Third-party logistics (3PL) are used when a company outsources part or all of their supply chain management and logistics to a third party. For those just getting into it, or who are considering 3PL, it’s important to have a good understanding of the concept before jumping in.

1. What are some advantages?

3PL can help to free up space internally for other processes, or if the company is ready to grow but doesn’t have the means to do so. 3PL can save time, money, and resources in the right context, and can help companies to expand and improve their processes over time. 3PL providers can also help companies to manage the ever-changing world of international laws and regulations, which can be a difficult landscape to navigate.

2. How do companies know they should invest?

Companies may see the advantages and know that 3PL is definitely the solution for them. However, there are some signs a company can look for. If processes are bottlenecking at any one point, it may mean that the company is not equipped to handle that volume of work, and may need to look externally. Companies could also analyze their clients’ wait times to see if they are slower than average. If they are, this is another sign that 3PL could be beneficial.

3. What are the cost implications?

In short, companies should be looking to save between 5 and 25 per cent after 3PL implementation. 3PL allows companies to avoid hiring more staff, building more warehouses or changing infrastructure to adjust to growth or other changes in the business. It is a money saving opportunity for companies that will effectively increase profits by outsourcing some of their processes.

4. Who uses 3PL?

3PL can be useful in most industries, especially industries that require significant supply chain management. The retail, construction, and food industries are just three industries that can benefit greatly from 3PL services.

5. How do companies choose a provider?

One of the most important factors in choosing a 3PL provider is to ensure they have a good, trusting relationship with the company they are going to provide for. Companies should trust their 3PL provider, otherwise they are only causing themselves more stress. As well, companies should ensure that the provider they choose is capable of handling the amount of work they require.

6. When to call?

The biggest mistake companies make when deciding to enlist 3PL is to make that decision and start searching after distribution and fulfillment has already become too much for them to handle, or when they’ve run out of space in the warehouse. Companies should consistently analyze 3PL as an option, and decide if it is something that would be good for them before its too late.

7. What types of 3PL exist?

There are four main stages that 3PL can take care of. These are:

  • Shipping and receiving
  • Distribution
  • Transportation
  • Warehousing

Of these four broad categories, there are many subcategories which 3PL providers may offer. Companies can pick and choose which of these services they feel is necessary for them. They may require 3PL for one or two of their supply chain management processes, or they may be looking to enlist 3PL for all such processes.

8. What are some disadvantages?

When companies outsource processes by using 3PL they are, in a sense, forfeiting a bit of the control they have over those processes. As a lot of 3PL is based directly on filling and shipping orders, if the 3PL provider makes a mistake, customers won’t be looking at the 3PL provider, they’ll be looking to the company whose logo is on their purchase.

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