Everything You Need To Know About Third Party Logistics Providers
Third party logistics providers offer a valuable service for your company as your order volume begins to scale up. When your core business does not revolve around supply chains and logistics, it can be difficult to put together the infrastructure that you need to properly support your company. When the customer experience is so important to how you're perceived as a brand, the last thing you want is for a lot of people to wait too long for their shipments. That's the type of mishap that has led to companies ultimately failing because of unexpected growth.
When you partner with a 3PL, they handle part or all of your logistics and supply chain. The primary difference between a 3PL and other types of logistics provider is that a 3PL provider works directly with your ordering system through integration. The typical workflow is that a customer orders a product through your store, and that order then gets processed and passed over to the 3PL provider. They handle the rest of the process, picking, packing and shipping the order to the customer. Warehousing, distribution, returns, shipping, and delivery are all part of the services that 3PL providers offer. Their supply chain and logistics experts focus on that aspect of your business, while you stay focused on the core competencies that established you in the marketplace.
You receive significant benefits from bringing in a 3PL to assist with your retail or ecommerce business operations. With companies competing on a global level, especially as they move from small to medium size. Supply chain logistics require a lot of specialized knowledge, infrastructure, and equipment to get orders from the warehouse to the customer's door. The 3PL has all that available for your business, which leads to these benefits:
Decreasing costs: You don't have to pay for the upfront fees associated with implementing supply chain logistics in your organization. Instead, you consolidate that into the fees that you pay the 3PL, which are typically much less.
Seamless scaling: Sudden order surges don't need to spell confusion or disaster. Instead, you can pat yourself on the back for your success and know that everything gets delivered on time thanks to 3PL providers.
Flexible delivery options: You can expand the types of delivery options and speeds that you offer your customers, so they can choose the right mix of delivery date and price that makes them the happiest.
Access to specialized skills and infrastructure: You don't have to maintain your own supply chain logistics department, as you can leverage the resources that the service provider already has available, such as a freight fleet.
Assistance with domestic and international compliance: Maintaining compliance is difficult enough when you're only dealing with domestic concerns. When you start to look at a global shipping marketplace, you run into a lot more complexity. The 3PL provider already has familiarity with these regulations, as they're part of the business' core competencies. They can ensure that you don't accidentally break any regulations when you send out orders.
Continual supply chain improvements: The 3PL company is always improving operations on their end, which results in a benefit to your company too. Whether they're upgrading to the latest solutions or partnering with more shipping companies, they can stay right alongside you with their innovations.
Flexible warehouse space: Use as little or as much of the warehouse space as you need, without dealing with the expenses associated with unused space.
Control overhead costs: If you did everything in-house, you would have to plan for your maximum order capacity, rather than your average. The unused infrastructure still needs to be staffed and maintained so that it is ready during high-demand periods. When you work with a 3PL, you take these expenses off the table.
Take advantage of favorable rates: The scale of the 3PL provider typically means that they have access to improved shipping costs and other rates.
Improved customer experience: Bad customer reviews add up fast, and you don't want to find yourself in a PR disaster because hundreds or thousands of orders were a month late. 3PL providers save you from that dire situation and keep your customer experience good and consistent.
A 3PL can manage the entire supply chain or the parts that you struggle with the most. They can also offer consultation services if you prefer to handle things in-house, or directly manage your systems as a service. When you bring in a highly experienced supply chain expert, they can advise you on ways to optimize the system, monitor it for any problems, properly train employees, and keep everything running smoothly.
These are the three areas that 3PL providers help with the most. You can choose to outsource all of these functions to the 3PL company or leverage their infrastructure to complement your own resources. Warehousing is particularly attractive to companies as they start to scale up, as you can rapidly run out of space to store inventory. Maintaining warehouse space and staff gets expensive, fast, and it's difficult to scale rapidly if you run into huge spikes in demand.
The 3PL has plenty of warehouse space available, and since they work with multiple clients, you can scale your needs up and down as required. Even if you have a lot of storage space available at your headquarters, you can take advantage of the warehouse locations in high-demand areas to speed up your shipping and to handle expedited orders.
Distribution and transportation 3PL services involve moving inventory and shipments around. This includes shifting inventory between warehouses, picking up inventory at your place of business, and getting orders to your customers.
You don't want to wake up and have your 3PL provider go under overnight. Look into their financial stability and ask to see supporting documentation that shows that they're a reliable company. Supply chain logistics is one of the most important aspects of your business operation, and you don't want to trust something so critical to just any company.
Compare the warehouse capacity and locations against the typical order numbers that you see. You want to have warehouses that are convenient to your most commonly shipped locations to speed up delivery in those areas.
Has the 3PL company worked with organizations in your industry? How about in the same market that you operate in? That kind of hands-on knowledge can make a big difference in the quality of service you receive, especially if you have specialized shipping requirements for your inventory.
You don't want to try to work with a 3PL whose primary hours are completely opposite of yours. Make sure that communication won't be an issue during standard business hours for your company.
How fast can the 3PL provider get orders to their destination? Do they offer two-day, next-day, and same-day delivery? Look at the commonly requested shipping speeds for your orders when you determine the delivery options you want to offer through the 3PL provider.
Is the 3PL company capable of supporting your maximum order capacity? How quickly can they scale up to the increased demand level?
Before working with a 3PL provider, make sure that their backend systems work well with yours. Having a properly integrated and synched system means a much smoother workflow and less confusion when it comes to out of stock inventory, whether an order has been processed and shipped, and other details.
Check any provided references and try to get referrals from your colleagues to get leads on good 3PL providers for your area.
Finally, how much does the 3PL charge to provide the requested services? This estimate is typically broken down into multiple sections to show you how much everything costs. If you're uncertain how the company came to the price that they quote, ask them to break it down further and explain the calculation. You don't want to have hidden fees popping up in the middle of an order surge, after all. Some areas to ask about include what gets included with the provided quote, add-on services, shipping rates, returns management, package insurance, when orders need to be in to the warehouse, pick-and- pack fees, the monthly expenses associated with using their warehouses, transportation fees, service- level guarantees, order minimum volumes, and set-up fees.