A supplier of 3PL (third-party logistics) services extends outsourced logistics services that encompass the management of one or more facets of procurement and fulfillment activities. Third-party logistics service may be a singular service provider, such as transportation or warehouse storage. However, 3PL can also offer a bundle of services with the capacity to oversee supply chain management.
The Mechanism of Third-Party Logistics
An illustration of how third-party logistics (3PL) function can be seen in the case of a comic book publishing company. The company hires writers, editors, and graphic designers to craft publications. This particular company does not wish to handle the procurement process or shipment of comic books. Instead, the publishing company enlists the services of a fulfillment center to process its online orders and engages a trucking carrier to transport the published comic books. Both the fulfillment center and the carrier serve as 3PL providers, and it is also plausible for a single 3PL provider to perform the fulfillment and shipment of the comic book orders.
By collaborating with a 3PL provider, the publishing company can take advantage of supply and distribution services solely when required, thus enhancing cost control measures while prioritizing its main expertise of book production.
Benefits and Advantages of Third-Party Logistics
The benefits of utilizing 3PL logistics services are vast and considerable, especially in eCommerce businesses. There are various reasons why many eCommerce brands prefer to use 3PL.
When starting out, some retailers choose to handle their shipping and logistics internally. This approach is feasible when order numbers are low and logistics can be efficiently managed in-house. However, as the number of orders increases over time, opting to work with a 3PL provider becomes a wise decision. Let’s take a look at some of the key advantages of leveraging 3PL.
- Fast Delivery
Third-party logistics providers specialize in shipping services and operate a diverse range of delivery fleets, making it easy to transport shipments in a timely manner from one location to another. Additionally, 3PLs have numerous warehouses located across the country, enabling them to deliver orders quickly to customers worldwide.
- Cost-Effective Solutions
As Third-Party Logistics companies have specialized expertise in logistics, they possess a vast network that goes beyond your company’s supply chain function. They have established relationships with logistics providers, which can give them more leverage during negotiations, allowing them to offer greater volume discounts to clients. This can lead to significant cost savings by reducing overhead expenses.
Collaborating with a 3PL supply chain management firm can also help you avoid significant infrastructure investments, such as building transportation networks, renting or buying warehouses, and hiring additional staff to manage logistics. 3PL companies have the resources and technology to provide transportation, warehouse space, staff, and tracking technology, among other things, to support your business operations.
- Concentrate on Key Points
By outsourcing logistics, your organization can concentrate on its core competencies and leave the management of critical but non-core functions to a third-party logistics provider. This way, your business can benefit from the logistical expertise of the 3PL without having to allocate internal resources to the task.
- Increased Customer Satisfaction
Customers appreciate when the delivery is hassle-free, and third-party logistics companies offer superior delivery fleets, personalized packaging, timely notifications, and safe and secure transit of orders without any damage or breakage. Customer satisfaction rates are important in every single business.
With a higher rate of customer retention, businesses can benefit from repeat customers, reduced product returns and exchanges, and a loyal customer base. One of the advantages of partnering with a 3PL provider is that they can help companies achieve this stage more efficiently, without the need to invest in larger warehouses or additional resources.
If your business deals with valuable items such as jewelry, precious stones, or designer watches, it is essential to have a shipping insurance plan in place. Working with a third-party logistics provider has a significant advantage in this aspect, as they offer insurance plans to cover any potential losses during shipping.
Insurance plans serve as a safety net in case of any unexpected events. When selecting an insurance plan, it’s crucial to ensure that you are not solely responsible for any losses. By partnering with a 3PL, you can negotiate and choose a plan that assigns responsibility to both parties, providing added protection and peace of mind.
Difference Between 3PL and 4PL
When researching third-party logistics (3PL) providers, you may encounter the term “4PL.” A fourth-party logistics (4PL) provider adds another layer of separation between merchants and the 3PLs responsible for shipping their products. With a 4PL, the business contracts with the 4PL, which then manages and arranges 3PL services on behalf of the client. This is sometimes referred to as “double brokering.”
4PL companies often offer end-to-end supply chain management services, which can include 3PL services, manufacturing, inventory procurement, and more.
Third-party logistics or 3PL services, for short, provide businesses with a cost-effective solution for their logistics needs. By outsourcing logistics functions to a third-party provider, businesses can benefit from faster delivery, reduced costs, increased customer satisfaction, insurance coverage, and the ability to concentrate on core competencies.
Utilizing 3PL services is particularly advantageous for eCommerce businesses that require efficient and reliable shipping services. While fourth-party logistics (4PL) providers offer additional supply chain management services, 3PLs are still the most popular choice for outsourcing logistics needs. Overall, working with a 3PL provider can help businesses optimize their logistics operations and focus on their core competencies to achieve sustainable growth.