Some people may think the logistics sector and the supply chain are one and the same, but this couldn't be further from the truth. There are many stages of the supply chain and many types of specialized companies operating at each one. While they act all along the supply chain, logistics businesses are highly particular in what they do and they have expertise other companies don't.
Warehousing and storage or manufacturing organizations, for example, might not have the requisite know-how or equipment to transport goods along the supply chain, and this is where third-party logistics (3PL) comes into play.
What is 3PL? What are the benefits of partnering with a 3PL company? And is a partnership the right move for your business?
As the name suggests, 3PL refers to using independent logistics contractors to move goods on a business's behalf. Beyond just transporting goods across the roads, seas and skies, 3PLs also provide highly trained employees who can help pick and pack products. Unlike 1PLs (first-party logistics) that provide only transportation services, 3PLs also assist in warehouse storage, management and organization. According to Mecalux, 3PLs act as a "go-between" for manufacturers and retailers.
As Shopify explains, because 3PL workers are so experienced in what they do, hiring them makes it easier for companies that aren't specialized in logistics to load and move cargo. This saves valuable time as businesses don't have to spend periods correcting mistakes. Naturally, this allows manufacturers to get their merchandise to customers and retailers much faster, which is always a win-win in the supply chain and retail sectors.
Furthermore, contracting a 3PL also helps reduce overhead expenses. How so? After all, that seems counterintuitive, given that you need to pay a 3PL partner, which is yet another cost. However, with that expertise comes a much lower risk of broken or missing goods, which means businesses can save considerable amounts on replacements.
Additionally, thanks to minimized turnover times, companies that partner with a 3PL might very well find that they generate more sales than their competitors. You'd be hard-pressed to find a customer who doesn't want their purchase on their doorstep sooner rather than later. And, in the world of the internet and social media, word spreads fast and good reviews and recommendations can strengthen your brand's reputation. This, in turn, can lead to greater order volumes and sales.
As with any question like this, the answer will be totally dependent on your organization's unique needs and circumstances. That said, it's advisable to outsource inventory storage and transport to a 3PL if you find that you're spending excessive time and money trying to handle and move your own merchandise. It's a good idea to partner with a 3PL if you don't have the capacity, know-how or necessary equipment to take care of logistics yourself. Choose your productivity metrics and crunch some numbers to help you make the decision.