Logistics 101: What Is 3PL?

what is 3PL?

Have you noticed how increasingly complex the modern supply chain has become? And there is no sign of it getting any easier anytime soon. In order to ensure that their goods make it to the consumer’s door or the retail store itself at the lowest possible cost, more and more companies are relying on 3PL providers.

Companies not wishing to invest in solutions to logistics issues rely heartily on 3PLs. “Investing in solutions” can mean keeping/paying the staff to solve all of their problems (i.e. storing and managing their stock in a warehouse, no-delay premium delivery solutions, etc.) and the running of those departments.

Third Party Logistics or 3PL

The official definition of 3PL or third party logistics is the outsourcing of all of your logistics operations and your supply chain to a different company. With behind-the-scene tasks being taken care of by a 3PL, it frees you up to devote your focus to marketing, sales, and business development.

What Are the Benefits of 3PL?

You will need to figure out which makes better sense – to outsource your ‘services’ or to manage them in-house – in order to accurately calculate the use of a 3PL’s cost benefits – ‘services’ being things like distribution and freight, reporting, order processing and management, inventory management, cross docking, the receipt and de-stuffing of containers, etc.

So, ask yourself if you have the resources (staff members) that can not only place received goods in the proper areas on the shelves of your warehouse but, if needed, add barcodes, unpack containers, and more. And speaking of warehouses, can you really afford that warehouse rental? When you look at all of the things to consider, it just makes good business sense that many or all of a shipper’s logistics services are outsourced.

Saving On Costs

There is buying power in 3PLs. They are the negotiators of lower costs when it comes to warehousing and shipping prices. Those savings are, of course, passed on to you. Because consumers today expect flat shipping rates (the less expensive the better) it is vital that the best prices for shipping that they can possibly offer be presented by online retailers.

  • Focus on business growth – you can focus on your business and growing it while your 3PL worries about supply chain management, logistics, etc.
  • Make a commitment to low capital – consider costs such as people power, IT systems, and electricity… those (and other) combined costs of maintaining a warehouse makes using a 3PL look extremely attractive.
  • Performance gains – improvements in order accuracy and order fill rates are just a couple of the advantages enjoyed by shippers who use 3PLs.

Additionally, 3PL works well for seasonal variations. Here’s an example: ramp up your 3PL investments quickly in the pre-Christmas, peak selling period. Then, when Christmas is over and all of the presents have been delivered, you can scale your 3PL back down to where it was before the seasonal rush. Bottom line: you can rely on a dependable 3PL company to make things run smoother. And that can make it just a little easier for you to sleep at night.