Third-party logistics (or 3PL) is both a huge business and a huge part of how business runs in the U.S., as well as around the world. For reference, 3PL accounted for $750 billion globally in 2014, and $157 billion in the U.S. alone.
For those unfamiliar with the concept, 3PL is a general term for companies that provide any number of logistical services and solutions along the supply chain. This can include warehousing, fulfillment, transportation, consolidation, freight forwarding, and even inventory forecasting just to name a few. Let’s take a closer look at some of those services.
Whether you sell retail, wholesale, B2C, B2B, brick-and-mortar, or e-commerce, chances are you will need a place to store your physical goods. On-site storage in your office or store is usually going to be pretty limited, and renting and maintaining your own warehouse and warehouse staff can be quite costly. 3PL can take care of your warehouse needs more efficiently, and usually more cost effectively. Not only are they experts, they also can keep overhead costs low by spreading them out amongst several clients. A 3PL company will also have incentive to keep up to date with the best and latest technologies, saving you on continually having to make those kinds of investments.
At its most basic, fulfillment refers to fulfilling an order. That means finding the product that was ordered, making sure it’s the right product, packing it up properly, and make sure it is labeled correctly for shipping. This can be time-consuming, especially for a small business. A 3PL company though, can find the right product from its place in the warehouse, pull it, package it, ready it for shipping, and send it on the way to your customers far more quickly and efficiently. This is sometimes referred to as “pick and pack.”
Companies can often have large catalogs of products, and especially if there are smaller goods on offering, customers may end up ordering several different products at once. Rather than processing each product on its own, a 3PL company that offers consolidation services can consolidate all of these products into a single package in order to save on shipping costs. Amazon is a master at this, and with a good 3PL company, you can be, too.
If your company sells goods internationally, finding a 3PL company that provides freight forwarding services is nearly a must. Freight forwarding basically means that the 3PL company will handle all of your importing and exporting properly and expertly. That means everything from filling out customs documentation to providing insurance to expediting border crossings, and being well-version ocean shipping, air freight, rail, etc.
Having a 3PL company to handle all the storage, fulfillment and shipping of your products can be great, but only if they actually have products in stock on their shelves when an order is placed. Being well-informed in what lead times are needed to keep items in stock, how long it will take to replace them, and even when they are likely to sell out is all part of inventory forecasting. A good 3PL that provides inventory forecasting will use software to not only tell you when products are running low, but will be able to predict when they are likely to run low based on sales history, trends, and other data.
As you can see, 3PL companies can provide any number of beneficial services, and these services can offer a business real advantages compared to handling logistics on their own.
For one, getting another company to handle logistics will free up your company to spend more time and resources doing what you do best, which is focusing on your core products and services, developing new products, and being active in the sales and marketing of those products.
3PL companies are also probably going to be better at handling logistics than you would ever be on your own. They have experience and expertise that make them smarter and more efficient. In fact, if anything you’d need to worry about them being TOO good. You’ll need to remind yourself to keep good lines of communication between your company and your 3PL provider so that you can handle any problems that come up with customers effectively, since you won’t have as much of a direct ability to solve customer issues, such as those with shipping or quality control.
As mentioned above, working with a 3PL company can also help you immensely with international sales, and potentially even provide you with the opportunity to sell to new global markets that you wouldn’t otherwise be capable of reaching.
While getting set up with a 3PL provider can be a significant investment up front, there are bound to be long-term savings from not having to lease, staff, and maintain your own warehouse, not having to fulfill orders, and not having to handle packaging and shipping yourself. And those savings can be extensive.
If your company is considering 3PL, contact 10twelve for a brief consultation on how to decide if 3PL is the right fit for your company.