Outsourcing logistics processes can be an effective means of managing the needs of your organization. However, when you decide to take the jump to outsourcing, you will have to choose between an asset-based and non-asset-based third-party logistics provider (3PL). Both types of 3PLs have advantages and disadvantages. But, a non-asset-based 3PL provider may offer much more than you realize, including these seven key benefits.
The first advantage of a non-asset-based 3PL provider is knowledge and experience. Asset-based providers have their own resources, materials and fleets, giving rise to the idea that they are superior choices. However, you must consider how a problem in that provider could evolve. In other words, an injunction or financial penalty assessed by the Department of Transportation (DOT) could jeopardize your entire operation. But, in a non-asset 3PL, additional resources can be diverted and accessed to keep you in operation, reports Aabaco Small Business.
Scalability is essential to the future success of your business. Market trends will change, and your business will need to adapt to sudden, unpredicted changes in your market forecasts. While analytics tools can help you create an accurate forecast, sometimes they are wrong. As a result, you need a flexible solution, and non-asset 3PLs can meet that demand, asserts 3PL Info. In fact, flexibility is considered the most important benefit a non-asset-based 3PL provider can give you.
It seems like every business comes with hidden costs these days. In asset-based 3PLs, you have no way of knowing what the actual operating costs of accessing their assets are. What are the fuel charges, and how do those charges compare to the rates you are currently being charged?
Non-asset providers have a bested interest in maintaining visibility, promoting greater use of their services. In addition, the goal is to provide the lowest service costs possible, even if it means outsourcing additional processes to asset-based providers. This can be confusing, but you must ultimately understand that the non-asset providers have the wherewithal to ensure their costs are kept down and passed along to you, their partner.
Before 2013, any organization could claim to be a non-asset-based 3PL provider. The reporting requirements were nonexistent, and some true asset-based enterprises took advantage of this to claim non-asset-based operations. That changed when the DOT mandated a $75,000 freight broker surety bond for all non-asset-based providers in 2013, explains PLS Logistics. Consequently, the true non-asset providers were the ones that could reasonably pay the bond amount without disrupting existing operations. Ultimately, this payment shows potential shippers that non-asset providers have already taken the steps to ensure the safety of their partners.
The definition of logistics services is all of the processes that go into manufacturing, distribution, sales and returns of products. Since an asset-based provider owns their own supply chain assets in the network, they would not be likely to improve your own network processes. Consequently, you would get the benefit, but if you were to abandon ship, you would lose the optimization. In a non-asset relationship, your own network becomes part of the whole network, creating lasting optimization that would enhance your workflow even if you were to take a different direction in the future.
This also includes equipment and hardware upgrades. For example, the use of a dedicated transportation management system, created by a non-asset-based partner, could help you identify the best carriers to use for future shipments. Meanwhile, an asset -based partner may limit your options to their resources, increasing costs unless fleets expand, explains Industry Week.
An asset-based provider is comparable to a for-profit enterprise, and a non-asset-based provider is comparable to a nonprofit. Asset-based providers are vested in your payments, not your honesty. As a result, you may be on your own with performing audits and preventing errors, such as double-billing, in your transactions. Since non-asset-based providers do not benefit from these actions, it is in their best interests to monitor your transactions for accuracy and catch errors as they occur.
Ultimately, this can prove to increase your profit margins, and within the contract of a non-asset-based 3PL provider, you may pay a portion of reclaimed payments to the provider. Ultimately, the lack of assets means the non-asset provider should work to reduce inefficiencies in your operation by identifying problems and errors to take advantage of a small profit for your larger reclamation.
When your organization benefits, the 3PL should benefit as well. In the case of non-asset-based partnerships, this concept is true. However, asset-based partnerships are built on your use of that company’s specific resources. As a result, you cannot be certain other cheaper rates are available. In non-asset 3PLs, you can access more resources to get a better rate. Since this type of company is built on working with more people to get smaller profits from each person, they can access more resources. Ultimately, a small profit among many people adds up to a greater profit than large profits off a few people.
No one can tell you what type of 3PL to use. That is your right as the owner of your organization. However, if you know the advantages and disadvantages of using a non-asset-based provider, you can be better-prepared to make a decision that will benefit your company in the long run.
There are a multitude of benefits companies gain by outsourcing supply chain management and logistics to a value-added 3PL provider. Third party logistics offers an all in one solution for assembly, packaging, warehousing, and distribution. Utilizing a 3PL provides businesses with a reliable logistics advantage, and maximizes profitability through combined knowledge and resources. The following are 5 advantages to using a 3PL provider.
3PL providers have a vast resource network available that provides advantages over in-house supply chains. Using a 3PL’s resource network, each step in the supply chain can be executed in the most efficient, cost effective way. 3PLs can leverage relationships and volume discounts, which results in lower overhead and the fastest possible service. Choosing a 3PL provider allows your company to benefit from resources which are unavailable in-house.
Outsourcing logistics will save a wealth of time and money for your company. Using a 3PL provider eliminates the need to invest in warehouse space, technology, transportation, and staff to execute the logistics process. 3PL providers can save from costly mistakes, and allow your business to build a global logistical network with lower risk and higher return. Additionally, 3PLs save you the time needed to carry out the supply chain. There is no need to worry about the paperwork, billing, audits, training, staffing, and optimization involved to get your goods where they need to go.
A 3PL provider is knowledgeable of industry best practices, and stay up to date with the latest developments in technology, manufacturing, and logistics. 3PL software is capable of advanced reporting, inventory management, and provides visibility to monitor the entire process. 3PL experts employ Just in Time practices to ensure the correct amount of inventory is shipped when and where you need it.
Outsourcing logistics allows your company to focus on your core competencies, and leaves the rest to the experts. 3PL services will allow you to have peace of mind knowing your logistics needs are being handled by reliable, seasoned professionals.
A benefit of using a 3PL provider is the ability to scale space, labor, and transportation according to inventory needs. Businesses with seasonal periods can enjoy stress free transitions between industry ups and downs, having the ability to utilize more space and resources when needed. Using a 3PL provider allows your business to grow into new regions without barriers. Furthermore, as you grow, a 3PL provider can help you scale as they have the resources to seamlessly support growth into new markets.
3PL providers have the resources at hand to make adjustments and improvements to each link in the supply chain. 3PL professionals will ensure your needs are met, by using the fastest, most efficient, and cost effective methods. A 3PL provider has the tools to restructure the supply chain, and use technology that ensures the proper amount of goods arrive when and where you need them. Sophisticated management software can analyze and monitor practices to eliminate inefficiencies and streamline the supply chain. Outsourcing 3PL services will ensure continuous improvements are made to your logistics process. Third Party Logistics providers can help maximize profits, reduce wait times, and improve customer service.
Why or why not would you suggest using a 3PL provider?
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