- Subject matter expertise
- Strong resource networks
- Increase in available time and capital
- Optimized supply chains
- Global capability
- Environmental sustainability
- Enhanced cargo security
- Faster process changes
3PLs can enhance a business in many ways, and even facilitate its expansion. Read on to find out more about the purpose of 3PLs, the benefits involved in outsourcing to a 3PL, and how to find one that fits your business.
Purpose of 3PLs
The purpose of third-party logistics companies is to help facilitate the many housekeeping tasks involved with running the supply chain of a major business, performing such tasks as verifying shipping, managing delivery issues, brokering transport, and other ancillary duties.
For the most part, the use of third-party logistics allows those who have invested in a fleet of transport trucks, for example, to be “hands off” in their management of workloads—the owner instead allows a 3PL to step in and broker the loads instead. This allows the business owner instead to turn his focus and interest to his drivers, or some other aspect of the business that needs his direct attention, or simply take a more hands off approach and free up time for personal endeavors.
By outsourcing their supply and distribution to a third party, businesses are allowed to focus on what they actually produce or provide as a service, rather than fiddling with transportation contracts and schedules. When retailers get especially large, 3PLs are pretty much the only way to guarantee consistent results with regards to delivery and supply.
The need for a third party provider to act as a mediator for these services has led to the rise of 3PLs as their own specialized industry, serving retailers across the globe by
Benefits of Using 3PLs
The main reason that many large corporations outsource their supply chains and deliveries to 3PLs is that the effectiveness of their company is, in all likelihood, not geared towards distribution and transportation. Companies are able to secure these services on their own, but nowhere near as efficiently as 3PLs can on their behalf.
3PLs Have Subject Matter Expertise
In many cases, a business is able to get their own supply chain up and running, especially in the beginning when they’re still relatively small, but the larger a business gets and the more it is forced to ship, the less efficient this aspect of the process becomes.
Because they specialize in shipping and transportations specifically, 3PLs usually have far more experience and background in supply chains that the business needing a 3PL doesn’t have. For example, a business that makes radios and wants to ship them to customers all over the world will know a lot about radios but may not know much at all about international shipping laws.
3PLs are good at keeping track of the following types of information that can trip up retailers when trying to ship both domestic and globally:
- Shipping and transport laws
- Shipping and transport regulations
- Associated taxes
- Information regarding customs and associated fees
- Miscellaneous shipping factors that might impact delivery and supply chains
If the radio company tries to run international shipping themselves, they will probably be able to manage it, but they wouldn’t be able to manage it nearly as gracefully as a 3PL built around streamlining global transportation would be able to.
3PLs can also specialize in other aspects of the supply chain, such as information technology or freight and transportation. While forming an integral part of many other businesses, these businesses are very complex operations in and of themselves, and very few companies can successfully manage the duties a 3PL can as efficiently and run their primary business at the same time, especially if they intend to expand globally.
3PLs Have Strong Resource Networks
3PLs tend to specialize in—you guessed it, logistics. And that means that the resource networks they can wield at a logistics problem are much more robust than the ones that most companies who don’t specialize in logistics can wield on their own.
Strong resource networks benefit 3PLs (and their employers) in the following ways:
- Strong resource networks help businesses save money by optimizing pricing and efficiency; because they tend to work in high volume shipping, 3PLs can get better shipping prices than someone who is not directly within the industry
- 3PLs have more advanced logistics technology than most unrelated industry companies have bothered to invest in—this technology allows them to maximize their efficiency by using state-of-the-art software to monitor distribution, communication with carriers, and other real-time management activities.
- 3PLs help to streamline transportation costs by participating in cost-saving activities such as warehouse sharing and freight consolidation, using related distribution centers to act as hubs for their activity
- In case of issues like carrier problems or other delays that arise off the cuff, 3PLs have the resources to mitigate problems and generate solutions quickly, minimizing the amount of time that the company is negatively affected by a transport delay or other breakdown in the supply or distribution chain.
- Because they are able to leverage discounts and other cost-saving resources, 3PLs reduce overhead and make the entire business more effective.
3PLs Free Up Time and Capital
3PLs have a strong network of resources and supply chain expertise, but these aspects of using a 3PL do not benefit a company in and of itself. What these benefits do result in, however, is additional free time for the business in alliance with the 3PL, and saved capital.
Learning how to delegate successfully is one of the most important skills a business executive can learn. By delegating transport and logistics duties to a 3PL, the management of a business is able to turn their attention to more important matters. Streamlining a business in this way leaves management open to find new markets, expand current business ventures, and make new contacts rather than waste time trying to micromanage transportation and shipping.
Aside from freeing up time for those running a business to focus on growth rather than maintenance chores, 3PLs also allow a business to be more cost-effective. By saving money on shipping, businesses can take the money they saved and re-invest in the business in other ways such as purchasing new equipment, hiring more staff, or investing in marketing ventures.
Here are some of the tasks that can be eliminated from a company’s responsibilities when outsourced to a 3PL:
- Finding the most efficient carrier for distribution or supply
- Pick-up and delivery scheduling
- Liaison between drivers and distribution centers
- Real-time order tracking
- Managing transportation problems as they occur
- Invoices, manifests, and shipping documentation
- Performance analysis
3PLs Offer Customizable Scale and Scope of Deliverables
Another benefit that 3PLs offer that companies usually don’t possess on their own is that because they depend on an established chain of warehouses and other assets, they can easily adjust to different volumes of goods and different transportation schedules without the owner of the company having to take a (financial) bath or suffer a massive blow to wasted overhead in order to achieve it.
Instead, 3PLs take advantage of their resource networks to adjust to a company’s ever-changing inventory needs and in accordance with other factors, such as seasonal rushes or a sudden reduction in demand. If a company invested in these transit assets themselves and needed to manage distribution that varied this much, they would waste money on warehouses standing full of unshipped product or other inefficiencies.
On the flip side of that, if a company experiences a period of intensive growth in a small amount of time that requires them to double-down on distribution or expand into the global market, 3PLs are much better at facilitating this than a company is on their own. This is because they already have the resources in place to take advantage of increased business.
3PLs Improve and Optimize Supply Chains for Their Clients
3PLs are important for a growing company because they improve and optimize a company’s supply chain. It is one thing for a company to be able to establish a distribution or supply chain, but it is another for them to be able to refine their shipping practices to the point that it is not negatively impacting the business’s bottom line. Shipping is notoriously expensive, and 3PLs can help offset some of these costs.
Because 3PLs have in-roads into markets that a business may not have contact with otherwise, 3PLs can be vital for the expansion of a company or the improvement of its transportation practices.
The main reason a 3PL is better at improving transportation practices over the management staff of
a business is that they specialize in the knowledge pools necessary to streamline the logistics side of
a business, whereas management in a business is typically trained in personnel, funding, and
customer relations.
The improvements that employing a 3PL allows for are both pervasive and cumulative. They lead not only to improved relationships with customers and potential business contacts but also to less stress on company personnel since they are no longer required to try and facilitate services they don’t have a strong background in.
3PLs Provide Global Capabilities for Supply and Distribution
When a company becomes large enough to require global distribution, it can be a make or break moment for the business. This kind of shipping model can be very costly for a business if they don’t
have the process optimized, but a 3PL allows a business to ship internationally as inexpensively as it possibly can.
Since the expansion involved with going global can be very costly, the capital saved by outsourcing to a 3PL can mean the difference between a business collapsing under its own weight and a business smoothly transitioning into international mercantile power.
Small businesses may not have the need to outsource to a 3PL, not at first. But once it’s time for a company to step onto the global stage, a 3PL can be a way to gird itself against a world of complex distribution chains that it would otherwise not be prepared to navigate alone.
One major benefit that global 3PLs can offer a company is access to cloud-based technology and real-time international shipping data. This level of control allows a company to react to potential problems instantaneously and head off an issue before it becomes a detriment to the company or its reputation.
3PLs Help Would-Be Green Companies Tackle Their Environmental Objectives
Trying to keep track of carbon credits and other business practices geared towards environmental sustainability can be overwhelming on top of all the other duties management of a business has to oversee.
3PLs can take the reins on green initiatives for a company as they relate to transportation and shipping, allowing companies to take advantage of resources such as electric vehicle carriers or other resources that are beneficial to the environment and show a company’s dedication to green manufacturing and distribution.
Logistics specialists, like 3PLs, can also aid companies with other environmentally minded logistics practices, such as the following:
- Distribution materials chosen to support sustainability
- Recycling practices
- Green packaging
- Waste minimization
- Energy-efficient warehouses and distribution centers
- Alternative fuels and green transportation vehicles
- Green management and training
Because a lot of the least-green practices in a business occur in shipping, transportation, and supply, 3PLs are uniquely positioned to make these processes greener and more environmentally sustainable, while also continuing to save the company time and money. It’s a win-win situation for everyone involved, businesses and customers alike.
3PLs Enhance Security for Businesses
3PLs are a good way for businesses to enhance security in a variety of ways. For one thing, when having to perform shipping in foreign countries where the safety of goods is questionable due to a high level of criminal activity or lack of government infrastructure, 3PLs are the ones who assume liability for lost shipments, hijackings, or other problems that might occur on the ground.
International shipping is very vulnerable to three major security breakdowns: theft of cargo, smuggling contraband, and terrorist activity. Thankfully due to the surveillance technology that 3PLs are increasingly specializing in with regards to transportation procedures, it is easy for 3PLs to keep a vigilant eye out for any shady business.
3PLs enhance security in a variety of ways, including the following:
- GPS tracking of vehicles, drivers, and cargo
- Remote control of vehicles
- Surveillance technology such as intermittent photo documentation of drivers
- Built-in alarm systems hooked into local law enforcement communications
Tens of thousands of dollars are lost every year as the result of lost cargo or other security-related problems in transportation, supply, and distribution. It is understandably difficult for a company to manage its property from thousands of miles awhile, especially since there are often language barriers to deal with as well.
Another issue, especially depending on where your company is shipping cargo, is potential terrorist threats. Cargo inventory must be carefully maintained to avoid picking up bogus cargo containing bombs, biochemical weapons, and other implements of terrorist action.
While finding illegal and potentially deadly contraband in cargo trucks is relatively rare considering how many are operating at any given time, these items are occasionally found nonetheless. To avoid being liable in such an incident, it’s crucial that companies can employ a logistics coordinator to maintain constant vigilance over any cargo being transported in the company’s name.
Inside jobs are one of the major vulnerabilities to companies such as this when it comes to things like theft or smuggling, so it’s very important to choose a well-established 3PL where you can develop a strong sense of trust in everyone involved with the logistics chain to do the right thing and see the cargo safely to its destination.
3PLs Help Businesses Speed Up Process Changes
One weakness that can cripple a business as it begins to expand is inertia within the company. Everyone in a business is usually entrenched in their particular duties and workplace culture, so it can be difficult to instigate any kind of company-wide process change in order to increase efficiency. There is an inclination to do things as they’ve always been done.
In bringing in a 3PL to handle logistics, the management of a company can make major company-wide shifts with regards to shipping processes or other logistics factors, and see the results of these changes with little negative impact on the business being conducted by other staff in the company.
Radical changes can be made with relatively little fuss, and as a result, the positive impacts of these changes can be seen more immediately. On the flip side of that, if a third party handles a logistics change and it turns out the change isn’t working, it is easier to direct a third party to make a major revision to process than the founding staff.
The rapid expansion of a company and the process changes that go with it depend on a company being able to practically turn on a dime with regards to its business practices, and 3PLs can help facilitate that in a way that regular companies can’t. The longer it takes for a company to adjust to new practices, the longer it takes for those practices to start becoming profitable.
How to Choose a 3PL to Benefit Your Company
Specialization in third-party logistics is a blossoming industry, and as a result, there are a variety of 3PL companies both large and small, domestic and global, that are tailored to fit a variety of different business logistics needs.
Here are a few ways you can narrow down your search when trying to find the right 3PL to fit
your company:
- Consider your needs. The 3PL industry is so refined that you can find a 3PL to fit practically any company’s logistics platform and improve upon it. To narrow down your search, identify what features you most need out of a logistics company and seek out those qualities above all others when considering which companies to pursue.
- Make sure to do plenty of research. Thanks to the Information Age, you can find the scoop on just about any business before ever even having to talk to someone involved with it. Before you start making any phone calls, do a little digging. A company is likely to represent itself much differently than one of its disgruntled customers might so see if the company’s clientele experienced any problems with them and how they handled those problems in response.
- Look for a 3PL that seeks to understand your business intimately. Every business is different, and you’ll need to look until you find a 3PL that is naturally aligned to your company’s culture and values. Chances are, you’ll know them when you see them. When interviewing prospective 3PLs or researching them directly, be sure to ask the hard questions but also let them know that you’re interested in a trusting relationship with direct communication.
- Find 3PLs with multifaceted capabilities. The 3PLs that are going to be most useful to a company for outsourced logistics are those 3PLs that act as a “one stop shop” and can handle almost anything related to shipping, freight, transport, invoicing, etc..The more mundane duties you can safely outsource, the more you can dedicate your company’s staff to creative expansion, marketing, and other profit-increasing activities.
- Check a 3PL’s track record. You don’t want to be a new 3PL’s guinea pig or the company that they learn on—you want a 3PL that has been around the block, has a well-established resource network, and can solve problems on the fly. Make sure that the 3PLs you’re working with have had a chance to establish themselves and iron out any problems with their business models.
- Look for “shared space distribution” and similar assets. One of the biggest ways that 3PLs can help cut down on overhead costs for supply and distribution is to use shared space warehouses and other distribution centers that can store cargo cheaply while in transit. These sorts of warehouses are not the kind of thing that normal companies usually invest in, which makes them a particular advantage of 3PLs.
- Think about hiring a logistics consultant to choose a 3PL service for you. The thing is, the owners of many companies do not understand the finer points of how logistics should ideally work for their business because business-based logistics is such a complex science. Hiring a neutral outside party to assess your business and make recommendations for a 3PL can lead to you getting a much better match than if you’d chosen one yourself. Take advantage of expertise.
- Look into a company’s financial stability and references. Trusting a 3PL is one of the biggest risks you can take as a business owner because if a 3PL pulls a cut and run after establishing itself into your business processes, it can be massively devastating to the running of your company as you try to muddle through the loss of those assets. Make sure they’re trustworthy.
- Pull staff from every applicable department to search for a suitable 3PL. Involve everyone who will be involved in maintaining liaison with the 3PL in the evaluation process in order to get a clearer idea of what each department needs with regards to outsourced responsibilities. Hiring a 3PL is a way to make everyone’s life a little easier as long as you know what each department is most desperately in need of on a process level.
There are plenty of 3PLs available, so don’t hop on the first one that catches your eye if you’re in the market to outsource some of your distribution and supply responsibilities. Make sure that you find a company you mesh well with, as the 3PL you choose can ultimately determine the success of your entire business, and nothing can cause a business to hemorrhage capital like inefficiency in shipping.
Choosing a 3PL is not a decision that should be made lightly, and each company you consider for the position should be investigated carefully to minimize the risk you’re placing the company in when you decide to trust an outside business to handle one of the most significant factors in your own.
3PLs Can Be the Difference Between Success and Failure
Expanding a company from a local company into any kind of larger venture that requires complex logistics can be a make or break moment for the business.
Whether you use a 3PL to expand your network of available resources, handle complicated international shipping, or simply take on the auxiliary duties that your best staff are being wasted trying to manage, the right 3PL can potentially take your company to the next level. To get you jumpstarted in your search, here are the best 50 3PLs of 2019.
