Third Party Logistics Providers
Learn how third-party logistics providers can elevate your ecommerce operations with seamless shipping and fulfillment services.
Introduction to Third-party logistics providers
In this day and age, customers have come to rely upon and expect a swift and reliable service when it comes to logistics. With the popularity of the internet and online shopping more and more people are relying on deliveries, sending and receiving products directly to their door, as opposed to shopping in the traditional sense. This shift in shopping patterns, together with modern transportation and faster vessels and vehicles has changed the whole logistics landscape.
As well as consumers, businesses are more reliant upon long distance transportation of goods. Whether that comes from Air, Sea or land transportation the world has become a smaller place, getting goods from manufacturer to supplier and ultimately to the final customer can be a daunting task, as such many small to medium-sized companies (SME), now outsource their logistics operations to a Third-Party Logistics (3PL) provider, these companies are specialists in the warehousing, storage, shipping and stock control of products and raw materials.
By outsourcing the logistics operations to a 3PL, companies can concentrate their resources on their primary business operation as well as sales and marketing, leaving the day-to-day logistics operations to a third party.
What is a Third-Party Logistics Provider?
A Third-party logistics provider (3PL) is a third party, external or outsourced if you like, they specialise and manage the day to day logistics for a business, this external solution is becoming more common as the increase in shipping continues worldwide. Some of the logistics operations that a 3PL can manage include the storage of goods, inventory and stock management, goods inspections and quality control, packing and relabelling of products, fulfilment, shipping as well as customs and paperwork production and accuracy.
The advantages of outsourcing this type of work, is so the company utilising these services can concentrate on their core business, therefore not having to learn all the various aspects of transportation, customs and storage, as well as the high cost of setting up a distribution warehouse or transportation hub.
3PL providers are a fairly new concept, evolving from older transportation companies and storage warehouses, as IT and infrastructure continue to change, so does a third-party provider and its services and efficiency.
In a nutshell a Third-party logistics provider cares for goods and ensures they are moved to the correct place at the correct time.
Types of 3PL Services
Third-party logistics providers offer multiple services within the warehousing and transportation sectors, below are some of the operations they perform.
Transportation
The transport of goods is a primary service offered by 3PL's, transferring goods by Air, sea and land to where the goods need to go. A 3PL provider can help determine the most efficient method of transport as well as the most economical routes available, coupled with filling in all the necessary paperwork to ensure legality and country specific requirements, including customs clearance and importation tax and duties are paid and adhered to.
Storage and Warehousing
One of the most expensive aspects of the supply chain is the storage and warehousing of goods, a 3PL can offer several solutions to ensure the goods are stored correctly and efficiently, warehousing includes the internal moving of goods, unloading of deliveries as well as the physical storage of the products or raw materials.
Many Third-party logistics companies have experience in how and where to store goods to make the picking and locating of products as accurate and quick as possible.
Inventory Management
Controlling stock is one of the most important aspects of the complete logistics operation, ensuring all products are correctly labelled and accounted for can save a company a considerable amount of money and reduce the problem of no products to sell and ultimately unhappy customers, using sophisticated Inventory management software, any company using a 3PL should be able to see 24/7 accurate stock levels for all their products, if this is not the case then it is time to change your 3PL.
We highly suggest operating an API or bridging software so that inventory levels can be monitored by both the owning company as well as the 3PL provider. As well as monitoring stock it is important to have a replenishment or low stock re-ordering or notification system in place, out of stock or lost products are a disaster for any company and can flag a problem with the stock management system and overall 3PL operation.
Freight Forwarding
Managing the transportation and logistics of cross border deliveries is generally known as freight forwarding. Day to day operations for freight forwarding include producing customs paperwork and submissions, complying with local shipping regulations and moving goods efficiently through international borders.
Freight forwarding can be a complex operation requiring knowledge of international laws and regulations as well as adhering to the various taxation and duties levied on goods.
Reverse Logistics
Reverse logistics is the process of handling returns, repairs, recycling and disposal of products, a 3PL can arrange the recovery or return of goods and then set about what to do with the returned products, starting with an inspection and then determining the next step for that product.
An efficient reverse logistics service can help retain customer loyalty as well as reducing costs of lost products or unnessecary disposal of resellable goods.
Benefits of Using a 3PL Provider
Partnering with a third party logistics provider has many benefits inclucing:
Saving Money
The obvious starting point and one that makes most companies ears prick up...
So how can using a 3PL reduce costs? Lets start with economies of scale, by bulk buying packaging and postal services, discounts are already starting to show, as well as experienced buyers and knowing where to get the best deals on these goods and services.
Setting up a warehouse is expensive, we mean very expensive, not just the physical building but also the racking, shelving, materials handling equipment, labelling, stock control the list is very very large and not cheap. A 3PL already has all of this in place and by sharing the cost of that across multiple companies then you start to realise the savings that can be made.
For smaller companies it is just not efficient to employ staff to ship orders when you are only having a few orders a day, a 3PL would utilise that staff member across several businesses orders to ensure an efficient use of staff and ultimately money.
Scalability and Growth
Using a 3PL for your logistics and specifically fulfilment means as a business you can control costs and ensure a level service regardless of peaks or troughs in your sales, during peak periods they have the resources to continue shipping goods out without any loss in service. At the other end of the spectrum during lulls in sales, you would not be paying out for a large warehouse or staff to ship orders that are not there. A 3PL would alleviate this problem ensuring a service that works for you financially through all periods of the year.
Knowledge and Experience
By using a Third-party logistics provider you also receive a tremendous amount of expertise and experience.
With regards shipping, ensuring the best routes and modes of transportation are put in place, for storage an accurate and efficient system to alleviate problems with retrieval or picking, with fulfilment and deliveries making surte the correct processes, labels and paperwork is completed, this experience is from real time dealings and is invaluable to ensure no costly mistakes are made, air freight products around the world can cost thousands, a slight mistake in the paperwork and those products will be sent back to you at your expense and they would require shipping again.
3PL companies use complex warehouse management software (WMS) as well as sophisticated tracking systems, this ensures problems can be rectified before they occur saving costs and unhappy end customers.
Focus on core elements
By using a Third party logistics provider as a product distributor, retailer or supplier, you have already removed a large portion of your business onto a professional. The time and manpower released from this outsource can be better spent on your business and what you do best. Free up time and operations can help you concentrate on increasing sales and dealing with your customers on a personal level as opposed to having to deal with the "where's my parcel scenario", you relationship can be a happy one with your customer, I am sure you would rather spend 5 hours a day increasing your customer base as opposed to packing orders??
Speedy Delivery
They say knowledge is power? By using a professional 3PL company such as Fulfilment House, you can utilise not only reduced shipping rates due to their larger buying power but also, their efficiency in handling your goods and orders. A more efficient system leads to quicker processing of orders, this ultimately leads to quicker shipping times and order processing times, on top of that the saving on the shipping rates often means for the same price you can employ a quicker shipping service, all this leads to a happier customer and better reviews and higher value to your business.
Most professional 3PL companies also have extensive knowledge of efficient shipping routes and methods, once again ensuring the quickest way to get your products from A to B.
Challenges of Using a 3PL Provider
Obviously we are biased but whilst there are many benefits to outsourcing your logistics operations, there also some challenges that may be relevant for some companies.
Control of the operation
Some people just like control!! We understand that and many companies like to keep a tight rein on what is happening with their expensive stock and to many their main investments. Outsourcing their logistics can take some of that control away from a company, by choosing a 3PL that has good communication as well as a WMS system with real time data linked back directly to the company it is working for then this problem can easily be rectified.
If this is a problem for you then ask the Third party logistics partner to supply regular reports and data in the format and frequency that you would like it, by communicating and sharing data then scenarios such as stock loss or out of stock products can be shared between parties.
Loss of goods
Entrusting your products with a third party can be a worrying prospect for many companies, for retailers and product supply companies, their stock can be their number one asset by a long way, leaving that investment with someone else is always a risky business but by using a professional and well established 3PL such as Fulfilment Centre, your concerns we understand and our operations and processes will help smooth any concerns.
Stock control is a major factor and when the correct processes are in place then stock loss should be zero, if this is not the case then it is time to find a new provider for your logistics.
Dependency
Putting all your eggs in one basket, a phrase that is often worrying for companies and their investments, relying on a single Third-party logistics provider can be risky, with the threat of financial problems or system failures that will ultimately affect your business and customers. Using a well established 3PL with robust systems should alleviate that problem, as well as stock management, if done efficiently, you would only hold the stock you need, this is how all of the world's largest manufacturers and retailers work and is why they are so successful.
Conclusion
Third-party logistics providers can offer companies a service that is flexible, efficient and adaptable, they are not for every business model but they can reduce costs, offer expertise and experience as well as increase delivery times and ultimately happier customers for companies.
We suggest continuously monitoring a 3PL performance and raise awareness of any problems, working well with your provider can be a massive benefit to your business, both in customer satisfaction and ultimately profit.
3PL outsourcing isn't for everyone but with the explosion of online retailing, e-commerce and global trade in general, these services are only going to get more efficient, with companies becoming more dependent on these services in this complex world we now live in, they are in a position to monitor and adapt to modern logistics and navigate the modern supply chain, leaving you and your business to prosper in this competitive and complex marketplace we now live in.