6 Key Benefits of Third-Party Logistics (3PL) in Supply Chain Management
September 24, 2019 | Logistics 5 minutes read
What is Third Party Logistics (3PL)?
Third party logistics or 3PL is a service that enables enterprises to outsource or make use of third -party businesses to carry out tasks to completion in its supply chain.
- 3PL providers are companies that offer comprehensive and even one-stop solutions for enterprise supply chains in packaging, warehousing, transportation and order fulfilment.
- 3PLs can identify and fill the gaps in your supply chain.
- Their expertise, best practices and technologies can integrate into your business processes to solve the most complex challenges in logistics management and make your supply chain a more agile, responsive function — a necessity in today’s uncertain market environment.
Working with a 3PL provider is a partnership and must be treated as such rather than as a transactional relationship.
Why to use Third Party Logistic Services?
It could be to expand customer base, venture into new markets, or create positive consumer experiences, but more and more businesses — big and small — are looking for external support and expertise to run their supply chain more efficiently and gain competitive advantage. And that’s where a third-party logistics (3PL, also known as TPL) provider comes in.
Here are the 6 key benefits of 3PL in supply chain management:
Drive Cost Savings
Third Party Logistics firms specialize in logistics and thus have a more extensive network than your company’s supply chain function. They have exclusive relationships within the logistics sector, and can have greater influence during negotiations, They can also help to offer greater volume discounts to clients. All of this can minimize overhead costs.
By partnering with a 3PL supply chain management firm, you can also save on making huge infrastructure investments as it can provide transportation, warehouse space, staff and tracking technology, among other things.
Get Access to Expertise and Experience
In today’s complex global market scenario, it is tough to anticipate and accommodate internal expertise in all the capacities and regions required. A 3PL service provider has knowledge and experience in matters such as transport documentation, import and export, international compliance and economic regulations, for instance. Businesses looking to expand into international markets can benefit from the logistics support and know-how that their partner can provide, thereby reducing costly delays, cutting down the cycle time, and making the entry into a new region smoother.
Focus on Core Competencies
Outsourcing logistics will give your organization the leeway to focus on its core competencies instead of getting involved in the management of non-core but critical functions. Your business can enjoy the benefits of logistical expertise without deploying internal resources.
Gain Flexibility and Scalability
Another advantage of third-party logistics in supply chain management is that it offers enterprises the flexibility and scalability to utilize supply and distribution resources based on current business needs. Thus, when sales are down, there are no redundant investments and unutilized resources, and when there’s a surge in demand, enterprises can upscale.
Enable Business Growth and Market Expansion
The role of third-party logistics in supply chain management is to drive business growth by giving companies access to markets where they don’t have established presence. Being able to manage inventory in a new market without having to spend money on warehousing, equipment, and labor can save money, as well as the effort of learning the logistical nuances of a new market.
Improve Customer Satisfaction
All of the aforesaid 3PL benefits will lead to improved services and response time, timely deliveries and greater brand reliability. This translates to satisfied customers — the fundamental goal of all businesses.
How to Select the Right 3PL Partner
Do you need external help to select a 3PL provider? A consultant or consultancy knowledgeable in the domain could make the selection easier.
- Define and document your 3PL requirements in supply chain, and the results expected, and state the priorities. Also, set down what logistical responsibilities will remain in-house.
- Have an internal multi-functional team to both select and work with the 3PL partner, as a logistical partner impacts multiple stakeholders. There will also be wider acceptance and higher compliance if everyone concerned is involved from the start.
- Check if the 3PL provider has the capability to upscale operations, if and when needed.
- Can the provider offer customizations? The one-size-fits-all template may not always be the ideal solution for your business.
- Does your potential partner offer solutions in multiple segments of the supply chain, or does it focus on only particular areas and solutions? If your organization’s needs are very specific, you may want to look for niche 3PL providers; otherwise, the more solutions you get out of a single provider, the more seamless your supply chain will be.
- Ask for client references and check on them thoroughly. An existing client’s feedback can be the best indication of the 3PL provider’s performance and reputation.
- Check the company’s financial health. Your business should not face unexpected turmoil and risks because your 3PL partner can’t deliver on the promised solutions.
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Frequently Asked Questions
3PL or Third-party logistics refers to companies that offer comprehensive solutions for enterprise supply chains in packaging, warehousing, transportation and order fulfillment. Outsourcing an enterprise’s logistics to a 3PL provider can help solve complex challenges in logistics management and make your supply chain a more agile, responsive function.
3PL stands for Third-party logistics in supply chain management. 3PL companies are service providers that offer enterprise management services such as packaging, warehousing, transportation and order fulfillment.
3PL helps companies to focus on their core competencies, thus fostering business growth, market expansion, and innovation. Outsourcing logistics services to a 3PL provider can drive cost savings, allow access to cutting-edge technologies in logistics, and improve scalability, flexibility, and customer satisfaction.
3PL companies can offer comprehensive logistics solutions for your company. You can use 3PL to expand your customer base, venture into new markets, and create positive consumer experiences. 3PL can be used by big and small businesses looking for external support and expertise to run their supply chain more efficiently and gain competitive advantage.
Before selecting a 3PL partner:
- Define and document your 3PL requirements in the supply chain and expected results.
- Check your 3PL provider’s upscaling capability and customization options.
- Consult other businesses and clients for their feedback to verify the 3PL provider’s credibility.
Every business must ensure that its 3PL partner has sound financial stability and can integrate with internal stakeholders and the existing team.
