What is 3PL?
One of the most frequent questions we encounter is: what is 3PL?
So, what is 3PL?
By definition,
The 3PL meaning is an abbreviation of the phrase: third party logistics. It is a growing industry where you outsource your entire shipping and delivery logistics to a specialised business.
From transporting your products to secure warehousing and customised packaging to stock management – 3PL outsourcing logistics takes away considerable overheads and allows you to focus on your core competency.
Still confused? Head over to our pros and cons to decide:
Still confused?
Head over to our pros and cons to decide:.
What are the benefits of using a 3PL provider?
There are various benefits of using a dedicated 3PL provider. Not only do you benefit from reduced work overload, but you also benefit from niche expertise. Here are some more:
Content Management
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3PL providers benefit from niche exposure, allowing them more leverage when negotiating with freight forwarders. This will enable them to offer cheaper, more affordable rates to their clients.
As they deal with bulk orders, they can decrease shipping costs to a point which is not realistically possible for a sole business.
Scale up or down as needed
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Not every month is the same. However, 3PL outsourcing logistics allow you to adjust your shipping requirements based on your order volume.
With shipping costs taking on a more variable nature, you can be more confident taking on business decisions without having to commit capital to shipping costs.
Provide a better customer experience
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Shipping is an entire industry in itself. With same-day delivery being the industry standard, businesses benefit from a dedicated 3PL outsourcing logistics provider who can ensure customer expectations are met, leading to an enhanced user experience.
Test new markets
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With a 3PL provider, businesses can deliver their products to new markets without having to set up shipping routes, warehouses, and finding the right shipping company. With an international 3PL service provider, you can increase exposure.
Mitigate risk
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Delays during shipping are not an uncommon sight. Without alternative arrangements in place, your delivery can be delayed for weeks at an end. 3PL providers are experienced enough to make such arrangements beforehand, ensuring timely delivery to your consumers.
Gain instant expertise and knowledge in the field
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If you are a growing business, shipping can represent a significant challenge with all the nuances and cost involved. Working with a 3PL provider allows you to leave the challenges to the experts.
Not only can you learn how to organise your logistics, but you also waive off the additional worries that come with managing in-house shipping.
Get a handle on international logistics
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When you plan on going international, there is much documentation, verification, and taxes to deal with. A 3PL provider not only has a sound knowledge of the prerequisites but prepare for it beforehand to avoid any delay in the shipping time.
Generate cost savings
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What’s a 3PL warehouse useful for? Well, firstly, you negate the additional costs of hiring staff, buying the space and managing the entire department.
Additionally, 3PL providers provide detailed analytics to find the optimal inventory level and save additional money.
What are the cons of using a 3PL provider?
However, 3PL outsourcing logistics might not be for everyone. Here are a few cons for this:
Less control over the process
While you might have outsourced the delivery process, the consumer will still find you guilty in case of a delay. This may prove challenging as you have minimal authority over the process.
Large upfront investment
If your business does not receive large orders, the initial investment involved in setting up a 3PL vendor can be discouraging. Nonetheless, a 3PL provider covers itself in the long run.
More distance between you and your product
Some businesses require extensive quality assurance, or you may incur a product issue which was identified later. In such a scenario, you may find the distance between the warehouse and your location challenging.
Which 3PL company is right for you?
The right provider has to tick a lot of boxes. Even if you have shortlisted a few, finding the ultimate 3PL partner involves considering a lot more factors.
Let‘s go through some factors that can help you pick the right one:
1. Current and forecasted volumes
The whole point of partnering with a 3PL outsourcing logistics provider is to grow. That is why it is vital to work with a provider that can scale with your business. You can‘t be looking for a new logistics partner once you hit full speed!
2. References and business performance
Before you approach the logistic provider heads on, it is crucial to do a subtle background check on them. Speak to a few of their former and current clientele to observe how they have fared in the last few years.
Another important reflector of their performance is customer feedback. Do they have any success stories in their resources? What are the general remarks on their website or social media pages?
The right 3PL provider will show a pattern of retaining clients and always delivering on their promises.
3. Compatible technology
When it comes to shipping logistics, there are various analytics that you have to study. From inventory forecasts to stock levels, you will require reports and data.
However, if your 3PL provider does not have the same compatibility, transfer of data can become an issue. If you are using a cloud-based inventory management system, you should choose a company that utilises similar technology.