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The Ultimate Guide to a 3PL Business

3pl business

Editor's Note: Today's blog is a guest blog by our friends at 2 Flow. In this blog, they discuss everything you need to know about a 3PL business.

What is 3PL?

There are several definitions of 3PL. These include: 

  • Third party logistics (3PL) is the function by where the owner of goods outsources numerous components of the supply chain to a 3PL company that can perform the management function of the clients’ customs, inbound freight, distribution, warehousing, order fulfilment and outbound freight to the client’s customers .
  • Third party logistics (3PL) is a company that provides an all-encompassing service to its customers of outsourced logistics services for a part or all of their supply chain management functions .
  • Third party logistics (3PL) refers to a business that provides one or several logistics related services. These types of services include distribution and transportation management, public warehousing, contract warehousing and freight consolidation .

3PL Services: What is Provided?

3PL Services: What Is Provided?

 
All of your logistics requirements should be taken care of with a full-service 3PL. These services include:

Warehousing

Although many merchants might not have a physical shop, physical goods have to be stored at a specific location. Typically, a 3PL business will take care of your warehousing necessities. In order to efficiently run a warehouse, the 3PL will invest in the necessary technology and space. In general, warehousing by a third party provider is more cost efficient . This is because they are able to spread their overheads over several clients.

Supply Chain Management

To have a successful business, you need to have a well-maintained supply chain . Therefore, if your inbound freight delivery specifications are taken care of, 3PL has done its job!

Order Fulfilment

It’s important to note that order fulfilment isn’t merely making sure that the specified goods reach the buyer. Nothing is done if a business has not fulfilled their orders . E-commerce is often plagued with invalid order fulfilment . The goods that reach the customer must be :

  • The right goods
  • Received on time
  • In good condition

Consolidation Service

Consolidation service is one of the many services delivered by a 3PL provider . Typically, eCommerce suppliers send many small goods to the same, exact location. In this situation, if all the small goods are consolidated into one shipment – the shipping charges are then considerably lowered. A service provider that sends various small packages as one larger package is known as a consolidation service . It is also referred to as a cargo or freight consolidation . 

5 Reasons to Use a 3PL Business

Why Use a 3PL Provider?

 

There are lots of reasons why a company might turn to a third-party logistics provider. Here are the five main reasons :
Reason #1
To provide supplementary supply chain support to test out new regional countries or markets where your company does not currently have a presence . This can be done without having to open a new distribution centre .

Reason #2
Companies with seasonal businesses can use a 3PL provider that allows you to scale your labour, warehousing space and transportation to provide full support during your busy business months while scaling back during slower months .

Reason #3
Using a third party logistics provider that has higher quality technology and processes than your in-house operations  will help realise efficiencies with the management of your inventory and increase on-time performance .

Reason #4
By employing a third party logistics provider, you can take advantage of lower transportation rates that are provided by the 3PL firms . These firms have substantial buying power as a result of their ability to leverage load consolidation , backhaul opportunities and the volume of freight they deal with .

Reason #5
With lower risk, you can quickly build a multi-location distribution network. This can be done without the major capital investment that is often associated with building out your own network . Full support during your busy business months while scaling back during slower months .

Reason #3
Using a third party logistics provider that has higher quality technology and processes than your in-house operations  will help realise efficiencies with the management of your inventory and increase on-time performance .

The Benefits of Using 3PL

The Benefits of 3PL

 

Some of the many benefits of using a 3PL provider include:

  • Improved Customer Service

With faster shipping times, the relationship you have with your customers is improved. The fast and efficient service your customers receive can, therefore, increase your returning customers. 

  • More Flexibility and Scalability

Depending on your type of business, 3PL allows you to scale back your operations over varied time frames. For example , if your prime business time is at Christmas, using 3PL will allow you to increase the scale of your business during this busy time period and reduce the size of your operations during the summer months.

  • More Resources

3PL service providers have a large resource network in comparison to in-house supply chains . This improved resource network allows your business to be more efficient (as well as save costs) at every part of the logistics process . This also allows the 3PL provider to optimise each step of the supply chain which will allow the overall service to be faster and more effective.

  • Saving Time and Money  

All that is required with 3PL is entering your order, exporting it and importing the 3PL warehouse information . When you use a 3PL provider, you no longer need to invest in several areas of your business . These include billing, training staff, audits,transportation, technology and warehouse space. 3PL providers can help your business avoid expensive 
mistakes – you will have a higher return with lower risk .This can help your business build a global logistical network at a fraction of the cost . 3PL is quicker than in-house fulfilment .

  • Professional Service

In logistics, software, hardware and equipment are constantly being upgraded.Third party service providers are continuously educating themselves on the latest trends and emerging technologies within the logistics industry . 3PLs employ advanced monitoring and reporting techniques to track and manage your inventory which ensures the most efficient service possible . By outsourcing your logistics services , you have time to concentrate on the other elements of your business .   

  • Responsiveness

The flexibility to respond quickly to varying business environments and peak periods as well as fluctuating market trends without major disturbances to distribution operations is a huge benefit of 3PL . 

Types Of 3PL Providers

If you decide to use a 3PL business, you must decide which 3PL provider suits your needs . The three types of third party logistics providers are :

  • Asset Based

These companies use their own warehouses , lorries and personnel to operate their business .

  • Management Based

These companies offer the managerial and technological aspects needs to operate the logistics functions of their clients. They do this by using the assets of other companies – they do not necessarily own any assets.

  • Integrated Providers

These companies are usually either management or asset based. In general, they supplement their services with the specific needs that are required by their clients .
out major disturbances to distribution operations is a huge benefit of a 3PL business.

How To Choose The Right 3PL Provider For You

Choosing The Right Third Party Logistics Provider

 

Choosing a 3PL business can be difficult – there are so many dynamics involved in making sure you have chosen the right provider before you even begin to work together. Before you start your search for a new 3PL business, ensure that you determine your own needs first. By conducting advanced research on your potential 3PLs that fit your requirements, you will ensure that you have the right provider for your business. By gathering information within the below three areas, you will be able to define your needs:

Analyse your accounts and look at your current performance.
Outline your current supply chain costs.
Examine your existing carrier relationships and advances and/or allowances that might be made in the future.

You then need to ask the 3PL provider for a request for information (RFI). The RFI is a detailed plan that the service provider has for your business. The RFI should include a thorough description of the areas to be outsourced. It should include:

•The scope of the contract
This should include the locations, amenities and departments of the 3PL business.

•The level of performance that is required

•Information on volumes involved
Including the warehouse sizes, the number of deliveries and number of items.

•The logistics tasks that will be undertaken
Including warehousing, transportation, etc.

Questions To Ask Your 3PL Provider

What To Ask Your 3PL Service Provider

 

It’s important that you ask your third party logistics service provider the following important questions before making your final decision:

  • Is the 3PL located near your business?
  • Are your customers' demands and priorities supported by the specific competencies of the 3PL?
  • Can the 3PL proficiently scale their operations to fit your companies’ changing needs?
  • Does the 3PL provider offer both direct-to-consumer and direct-to-retail fulfilment and distribution services?
  • Does the 3PL have a modern technology platform backing up their business?
  • Does the 3PL have numerous transportation and warehousing options available to choose from?
  • Is the 3PL financially stable?
  • Does the 3PL have a list of previous partners?
  • What is the 3PL’shistory with their partners?
  • Does the 3PL have a proven track record of delivering a superior service?
  • Does the 3PL have many long-term clients?
  • Does the 3PL have high-quality industry references?
  • Does the 3PL have the necessary expertise and experience to help you improve your company’s logistics activities?

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Adam Robinson
Adam Robinson oversees the overall marketing strategy for Cerasis including website development, social media and content marketing, trade show marketing, email campaigns, and webinar marketing. Mr. Robinson works with the business development department to create messaging that attracts the right decision makers, gaining inbound leads and increasing brand awareness all while shortening sales cycles, the time it takes to gain sales appointments and set proper sales and execution expectations.
Adam Robinson
Adam Robinson
  • It’s important to work with a 3PL that you trust and that can cater to your needs. No two companies are the same which is why it’s recommended to work with a 3PL that creates customized solutions for each customer.

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