
  • Warehousing
  • Distribution

There are many sub-types mixed into these, too. This can include information-based firms dedicated to providing logistics data. Or, forwarders with the sole role of forwarding items from their hubs.

Warehousing and Distribution

The common form of 3PL offer warehousing and distribution services. With this service, you gain access to their warehouse network, labor, and freight connections. You also get a wealth of knowledge and expertise.

The service is very much hands-off at this point. You’ll have delivered the product for them to handle. They’ll integrate with your sales/inventory, keeping you updated along the process.

Transportation

The 3PLs in this area are mainly there for transportation (as noted). These are more aligned with 2PL, delivering product from you to customers. Except, several extras may be included like temp warehousing and last-mile delivery.

A 3PL will have access to several carrier services to meet their needs. You benefit throughout as the 3PL leverages their connections and resources.

Pros and Cons of 3PL Services

What benefits does 3PL bring to a business? What drawbacks might it have? Let’s take a moment to break it all down into quick snippets.

The 3PL Positives

  • Growth and Scaling – A 3PL allows a business poised for epic growth to do so without setbacks. The supply chain doesn’t breakdown. The 3PL offers a larger labor force and resources to handle the demand.
  • Financial Gain – The supply chain and its associated costs handled by the provider. You save since you’re not undertaking the warehousing, staff, and all that encompasses.
  • Support – Experts and their resources are available when needed. This lets you focus on your operations, while they handle the minutiae.

The 3PL Negatives

  • Upfront Costs – Setting up tends to have a higher upfront cost. You’re paying set up fees, initial product delivery, and more. 
  • Loss of (Some) Control – You’re no longer one-on-one with your products. It means you cannot modify items as easily as you would in-house. This could take away a bit of the personalization you offer.
  • Added Responsibilities – The 3PL may handle the supply chain well but problems do happen. You’ll take the brunt of logistics errors like dissatisfied customers. You now have added responsibilities handling the 3PL on top of the daily operations.

The Consensus

3PL is a great decision if you understand how far along you are in business operations. A small operation may not get the same benefits as a large one because of its inherent logistics needs. On the other end, any business seeing meteoric growth absolutely benefits from 3PL.

The service shines as growth accelerates. Let data drive the decision on using this service, weighing the pros and cons.

Picking a Third Party Logistics Company

How will you know when to rely on 3PL services?

Determining Your 3PL Needs

Do a basic understanding and test to see if you could benefit from 3PL:

  • How many orders are you doing every day?
  • Have you seen interruptions in shipping and handling?
  • Are you running out of space and labor?

Stress-test your team if you want a clear answer.

Inflate the order volume and record how your team reacts and completes their tasks. This is like simulating a massive influx during a sales event or sudden viral popularity. The test reveals the risks of supply chain disruption.

Do the answers and real-world insights show flaws in your supply chain? If so, you are a candidate for 3PL services.

Considerations for a 3PL Provider

Consider the relationship you’re building with the provider:

  • Transactional – No real relationship, business is business
  • Tactical – Long-term relationship designed so both parties win
  • Strategic – A near symbiotic relationship between business and 3PL

How do you find which one is right for your needs? Do your due diligence!

Connect and talk with 3PL providers, learning about what they provide. Then, verify their pitch by matching it with feedback and reviews. Run a trial with a company if they offer it, doing this several times before deciding on the one.

Make sure the 3PL satisfies your business needs, wants, and goals.

Start Working with the Logistics Experts

Business owners excited for growth opportunities look no further. Streamlining the supply chain (and its management) without headaches is a reality.

Our third party logistics services provide everything needed to handle your company’s growth. We’re here for your distribution to warehousing, fulfillment and more. Let us handle all your logistics needs.

Let our services help grow yours. Contact us, today, for a free quote.

Author: makomako

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