To serve your customers better, you need to work on your logistics processes. Lean and agile processes hold the key to business excellence and can help improve your ROI. Streamlining your logistics processes should top your list of priorities. You shouldn’t, however, try to do everything yourself. Logistics management is a complex and involved task. Taking the DIY route can result in costly mistakes. To achieve operational efficiencies, you need to focus on your strength areas and outsource your logistics to an experienced service provider.
3PL: An introduction
3PL or third-party logistics involves outsourcing different logistics processes related to distribution, warehousing, and fulfillment to a service provider. 3PL service providers have been in existence since the early 1970s. Prior to this period, contracts usually featured two parties- a shipper and a carrier. During the early 1970s, when more businesses with little or no experience of managing logistics processes started entering the market, the need for providers who can help with the task was felt.
Soon, every other organization was using the services of a 3PL company. A study suggests that almost 86 percent of Fortune 500 companies and 96 percent of Fortune 100 companies use 3PL service providers. Expert and experienced 3PL service providers offer end-to-end services, managing everything right from receiving new stock to delivering it to the end customer. Some providers even manage their clients’ return process.
Though 3PL service providers do not own the inventory, they are responsible for its safety and performing the fulfillment activities mentioned in the contract.
Given the value that 3PL companies deliver to their clients, it is no surprise that they are extensively used by businesses of all sizes. Some substantial benefits of 3PL for businesses are:
3PL providers have a global infrastructure network. Most 3PL businesses have their warehouses, trucking and transportation fleets, and an in-house team of logistics experts. Businesses availing their services do not have to invest in setting up infrastructure, which helps save costs. Hiring a 3PL service provider can help free up valuable man-hours. When your managers have more time on their hands, they can focus on their KRAs.
2. Service improvements
Hiring an expert 3PL service provider with years of experience can prove to be a gamechanger. Reputable 3PL service providers go the extra mile to ensure orders are picked and delivered on time. 3PL providers use advanced technologies that facilitate real-time communication with drivers and help improve tracking and avoiding delivery errors, helping to keep your customers happy. Service improvements not only help you retain your customers but also get new ones and improve your brand image
3. Access to the provider’s extensive network
3PL service providers have an extensive resource network and can help clients get volume discounts, resulting in reduced overhead costs. Additionally, when you’re expanding your operations, your 3PL service provider can offer consultation services. An expert provider can help you overcome several challenges related to customs clearances, communications, and regulatory compliance.
4. Flexibility and scalability
A major benefit of hiring a 3PL service provider is that you can adjust the level of services offered according to your business’ needs during seasonal cycles. If the demand for your products rises during holidays, for instance, you can scale up services and labor to meet the increased demand.
5 Mantras for achieving 3PL success
1. Set goals and establish key performance indicators
Before hiring a 3PL service provider, it is necessary that you create a framework to measure results. Evaluate your logistics processes thoroughly. Answer the most important questions: why a 3PL service provider, and what do you expect to achieve from the partnership? Depending on your needs, establish important KPIs such as on-time delivery, on-time pick-up, and tender acceptance/ rejection percentage, and EDI compliance.
2. Conduct thorough research
Before signing on the dotted line, learn everything there is to know about your provider. Instead of looking for the cheapest provider, opt for an expert with a track record of helping businesses from different industries streamline their logistics processes. Enquire whether there are any unresolved complaints against the provider. Make sure your 3PL is ahead of the curve and uses the latest tools.
3. Take updates at regular intervals
You cannot just establish your KPIs and goals and forget them. To ensure your service provider is taking concrete steps to help you meet your goals, hold update meetings at regular intervals. Make sure your 3PL provides quarterly reviews. Use a checklist to ensure that your provider offers what you need.
4. Take steps to maintain your 3PL relationship
Treat your 3PL like your partner. To avoid confusion, appoint single points of contact. Create a communication channel and use it to communicate expectations and keep your 3PL in the loop regarding major developments. Define your escalation process.
5. Make sure your provider understands their legal responsibilities
Make sure your 3PL complies with different regulations related to insurance policies and safety laws. Before signing the contract, set standards. It is also important for you to understand your duties and establish a framework to ensure compliance.
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