Choosing to outsource your logistics operations may be a challenging thing to decide. However, with a massive boom in e-commerce and the constant rush in technology, it may be more difficult for your business to manage all the functions by yourself. Partnering with a third-party logistics company allows you to focus on other aspects of your business. You will need to consider various things when choosing a 3PL partner, and we will discuss them in this article.
Third-party logistics (3PL) enables businesses to outsource their operational logistics from warehousing to delivery. It was common for companies to handle their shipping and logistics in the past. But with supply chains becoming more technologically driven and complex, more and more businesses are beginning to outsource their logistics to third parties. Some logistics services businesses may choose to outsource include cross-docking, transportation, packaging, and inventory management. Using a 3PL provider provides plenty of benefits for businesses as they enable companies to focus on other aspects, such as product development, sales and marketing. Here are some of the most significant benefits of a 3PL provider.
1. Cost reduction
Working with a 3PL company will reduce costs as they can leverage more freight companies than individual shippers can. They will be able to negotiate pricing based on order frequency and volume. 3PLs can also manage part or all of your supply chain, giving you greater freedom to invest in critical areas and enabling you to develop and grow your company.
Businesses tend to experience fluctuations in terms of demand throughout the year. Using a 3PL partner will enable you to effectively manage the different demand trends that your business will go through without having to invest more capital when it is not necessary.
3. Better customer experience
Next-day or same-day delivery is the standard nowadays as customers expect it. 3PL companies can offer fast shipping regardless of where your order is sent due to their access to a vast distribution network.
4. Mitigate risk
It is common for shipping delays to occur, and they happen for several reasons. When these unforeseen circumstances arise, a 3PL will be responsible for making alternate arrangements to fulfil orders in the fastest time possible. If your merchandise is lost or damaged, you would also receive protection against this.
What to Know Before Outsourcing 3PL
When choosing a third-party logistics partner for your business, you should consider a partner that will support your goals and align with some aspects of your business. Your company’s relationship with the 3PL should be centred around an outcome-based result. Below are the things you should know when choosing a 3PL partner.
1. Understand your business’ direction
When looking to expand your channels, think about how many SKUs you plan on acquiring and whether you also plan to develop new product categories and your projected monthly order volume. The best way to do this is by outlining the ongoing problems you are currently trying to solve and the problems you think you will encounter. Doing this will give you a better idea of the 3PL partner who will best meet these challenges.
2. Think about the costs involved
Costs are an essential aspect; therefore, you should outline all your service and storage requirements with potential 3PL partners. You should also consider the anticipated costs of orders shipped, pallet storage, the number of items picked, inserts, and other aspects of your process. Your products may not require a lot of handling, but you may experience high volume orders, so you should discuss all of these with your 3PL.
3. Determine the geography of your warehouse footprint
You should look at where the majority of your orders come from, and when picking a 3PL partner, prioritise a 3PL partner with warehouses located in those areas. This will allow you to keep them within lower-priced shipping zones while also getting products out to your customers faster. By strategically choosing the location of your main warehouse distribution centres, you will significantly reduce shipping rates and freight time.
4. References and business performance
Before deciding on a 3PL provider that your business will partner with, look for references from other customers that also use that 3PL provider and gain a report on the provider’s performance over the last few years. You should see what their other customers have to say about them from customer case studies and quotes as they indicate how the 3PL provider has not only built but maintained relationships with their customers. Look out for information about how they compensate businesses when problems arise and their on-time deliveries versus delays from references.
5. Compatible technology
If your business uses a cloud-based inventory management system, ensure that you choose a company that offers similarly cutting edge technology and that they are ready to integrate with your business’ stock control software. You must ensure that the 3PL’s technology also works with how yours work.
You can expect many benefits when working with a 3PL partner, and you must choose a trusted 3PL partner as their service will directly impact the growth of your business.