The supply chain is filled with many risks that range from the supplier base, inter-organizational issues, to the integration of partners involved in the supply chain. Partnering with 3PL providers can assist in reducing some of the risks.
A 3PL or third-party logistics refer to services that are outsourced in operational logistics, and these services can range from warehousing to delivery. Outsourcing allows the business to better focus on the other aspects of their business. Some of the services that 3PL providers offer include warehousing, transportation, picking and packing, order fulfilment and packaging.
3PL Benefits
Using a 3PL provider can offer plenty of benefits for the organizations that choose to use them, such as:
1. Cost Savings
3PL providers specialize in logistics, and they will likely have a diverse network and exclusive relationships within the logistics sector. These relationships will be beneficial for negotiations as they will be able to receive better discounts, which can minimize overhead costs. Using 3PL services can also reduce costs typically involved in infrastructure investments as the 3PL provider will provide warehouse space, staff, tracking technology and transportation.
2. Scalability
Another one of the benefits of using 3PL is that they offer flexibility and scalability needed for the supply and distribution of resources required for business needs. Flexibility and scalability are beneficial when the business’ sales are lower than usual. They will not have to spend a lot of money investing and using the same resources as they usually would when demand is higher, and vice versa when there is a surge in demand.
3. Increased Customer Satisfaction
The greatest benefit of using a 3PL is that they improve the quality of services that you offer and your response time. 3PL also ensures that deliveries are made in time, which provides more significant brand reliability. All these factors contribute to greater customer satisfaction which is essential for any business.
3PL Role in Supply Chain
Logistic businesses are constantly looking for methods that will improve and optimize their business operations. Finding strategies that will make their processes more efficient is the ultimate goal. However, there are some risks associated with the supply chain, making it difficult to become more efficient. 3PLs in such situations can then assist in mitigating some of the risks, and we will discuss how they can do so.
1. Monitoring
3PL providers offer visibility which is the key to being resilient in a supply chain. Visibility ensures that materials are being tracked from the supplier until they reach the customers. Visibility is critical in the supply chain as it is common for there to be many disruptions. Therefore, having more visibility ensures that you can respond quickly to these disruptions. 3PL providers have more experience and specialized services that make intervention and remediation easier. The services they offer also ensure constant monitoring of shipments, which ensures that deliveries are made on time.
2. Technology
Technology plays a crucial role in gaining real-time visibility. Smart technology solutions such as cloud-based systems and GPS tracking, are key to making better decisions within the supply chain. These smart technology solutions offer access to information relating to your goods. 3PLs have technology solutions that enable them to detect problems as they occur. The information is then received, allowing them to assess the situation quickly. This process enables them to promptly take action that is crucial in minimizing the impact of the problem.
3. Plans Ahead
Some disruptions occur in the supply chain that might be easy to predict as some of the disruptions are due to natural disasters, war, theft or damage. Therefore, businesses must have a risk management process, especially when dealing with import and export. Having a risk management process is vital as it assists in mitigating and minimizing the impact of these disruptions. 3PLs can better identify and evaluate the areas that have more risks and prioritize potential risks of the disruptions occurring. Supply chain planning is crucial as it can predict the financial impact that each disruption will have, and it is beneficial for the development of contingency plans in the supply chain.
4. Assistance in Choosing the Right Supplier
The suppliers that a business chooses will play an essential role in their success, affecting the service they will offer. 3PLs have information about suppliers that relate to your industry from working with these suppliers from different customers. Therefore, they will be able to evaluate whether your current supplier meets your standards or not and assist you in finding a supplier who ticks all of your boxes. Having the right supplier will ensure that your supply chain is more stable and that you avoid any disruptions that might occur in the future.
5. Better Supplier Management
The challenges that your suppliers face will affect you as you could end up experiencing delays given that the supply chain is interconnected. Therefore, to avoid any disruptions, 3PLs assist in creating better processes regarding the management of the flow of goods and educate your suppliers on downstream processes. This will ensure that the supplier won’t deviate from these processes, reducing the chances of disruptions occurring. For new suppliers, 3PLs will be able to watch these suppliers and offer them support until they understand these processes better.
Conclusion
Partnering with a 3PL provider is key to ensure the growth of a business. They will assist in managing the risks that arise in the supply chain as they handle all the logistical operations, allowing you to have a better supply chain.
Take a look at the 5 Questions to Ask Potential 3PL Partners When Evaluating Their Last-Mile Offering.