What exactly is third-party logistics (3PL)?
Third-party logistics, or 3PL, is a service that allows businesses to outsource or use third-party businesses to complete tasks in their supply chain.
- 3PL providers are businesses that provide comprehensive, sometimes one-stop solutions for enterprise supply chains in packaging, warehousing, transportation, and order fulfillment.
- 3PLs can help you identify and fill gaps in your supply chain.
- Their expertise, best practices, and technologies can be integrated into your business processes to solve the most complex logistical challenges and make your supply chain a more agile, responsive function — a requirement in today’s uncertain market environment.
Working with a third-party logistics provider is a partnership that must be treated as such rather than as a transaction.
Why Should You Use Third-Party Logistic Services?
It could be to increase customer base, enter new markets, or create positive consumer experiences, but more and more businesses, both large and small, are seeking external support and expertise to run their supply chain more efficiently and gain a competitive advantage. This is where a third-party logistics (3PL, also known as TPL) provider can help.
Here are the 6 key benefits of 3PL in supply chain management:
Drive Cost Savings
Third-party logistics companies specialize in logistics and, as a result, will have a larger network than your company’s supply chain function. They will most likely have exclusive relationships in the logistics sector, more negotiating power, and will be able to offer greater volume discounts to clients. All of this can help to reduce overhead costs.
You can also save money on infrastructure by partnering with a 3PL supply chain management firm, which can provide transportation, warehouse space, staff, and tracking technology, among other things.
Get Access to Expertise and Experience
It is difficult to anticipate and accommodate internal expertise in all capacities and regions required in today’s complex global market scenario. A 3PL service provider, for example, will be knowledgeable and experienced in areas such as transportation documentation, import and export, international compliance, and economic regulations. Businesses looking to expand into international markets can benefit from their partner’s logistics support and know-how, reducing costly delays, shortening the cycle time, and smoothing the entry into a new region.
Concentrate on Core Competencies
Outsourcing logistics will allow your organization to concentrate on its core competencies rather than managing non-core but critical functions. Without deploying internal resources, your company can reap the benefits of logistical expertise.
Increase your flexibility and scalability.
Third-party logistics in supply chain management has the advantage of providing enterprises with the flexibility and scalability to use supply and distribution resources based on current business needs. When sales are down, there are no redundant investments or unutilized resources, and when demand increases, enterprises can scale up.
Allow for Business Expansion and Market Expansion
The role of third-party logistics in supply chain management is to enable business growth by providing companies with access to markets where they do not currently have a presence. The ability to manage inventory in a new market without spending money on warehousing, equipment, and labor can save money as well as the effort of learning the logistical nuances of a new market.
Enhance Customer Satisfaction
All of the aforementioned 3PL advantages will result in improved services and response times, on-time deliveries, and increased brand reliability. This translates to happy customers, which is the ultimate goal of all businesses.
