Third-party logistics (3PL) has become a key part of many companies’ strategies for success. In 2023, the global 3PL market was estimated at $1,095.85 billion. Learn more about 3PL and its benefits that have motivated companies to outsource portions of their logistics operations.
What Is Third-Party Logistics?
Third-party logistics is a means of outsourcing services associated with your supply chain. By partnering with a 3PL provider, 3PL users, also called “shippers,” can access a larger service network for their supply chain needs. This might include packaging, warehousing, picking and packing, freight forwarding or order fulfillment. It may also be all of the above and more.
Third-party logistics providers, sometimes called “3PLs,” can offer comprehensive logistics solutions, or they can fill gaps to make your supply chain stronger and more efficient. The most frequently outsourced service among 3PL users is domestic transportation, followed by warehousing, international transportation, customs brokerage and freight forwarding.
In-House Logistics vs. a Third-Party Provider
If you’re considering how to approach your supply chain process, here’s the difference between doing it yourself versus hiring an external company to do it for you:
- In-house logistics: In this format, you handle everything related to your supply chain, such as management, storage, fulfillment and delivery drivers. Managing your process internally offers a high level of control.
- Third-party provider: Third-party logistics providers allow a trusted company to take over these supply chain tasks for you. They’re often more effective than trying to stay on top of everything yourself, especially once your business starts growing.
What Are the Main Benefits of Companies Using a 3PL Provider?
There’s a reason 3PL has grown so popular. Companies in a variety of industries are discovering the advantages of 3PL. By outsourcing aspects of your supply chain, you can:
1. Save Time and Money
Outsourcing aspects of your operations to third-party providers can free up time, allowing you to focus more intently on core business functions. 3PL can also save your company money. In a recent study, more than two-thirds of 3PL users reported that leveraging 3PLs has translated directly into cost savings.
Consider the cost of a 3PL compared to the time and resources you would otherwise have to devote to building your own facilities, training and paying logistics staff, handling paperwork, investing in technology and more. For many companies, 3PL is by far the more cost-effective choice. Plus, entrusting operations to a 3PL provider can lower risk and save you from potentially costly mistakes you might make if you try to operate outside of your core competencies.
2. Access Experts and Logistics Technology
The benefits of 3PL providers aren’t just limited to time and financial savings. 3PLs are also likely to have high levels of expertise and specialized technology to help them accomplish their logistics objectives with excellence and efficiency.
Your company may not have access to these resources in-house. Sophisticated management software, for instance, can make a significant difference in helping you optimize your supply chain. Third-party logistics providers will be able to leverage this type of software, along with other resources, to identify and correct weak points in your supply chain.
3. Increase Your Logistics Capacity
More customers and more output are likely your goal, and these measures of success also require larger-scale logistics operations that may be outside the realm of your current capabilities. Expanding your capabilities can be an expensive and complicated endeavor. It may also be impractical for you to build new fulfillment centers to deliver fast shipping for a broader customer base.
You don’t want your logistics limitations to hinder your company’s growth. An excellent solution is to take advantage of the large carrier network a 3PL provider already has in place. These companies already have the technology, storage facilities, drivers and other staff to increase your logistics capacity.
4. Optimize Your Operations
Partnering with a 3PL provider is an effective way to shore up any weaknesses in your supply chain and optimize every aspect of your logistics. 3PLs know how to minimize waste, inaccuracies and other problems that may stand in the way of your supply chain operating at its best. More than three-quarters of 3PL users say their 3PLs have delivered new and innovative ways to improve their logistics effectiveness.
Third-party logistics providers can also provide the flexibility you need to scale according to inventory needs. This allows you to meet increased demand when it comes, minimize overhead costs when demand is low and expand into new markets when you spot an opportunity to reach new consumers.
5. Improve Customer Satisfaction
In all your business decisions, you should maintain a focus on customer satisfaction. 3PL can benefit your business and the customer. In-house supply chains can easily become overwhelmed due to limited resources. The result is longer lag times and less reliable service for customers.
A 3PL provider can help you develop a positive reputation for fast delivery times and accurate order fulfillment. Most American consumers believe fast shipping means getting their order within two days, so fast and reliable service is a must to be competitive in today’s e-commerce marketplace.
6. Lower Your Risk
Because you’re working with an external contract, some of the risk may fall on the third party instead of on you, which means your business has less to lose. Of course, this is only true if you use a reputable company, so ensure you use a trusted and reliable 3PL.
Additionally, third-party companies can help you lower the risks generally associated with supply chain management. For example, using a 3PL provider may reduce the risk of transportation issues, as they often have multiple delivery options, allowing them to find alternative transportation. They’re also well-versed in the necessary regulations, lowering your risk of noncompliance.
7. Experience Quicker Adaptability
When you’re a business owner managing various aspects of your company, you don’t always have the time needed to stay up to date on industry trends across all business areas. However, 3PL companies prioritize knowing what’s new and finding ways to implement that into their services.
This adaptability means that when there are changes in season, demand or supply chain technologies, third-party services can often adjust to them much quicker than companies that handle their logistics in-house.
8. Enjoy Faster Delivery
Your customers are likely in a rush, so they don’t want to wait unnecessarily long for their products. With services like Amazon delivering items at high speeds, you need to do the same if you want to keep up with the industry and maintain customer loyalty.
If you have an internal supply chain, you probably have limited resources for packaging and delivery, which can cause delays in the process. 3PL providers, however, specialize in these services. They have the scale and resources needed to quickly and efficiently deliver your products to your customers.
9. Customize Processes to Your Needs
Finally, 3PL services allow you an extra level of personalization. With in-house management, the most effective strategy is to handle all deliveries the same rather than customizing each shipment’s process.
With third-party services, you can achieve this customization. Many 3PL providers will go the extra mile and offer additional solutions, such as:
- Personalized packaging
- Customized labels
- Same-day or rush shipping
10. Increase Productivity
Finally, all of the benefits of third-party logistics combine into one big one — increased productivity. Because 3PLs take over so many tasks that either you or your employees would otherwise need to do, this frees up a lot of time.
You can use this time to focus on other areas of your business, and employees will spend less of their workday on logistics and more on work, which propels your company forward.
Logistics Solutions From ExpressIt
Working with a third-party logistics provider allows you to move beyond your own company’s limitations and benefit from more cost-effective, scalable and optimized logistics solutions from experts.
If you need to improve your logistics, ExpressIt is here to help. We’re a third-party delivery company that takes an individualized approach to every client we work with, developing customized and targeted delivery solutions based on your needs. In addition to our fast and reliable delivery services, we also offer logistics and warehousing solutions. Contact us to learn more about how ExpressIt can help you cash in on the benefits of 3PL.
