Third-party logistics (3PL) has increasingly become a key part of many companies’ strategies for success. In 2018, the 3PL market generated over $931 billion worldwide in economic value. Take a moment to learn more about what 3PL is and the benefits of 3PL that have motivated companies of all kinds 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, who are also called “shippers,” are able to access a larger service network for their supply chain needs. This might include packaging, warehousing, picking and packing, freight forwarding or order fulfilment. It may also be all of the above and more.
3PL providers, sometimes called “3PLs,” can offer comprehensive logistics solutions, or they can fill gaps where they exist 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. Third-Party Provider
A helpful way to understand 3PL is to compare it to the alternative — handling your logistics in-house. In-house logistics means you manage every aspect of your supply chain on your own as a company. Your management team, storage facilities, fulfillment centers, delivery drivers and other aspects of your supply chain all belong to your company. Some companies may prefer the level of control they have with this model. They can exercise oversight over every stage of the process.
However, many companies begin to consider in-house logistics vs. 3PL when they grow and start running into their own limitations. In these cases, companies either need to expand their own logistics operations or reach out to a 3PL to meet their needs. Companies of all sizes can benefit from trusting a 3PL with aspects of their supply chain. These providers may have the resources needed to execute the job more efficiently and effectively than a company could in-house.
What Are the Main Advantages of Using a Third-Party Logistics Provider?
There’s a reason 3PL has grown so much in popularity. 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 report 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 third-party logistic providers aren’t just limited to time and financial savings. 3PLs are also likely to have high levels of expertise and specialized technology in place 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. 3PL providers will be able to leverage this type of software, along with other resources, to identify and correct weak points in your supply chain and perhaps improve parts you thought were fine.
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. One of the issues you may run into in the U.S. is that truck drivers have been hard to come by since the shortage began in 2005. 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 limit 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 in place 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 ultimate 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. In the 2021 Third-Party Logistics Study, 88% of 3PL users agreed that taking advantage of 3PL had ultimately improved the service to the end-user.
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.