The term ‘supply chain’ conjures up images of long, dusty warehouses, endless work processes, and high-cost fixed assets. The reality is that modern supply chains now operate efficiently and cost-effectively in just about any environment.

As the use of digital technologies rapidly becomes the new normal, so too has the way in which suppliers manage their inventory, business processes, and vendors.

Tracking inventory and operating in multiple locations have made it almost impossible for buyers to hide anything anymore. That being said, there are still plenty of potential pitfalls you should be aware of.

In this blog post we’ll be exploring 3PLs (third-party logistics), their risks & rewards as well as how to implement effective third-party logistics programs with a focus on visibility and control.

Is it Worth using a 3rd party logistics?

If you’re considering whether or not to use a Third Party Logistics (3PL) provider, you should know that the pros far outweigh the cons. With a 3PL provider, you can save money on costs, streamline transportation processes, and improve customer satisfaction.

Partnering with a 3PL can also help you expand into new markets without having to invest in warehousing, equipment, and labor. On top of this, 3PLs have the infrastructure and experience to maximize value, while allowing you to scale your logistics up and down as needed.

Plus, they can provide IT solutions to streamline your operations. Ultimately, using a 3PL provider will save you time and resources, allowing you to focus on other aspects of your small business.

5 reasons for Using a 3rd party logistics

1. You’ll Save Time and Money – Outsourcing your logistics operations to a 3PL provider can save you time and money. By having a 3PL handle the tedious tasks, you and your team can focus on other areas that need attention, while they handle the labor costs, warehouse management, and other logistics-related tasks.

2. Specialized Services – A 3PL provider can bring higher variety in terms of the services they offer and provide higher flexibility in terms of geographical coverage. They offer specialized services such as order fulfillment, warehousing, transportation management, and more.

3. Lower Shipping Prices – Working with a 3PL provider can help you save on shipping costs. Since they usually have access to better shipping rates than the average company due to their volume of shipments, they can provide you with more competitive prices.

4. Increased Efficiency – By outsourcing your logistics operations to a 3PL, you can increase the efficiency of your supply chain operations. They can help you streamline your processes, optimize delivery routes, and provide real-time data to help you stay informed of your shipments and make better decisions.

5. Improved Customer Service – Working with a 3PL provider can also improve your customer service. Customers will appreciate faster delivery times, accurate tracking information, and better communication regarding their orders.

How to Choose an effective 3PL Provider

When choosing a 3PL provider, first think about what you want to accomplish. Do you want your vendor to do the hard work for you, or do you want them to simply manage your logistics? You also need to consider whether you’re looking for an in-house provider or an outsourcing partner. If you’re looking for a partner, make sure that they’re certified and that their results speak for themselves. Once you have your goals in mind, it will be easier to decide on who is the best fit for your business.

What is Third-Party Logistics?

Third-party logistics, or 3PLs, is the use of outsourced companies to manage inventory, business processes and vendors. The term ‘logistics’ is often used interchangeably with ‘supply chain management’.

What this means is that 3PLs are primarily responsible for managing the movement of goods (including warehousing) from point of production to a customer’s location. The primary benefit of using third party logistics providers is increased visibility as well as control over inventory.

With visibility comes increased control, ultimately leading to cost savings and optimized supply chains.

What is 3PL and 4PL in logistics?

3PL stands for third party logistics, which is a service where a company hires an outside partner to handle the distribution and transportation of their goods. In other words, 3PLs pick up the product from your warehouse and deliver it to your customers.

4PL stands for fourth-party logistics and refers to the process of having an outside company handle the entire supply chain – from receiving raw materials at the supplier’s premises, manufacturing them in-house or buying them directly from a vendor, packaging them, storing them and finally delivering them to your customers.

If you are considering implementing a 3PL program, you should first be aware of its risks and rewards.

Benefits of a Third-Party Logistics Program

In a nutshell, 3PLs allow for companies to have access to multiple locations and work with vendors without having to physically monitor or manage every aspect of their inventory. With this in mind, the potential benefits are immense. For example, centralized dispatch centers can distribute orders efficiently while vendors can process orders more quickly.

There are also fewer product shortages and costs related to internal fraud & theft. By automating these processes, 3PLs increase efficiency and ensure that the ‘supply chain’ is efficient at all times.

Risks of a Third-Party Logistics Program

One risk of a third-party logistics program is that it will not be able to manage inventory effectively. If you don’t have the time or expertise to maintain your own inventory, hiring a third party logistics service provider may not be worthwhile.

Another risk is that you will lose control of your business and give up management power over how your products are handled. Another major risk of using third-party logistics is the price tag.

Not only will you pay more for your 3PL services, but the increased cost may offset any gains. And with limited visibility into your supply chain, it can be hard to find out if these additional costs are worth it.

3rd party logistics example

A real-life example of a 3PL can be seen in the fashion retail industry. It’s not uncommon for brands to contract a third party logistics provider to help warehouse and order their products to a specific customer. This is at times referred to as ‘logistics outsourcing’. If you wanted to see your products being delivered, or if you wanted to manage your own supply chain, one way would be through 3PLs.

You could also use 3PLs indirectly by using them as factories. For instance, if you wanted to make t-shirts in China but needed them shipped directly into your US warehouse, then that’s where they would come from. Another popular use case of 3PLs is inventory management.

A company like Walmart has three different warehouses in America and one in Mexico so it can handle large orders on short notice. If you’re looking for affordable solutions for inventory management that rely on an outside vendor like this, then a third party logistics provider is worth considering.

Bottom line

Third party logistics, or 3PLs, is a business model in which the supplier deals with their own inventory and vendors. The main benefit of this form of supply chain management is that it can help manage costs by limiting the number of assets and resources needed to operate a business.

In addition, it allows the supplier to reduce inventory risk and focus on other important aspects of their operation. A downside to this model is that there is a lack of visibility into the operations.

The main challenge of third-party logistics or 3PL is that they don’t offer full visibility into operations because they’re not in charge; they are only an intermediary between the buyer and seller. However, as third-party logistics become more popular and more widespread, businesses are recognizing its benefits and trying to move away from traditional systems.