What is Third Party Logistics? Why does your business need one!
In logistics and the supply chain management third party logistics (abbreviated to 3PL) means the use of third-party companies to outsource various components of its distribution, warehousing fulfillment services by an organization. Typically, third-party logistics suppliers are specialized in integrated warehousing and transportation services activities that can be scaled and tailored to the needs of clients depending on market circumstances to satisfy the requirements for their products and distribution services. A provider of such integrated services is referenced as a third-party supply chain manager (3PSCM) or supply chain management service provider (SCMSP). 3PL targets specific supply management tasks, such as warehousing, transport or supply of raw materials
What is 3pl?
Before the Internet, however, the first 3PL’s were born in the 1970s. Some businesses acknowledged that outsourcing some or all of their logistical functions could save them a considerable amount of capital. And the amount of 3PL suppliers to select from was growing once the online sales became more popular or picked momentum.
The term third party logistics is used for those businesses that manage the acquisition of a product, logistics and the process of storing inventory, collecting and packing of products or shipping the orders that were placed online by the customers from all over the world. In the previous century, the product selling process involved two-side i.e. the suppliers and the manufacturers. Since the digitization of the economies, a third party has come into existence that oversees the management and shipping of the inventory.
They are fundamental in light of the fact that most online business stores basically can’t deal with all aspects of the business from the manufacturing of a product (sometimes retailing) to advertising, deals, stock administration, and transportation, etc. The 3PL suppliers help them take half of these administrations off their hands, enabling them to focus more on growing their business.
An Indication that your Business is in Need of a 3PL Service Provider
A 3PL only costs you for the room and facilities you are using, making your cash flow convenient to handle. In the end, all supply chain efficiencies contribute to a reduction in expenses. The more you see, automate and regulate inventories from manufacture to logistics, the stronger your base becomes.
• Overflow of Packaging and Inventory — Your business is expanding beyond your office and due to which you need to start resigning your order fulfillment process by outsourcing certain services. A third party logistician helps owner to hold more inventory and packaging to make sure your orders are handled as efficiently as possible.
• There’s no time for Marketing or Client Servicing –Fulfillment and shipping is a long-term practice and small business owners only have so many hours a day. Order fulfillment of the customers and shipping is taking up too much of your time. You need to spend time on customer service and expand the customer base to ensure your business is successful. The transfer of performance duties to a professional means that you can be more efficient with your time.
• Transportation Costs are cutting into your Profits — You have no time to negotiate rates with shipping/transportation bearers. Shipping is a significant cost to companies in e-commerce, but their tiny size provides them little negotiating authority for better prices. By aligning your company with a 3PL, you can use its size to get better delivery expenses. For you this means better profit and reliable order fulfillment.
• You are selling to specific locations or new zones — The factor to consider over here is the duration it takes for you to deliver the product to the concerned customer. Having a partnership with a 3PL service provider closer to where you are selling can result in quicker and less expensive delivery.
Different kinds of businesses require different kind of third party logistics service providers that suit their logistic needs or demands. Online shopping is gaining huge momentum due to its growing popularity among consumers. Due to the high expectation of the consumers, there is too much pressure on the retailers to satisfy the rising demands of the customers. And there are certain companies like Amazon which has created high expectancy ratio among the customers for low cost and express delivery.
It was discovered in a survey that:
• 46% of clients who relinquished their carts expressed it was on the grounds that delivery charges were excessively high.
• Then again, 69% of those studied expressed that they are significantly less liable to shop with a retailer again if their package isn’t conveyed within two days of date guaranteed.
• The expense of order processing is usually 70% of the total sum of the order value.
How can your business stay profitable when customer demand for cheap and accurate shipping takes so much of your profits? Therefore various e-commerce businesses resort to Third Party Logistics (3PL) to enhance their speed and efficiency and lower their expenses. Right, Third Party Logistician can prove to be an asset for developing your business. However the wrong one causes more issues. Therefore careful consideration is of prime importance before choosing a service provider.
