As a company grows and offers more services and goods to more consumers in more areas, it must decide whether to outsource its shipping and fulfillment operations. Many of these firms rely on a third-party logistics (3PL logistics) supplier to satisfy consumer demand.
However, not all 3PLs provide the same services and capabilities. Continue reading to find out all you need to know about third-party logistics providers and the important business processes they serve.
Before determining whether to outsource your logistics to a third-party logistics company, be sure you understand what 3PL logistics services include.
Think of logistics in the broad sense of organizing a complex process. A logistics process refers to the movement of commodities along a supply chain in businesses that sell products or procure raw materials. The following are examples of logistics services:
- Storage and warehousing
- Inventory control in retail
- Kitting and putting together
- Logistics in reverse (returns)
- Distribution and fulfillment
- Product delivery deadlines are approaching
- completion of pick and pack
- Drayage, transloading, and cross-docking
One of the most significant benefits of third-party logistics is the cost-effectiveness it delivers. Because third-party logistics providers operate with a wide range of businesses, they are able to provide far lower and more appealing shipping rates to individual eCommerce businesses.
Managing logistics in-house is a very expensive investment. 3PL (3PL logistics) organizations, on the other hand, may exploit economies of scale to provide valuable transportation services at significantly reduced costs.
Inventory management is another advantage of third-party logistics. E-commerce businesses may rely on 3PLs to manage their inventory, keep track of which goods are in stock, refill stock as needed, and update inventory in the event of product returns or exchanges.
In inventory management, all inventory is classified into SKUs and housed in warehouse racks and bins. To display new goods on the e-commerce company’s website or virtual marketplaces, 3PLs will use an OMS (Order Management System) or WMS (Warehouse Management System).
While there are evident benefits to outsourcing your logistical needs, you should also evaluate the disadvantages of partnering with another organization. Some of these may be dealbreakers based on your company’s needs and where you want to take them. If you elect to outsource to a third-party logistics provider, you can:
- You may lose the talents and infrastructure that you would like to build.
- Has difficulty locating a reliable 3PL?
- Give up some control over your image and client service.
- Send your inventory to an unidentified third party.
Other businesses may choose not to utilize a 3PL provider in order to preserve as much control over their supply chain as feasible.
Simply said, you may not feel comfortable entrusting your inventory to a third party, especially if you are just starting or are concerned about security.
If you just have a few clients, the ability to ship at low cost and scale may not be a meaningful advantage for your trade-off. If you wish to maintain solid control over your image, you may also be hesitant to delegate client contacts to a third party.
So, in this article, you have read what are 3PL logistics, their use cases, and their benefits and disadvantages. You can do more and more research on this topic to grab a better understanding.