Ecommerce and most business-to-business (B2B) companies don’t exist to ship products. That may be an important role in what they do, but it’s not the purpose. They want to get their products to customers who can use them. The supply chain is how this happens, and many businesses find that outsourcing some or all of this role can improve their growth, customer service, and the bottom line.
Investing wisely in these supply chain services is important in meeting the company’s strategic goals. Third-party logistics (3PL) providers can do just that, providing various services depending on the business’s needs, from receiving and storing products to shipping them to handling returns. This is a high-level view of what a 3PL can provide. Digging into the details and sharing the five key functions of a 3PL will drive the point home: A 3PL can make a major difference in a company’s operations if it’s leveraged properly.
What is a 3PL?
Let’s start with the basics. A third-party logistics provider handles various parts of the supply chain relating to receiving, storing, and shipping products. They manage the inventory in a warehouse, ensuring the products are packaged properly and arrive at their destination, according to the shipper and customer’s preferences. If the items need to be returned, they can also handle that.
3PL as a Reliable Partner
It’s helpful to understand a 3PL as a supply chain management reliable partner, not just an intermediary. An intermediary carries out functions, like delivering the mail, picking up supplies for you, or completing another kind of service. A partner works with you to ensure you’re getting what you need and providing advice and expertise. They don’t just take orders, they think through the situation to ensure what you ask for is what you need—and get. They come up with solutions and customize their offerings so you get the highest value from your providers. The right 3PL partnership can help you optimize your shipping, lower your costs, and increase your sales. It frees up your time and resources to do what you do best.
Understanding 3PL Logistics Providers
With a supply chain 3PL provider, you no longer need to supervise the warehouse and provide your picking and packing, and product distribution. The 3PL has warehouse space, and it can scale up and down with your market needs. You don’t have to touch the products—it’s all done by the 3PL staff. Customers just know you’re shipping them their merchandise, whether it’s retail ecommerce customers or B2B clients. That’s why the partnership is important—you want a 3PL you can trust that can provide the best image for your company, representing you in a quality manner.
5 Key Functions and Benefits of 3PLs
Here are the five key functions and benefits of 3PLs.
Streamline Supply Chain Management and Transportation
Key Function: 3PLs can streamline the flow of goods and information across your supply chain. With their technology, warehouse management systems, inventory management systems, and transportation management systems, they can track what products are in stock, which are in transit, and what the client needs to know to order more. They also ensure that products are transported in a timely, secure way.
Benefits: 3PL management can efficiently meet customer demands while minimizing operational costs. They help their clients reach broader markets, enhance customer satisfaction, and improve distribution.
Optimize Inventory and Logistical Expertise
Key Function: A good supply chain 3PL will maintain accurate inventory records and implement effective control systems. This allows the company to concentrate on its core competencies while relying on the 3PL for its high-quality logistics. Many companies don’t have internal logistics departments, or the departments are not as fully staffed and trained as a 3PL. Partnering with a 3PL allows a company to leverage the outsourced functions to improve its operations through inventory management and logistics.
Benefits: With a 3PL behind them, companies can achieve optimal stock levels, effectively balancing supply and demand. Access to the 3PL’s inventory software can help companies ensure their order numbers and timing match needs, and they can use the 3PL’s expertise to improve their fulfillment process and send packages efficiently and cost-effectively.
Gather Analytics and Industry Insights
Key Function: 3PL management relies on software to efficiently manage their warehouses, inventory, and transportation. That is a huge benefit to shippers, especially if they don’t already have their software. The 3PLs collect, analyze, and interpret data that the companies can use for informed decision-making. They can also seamlessly navigate international regulations and compliance complexities that might provide obstacles and time-consuming efforts to address otherwise.
Benefit: With a supply chain 3PL, companies can identify areas of improvement, allowing greater business growth and efficiencies. With international market insights and expansion guidance from 3PL experts (including shipping to other domestic locations), companies can expand their markets and grow their businesses.
Reduce Risk While Saving Cost and Time
Key Function: Companies can partner with 3PLs to reduce risk in various ways, like ensuring that secure transportation and reliable delivery are available. This can reduce product loss and improve the customer experience. A 3PL in supply chain management can also reduce logistics costs, through lower shipping costs, personnel costs, and more efficient packing.
Benefits: With the reduced risk of using 3PL management, companies can enhance their profit margins by safeguarding products from damage or loss. Companies can use these savings to fund other strategic business endeavors.
Access to Market Expansion and Growth
Function: 3PLs provide access to established and expanded distribution networks, allowing businesses to reach new geographic regions without requiring extensive infrastructure investment. Their expertise can also help companies gain a foothold in those markets.
Benefit: Many companies rely on these distribution networks for quicker expansion. It’s like bringing in a consulting partner already part of your business process. The 3PL can help you explore untapped markets and increase overall business productivity.
Improving Customer Satisfaction With 3PLs
In addition to these five benefits, 3PL management can help companies provide exceptional customer service. They are focused on logistics, and it is their job to move products in a timely manner, reducing shipping risks like damage and late arrivals. They have customer service departments that can handle concerns in an appropriate manner. They have close relationships with carriers and easy access to the products in their warehouses. A 3PL in supply chain management can help a company streamline its operations, allowing it to provide customers with on-time deliveries, and reliable services, and to build customer loyalty.
There are several ways businesses can grow and thrive. A 3PL can help businesses move into new markets, whether shipping to international clients, sending new product types requiring unique packaging, or providing faster service. By outsourcing the supply chain logistics to an expert 3PL, the business can focus on what it does best. This 3PL relationship is a partnership and should be a win-win proposition. The 3PL wants to retain the business too, doing a great job in its services and providing the expertise needed to grow.
One way to grow is by improving and maintaining good relationships with customers. These customers, whether ecommerce or B2B, don’t care who ships the products, they just want them to arrive on time and in good condition. Consumer satisfaction is vital.
3PLs can provide services not easily obtained in-house, like lower shipping costs due to their high-volume shipping, faster and more accurate picking and packing, warehousing options domestically and globally, expertise in international shipping, and technology to help optimize inventory and analytics.
3PL Contract Consulting with Shipware
As you consider adding a 3PL provider to your business strategy (or finding a new one), know that Shipware can help. Shipware assists businesses of all types in locating suitable 3PL partners and enhancing service levels, while also achieving cost savings through contract negotiations. We offer a complimentary evaluation for optimizing and negotiating 3PL contracts. Contact us today to start the process.
This post was developed by SIB’s team of logistics experts from our Shipware division.