Firstly, what is Third Party Logistics (3PL)?
- 3PL (third party logistics) 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( third party logistics) provider is a partnership and must be treated as such rather than as a transactional relationship.
Should you be utilising a 3PL company?
The answer of course, is that it all depends. It depends on a multitude of factors, not the least of which include the stage your business is in, your existing infrastructure and the functions that you require to service your customers. While it doesn’t make sense in every situation, the benefits of using a third party logistics company in the following situation can be staggering.
Have seasonal demand. If your retail business has seasonal spikes in sales – for example, a busy lead-up to Christmas or Easter – a 3PL makes solid business sense. Instead of having to pay for extra warehouse space or resourcing to cope with these spikes yourself, a 3PL can step in during these peak periods to handle your fulfilment needs.
Plan online expansion. The warehousing and distribution capabilities of 3PLs make it much easier to respond to the unpredictable needs of online shoppers. While you’re finding your feet online, let a 3PL take this bumpy logistical ride for you.
Plan overseas expansion. Before you invest in overseas warehouse and distribution facilities, test the waters with a 3PL. This way, you can get a clear idea of how your business will fare in new markets before taking the full plunge.
Need competitive freight. 3PL providers have great buying power. They can negotiate the best deals on freight – what may cost your business £2 per mile when you go direct to a freight company, will only cost £1.50 through a 3PL. These savings quickly add up.
What are the benefits of using a 3PL?
Using a 3PL provider offers lots of advantages. The biggest is that by handing over these logistics, you can focus on other aspects of your business such as sales, marketing and product development. Outsourcing 3PL leaves you with more time and resources as well as other advantages:
- Gain instant expertise and knowledge in the field.
If you’re just starting out, who better to take care of your logistics than a company that specialises in them? Fulfilment, warehousing and shipping come with major challenges of their own, so handing it off to the experts can really make a difference in the way you function – and it leaves you to focus on increasing your overall value to your customers.
To remain competitive, 3PLs usually have the latest technology, this gives you the benefits of capitalising on their knowledge and expertise on the features and benefits of WMS technology for the elements that remain in-house. A cloud based WMS will ensure you receive all the latest updates to the technology as a user.
- Get a handle on international logistics.
If you’re selling internationally, 3PLs can take care of documentation, customs, duties and other issues that come up at the borders that can delay your shipments and result in high costs if not done thoroughly. Plus, you save time trying to work out complicated rules pertaining to different countries.
- Generate cost savings & scalability.
When it comes to warehousing, not having to maintain your own or extra space and or extra staff during peak seasons can be a big cost-saving measure. Also, companies that provide good inventory forecasting can help optimise your inventory levels and save money on inventory holding costs.
3PLs are almost infinitely scalable. If your business triples in 18 months you don’t have to rush to secure new facilities, buy new equipment or hire and train staff. It simply takes one phone call to reach out to the third party logistics company to secure new rates as you open up more shipping lanes or add another login to the transportation management system as you bring on new locations.
However, a 3PL isn’t for every business.
Here are a few drawbacks you need to take into consideration.
- Lesser control over the delivery process.
With a third-party taking care of your shipping, there can be challenges when there are delays or problems in shipping a customer’s order. The customer will be looking at you for the resolution, not your 3PL.
- Larger upfront investment.
On the flip side of the cost issue, while hiring a 3PL can pay for itself in the long run, the investment can still be a large cost in the beginning. If you don’t need a big warehouse or don’t have many orders, the cost of a 3PL can be prohibitive.
- More distance between you and your product.
The 3PL you choose may position you far away from your products, which would be an inconvenience if you run into quality control issues, or need to physically inspect your stock for any reason.
There are a variety of different 3PL companies and they all offer different levels of support. Some take care of warehousing and fulfilment only, some add forecasting to their services, others focus mostly on shipping and delivery, and so on. An integrated WMS solutions within your existing facilities and those of your chosen 3PL will ensure you have visibility at all times and coherent information on your products, deliveries, returns etc.
Finally before you make that decision, you might like to consider the following:
Current and forecasted volumes
Choose a 3PL that can handle your current volume, but that also will be ready to handle your volume if you suddenly add a bunch of new stock, increase your stock volumes, or have a great spike in sales by going international. You want to choose a 3PL that can handle your business now and as your grow or during peak seasons.
References and business performance.
Check out references from other customers that use the 3PL provider and get a report on the company’s performance over the last few years. Seek out references and information about on-time deliveries versus delays, and how they compensate businesses when there are problems. See what their customers are saying about them – customer case studies and quotes are a good indicator of how the 3PL provider has built and maintained the customer relationship.
If you are using a cloud based inventory management system, make sure you choose a company that is similarly cutting edge and ready to integrate with your stock control software. Ensure that the 3PL provider’s technology works with how you work.
Ready for a 3PL?
Hiring a 3PL company to take care of your logistics can really improve your supply chain and increase sales. Take the time to weigh the pros and cons, and to ensure a good fit between your inventory management system and your third-party logistics provider. If you decide to go it alone, make sure you seek all the benefits of a cloud based WMS solution.
Speak to one of our team to understand how Clarus’ WMS system can cost effectively support best practice warehouse management processes, better customer service and highly efficient working for a range of warehouse operations with pay per month options and no IT infrastructure needed.
Our platform can scale from a one user, small depot system to a 100’s of user distribution centre operation. The ClarusWMS platform will cost effectively scale with your business based on demand.
ClarusWMS is a UK based supplier of warehouse management solutions with a wealth of industry experience in third party logistics, wholesale / retail distribution, online fulfillment and manufacturing warehousing.