As a business owner, you might have met the concept of third-party logistics. When it is time to turn to this option and whether this is the right choice for your company are complex questions. You need to familiarize yourself with the exact role of this service and the advantages and disadvantages it would bring to your business. Here is what you need to know about third-party logistics to help you in your decision.
What is third-party logistics?
One Warehousing 3PL Melbourne explains that Third-party logistics (or 3PL) refers to supply-chain-related services a company offers to other businesses. A business may decide to outsource these often expensive and complicated logistics tasks to a 3PL company for a variety of reasons and save time and money while professionals take care of any or all supply-chain-related needs the business has. This is a common procedure in e-commerce– for instance, merchants may turn to 3PL providers to automate their retail order fulfillment process. The 3PL company does all the hard lifting while the merchant gets to focus on other aspects of their business. When talking about supply chain processes, everything from procurement, production, and warehousing to packing, shipping, and even returns is included in the definition. A company may specialize in one or some of these processes or offer all-inclusive logistics services to clients.
There are several types of 3PL providers:
- Standard 3PL – These 3PL providers do some of the most basic tasks, such as warehousing and transportation. This is the most affordable option for businesses that only need the bare minimum.
- Service developer 3PL – The next level of 3PL includes, besides the aforementioned basics, a tech aspect to their services as well. Their services are value-added with boosted security and tracking services, as well as possibly docking services. This option is suitable for companies with larger needs.
- Customer adapter 3PL – If you have a small business, this is the option for you. These providers offer complete logistics services.
- Customer developer 3PL – Finally, customer developer 3PL is often the most expensive option, since in this case, the 3PL provider becomes the logistics department of the partner company.
What are the advantages of 3PL?
The advantages of turning to third-party logistics can be many:
- Saves you time and effort
When a business starts growing rapidly, logistics tasks might become overwhelming and the business might not have the capacities to deal with them as well as with their core operations at the same time. This can end up being limiting in terms of the growth of the company. Outsourcing logistics to a 3PL provider saves a huge amount of time for the business. You won’t have to think about issues such as fleet management and can focus on developing and marketing your product instead.
- It’s cost-effective
Logistics is a complex and expensive issue, and your business simply cannot compete with a company that specializes in this area. A 3PL company has an already developed system and a myriad of network connections, which means that they can do the same job for a much lower price than you would. You can basically take advantage of their well-developed system without having to make massive investments. Developing the same level of structure and network would take a lot of time and resources, so unless this is the direction you want to develop your business, outsourcing to a 3PL company is a clever decision that will take a huge financial burden off your shoulders.
- Scalable and customizable
Another important benefit that must be mentioned is that 3PL companies allow for a level of flexibility an in-house logistics department never could. Since you can customize the services you need, 3PL is available to businesses of all sizes, and your demand can grow together with your company. But even more importantly, if your business experiences a lot of fluctuation, for instance, changing seasonal demands, you can always adjust the third-party services to your needs and save considerable amounts of money this way.
- Ensuring fast and smooth delivery
A third-party logistics company has extensive knowledge of the supply chain that makes them more efficient in completing these jobs than a company whose main focus isn’t logistics but still needs these services. Big and small businesses alike can take advantage of this benefit and reach a whole new level of customer satisfaction. Choosing the right partner to work with is quite crucial in this regard, though. If you are dealing with urgent requests frequently, your 3PL provider needs to be reliable. One of the leading Australian third-party logistics companies, General Carrying, for instance, solves this issue by operating overnight, and thereby cutting waiting times and making delivery processes much smoother.
Are there any disadvantages?
The potential disadvantages of utilizing 3PL companies lie in the fact that there is a certain level of loss of control. Since things will be out of your hands, it is ever so essential that you can trust your 3PL provider. Outsourcing also always comes with a larger distance between you and your product, or you and your customers. For small businesses that have done everything by themselves until now, this can be a change that is hard to adjust to. Of course, these services also have their price tag, and while you will certainly save money in the long-term, you might have to make some up-front investments to get things started.
Whether it makes sense for you to outsource your logistics tasks to a third-party service heavily depends on your own business. However, there is no doubt that 3PL can bring a myriad of benefits to a business.
Billy Bummer is a business manager and technology fan with 15 years of experience in the business world. He is also a regular contributor on-site Techiezer.
