When logistics is not your company’s main skill, it can help to hire a sub-contractor who specializes in shipping and distribution to assist with those tasks. But making the decision to outsource work from your business can be a difficult job. Choosing the correct provider who will meet all your needs, work within your budget and schedule, and help keep your company running smoothly can take some time. Knowing the pros and cons of using a third-party logistics company (3PL) will make the selection process easier and help you pick the right company to trust with your inventory and your business.
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Third-party logistics companies provide supply chain processes for a variety of industries. These companies specialize in procurement, transportation, and distribution functions and can customize their services to meet each client’s needs. Third-party logistics companies take the burden of inventory management off of their customers’ shoulders and use their logistics skills to allow their clients to focus on their own products and services.
Instead of worrying over the costs of labor, storage, and technology related to receiving and fulfilling orders, you can hand these tasks over to a 3PL. A 3PL can save you time and money by supplying staff for handling inventory and shipping and usually offers better prices due to bulk discounts on packing and other logistics needs.
Logistics companies use their knowledge of supply chain processes and procedures, along with their network of inventory and shipping contacts to take this work off of their clients’ hands. The main services most third-party logistics companies offer include:
Some 3PLs also offer inventory management, quick-turn-around shipping times and other services business owners might need to help with managing their supply chains.
Related: What is the Difference Between 3PL vs Freight Broker?
How can third-party logistics really help me, you might ask? Here are a few examples of businesses that benefited from hiring a third-party logistics company to assist with their logistics needs.
Sara’s new t-shirt business has really taken off in the last few months. Her sales have sky-rocketed and she is even getting overseas orders. Keeping up with her inventory has become overwhelming for her. The small storage room in her company’s office can’t hold all of the shirts she and her employees are creating, and trying to get shipping labels printed, packages assembled, and orders sent to the correct locations is taking too much of her designers’ time. She needs some help! After researching the benefits of using a third-party logistics company, she has decided to use Acme Logistics to handle the supply chain process for her t-shirts. Acme can store Sara’s shirts, and take care of packing and shipping all of her orders, and their network of contacts will get her the best possible prices for domestic and international distribution. Sara can now focus on continuing to build her business and channel her energies into creating more great shirts
Mike has expanded his family’s candy business since he took over five years ago. When he started, it was a small group of people who were able to run a small store inside the candy factory, and delivery was confined to the local area. Since Mike added online ordering to the company’s services, he is having a hard time keeping up with the demand for shipping candy across the country without it spoiling or melting. When he found out that the Mega-Logistics Company offered refrigerated storage and shipping, he contacted them right away. Mega-Logistics was able to better organize Mike’s inventory and keep the candy fresh from receipt in their storage warehouse through travel and delivery to his customers.
While there might be a few drawbacks to outsourcing logistics for your company, there are numerous advantages to using a 3PL for your supply chain needs.
Related: Third Party Logistics (3PL): Advantages and Disadvantages
Small to mid-sized e-commerce businesses have the most to gain when they partner with third-party logistics companies. These are the types of e-commerce businesses that should hire a third-party logistics warehouse and logistics provider:
If you don’t know whether your business can benefit from working with a 3PL services company, here are some questions to ask yourself:
Is your business at the point where orders are piling up? Do you struggle with handling your business’ sales, management, and administrative duties because all your time and energy are dedicated to logistics? If you answered yes to either of these questions, it is a sign you should partner with a third-party logistics provider.
Trying to manage your growing business’ logistics on your own can have devastating consequences including angry customers, poor quality workmanship, missed delivery dates, and dismal customer service. Each of these can destroy your business rather than expanding it.
Having a system in place that keeps customers informed about the status of their order during delivery will keep your customers happy. Customers who have a positive experience with your company will likely return and result in your business’ growth. Working with a third-party logistics warehouse and shipping logistics company will keep your customers in the know about when their order will be shipped and when they can expect to receive it. If you don’t have this level of communication with your customers, you risk losing them.
When it comes to order fulfillment logistics, human error is basically inevitable. However, if your company is constantly missing delivery dates, shipping to the wrong location, or delivering the wrong items, you need a 3PL. These mistakes will drive away customers and put a potentially irreversible stain on your company’s reputation.
As your company grows, its logistics and operations will become more complex and complicated. If you don’t have the workforce, skills, tools, or resources to tackle the increased complexity, you and your team will get burned out. Third-party logistics companies are armed with programs, software, skills, and expertise to help your business’ logistics and operations run smoothly as they grow and become more complicated.
For your business to grow and succeed, you need to make smart decisions. You can’t make logistics decisions without data about your supply chain. Knowing where your materials are, when your materials will arrive, what orders have come in, and when the orders will be delivered are some of the key data you need access to. Handing your logistics to a 3PL warehouse and logistics provider will give you access to valuable supply chain data that can save your business time and money.
The costs of packing supplies, labor, and shipping can add up. If you’re handling your own logistics, you can be spending more on order fulfillment than you need to. The costs of shipping orders will eat away at your margins. Working with a third-party logistics company can save your business money with discounted rates from carriers like DHL, FedEx, UPS, and USPS.
A work-life balance is important for employees to perform their best. It will also keep employees and happy. If the volume of orders coming in is so great that your employees must constantly work overtime, you need a 3PL services company.
Is your warehouse large enough to store your entire inventory? If you don’t, third-party logistics providers offer secure and convenient warehouse storage.
You know you need a third-party logistics company, but how do you know which one is best for your company? It’s important to note there are multiple types of 3PL providers.
Below are some questions to ask a 3PL service provider:
Below are some characteristics to consider when looking at prospective third-party logistics companies:
It can take many months to find the best third-party logistics company for your business. Chances are, however, your company can’t afford to wait this long. Here are some steps to evaluate prospective 3PL providers so your search is short:
If your business has grown and the work of shipping, receiving, and inventory control have gotten beyond your control, it is probably time to look into hiring a 3PL. 3PLs have the professional expertise to take on the tasks – and the cost – of storing, packing, and delivering your products. Outsourcing your supply chain processes to Ship My Orders can simplify your operations, save your company time and money and take the burden of logistics off your mind. Find out if we’re the right fit!