Why Companies Use Third-Party Logistics (3PL) Providers and the Benefits

Outsourcing fulfillment and supply chain operations to a third-party logistics (3PL) provider offers numerous benefits for companies seeking to optimize their warehousing, distribution, inventory management, and overall logistics performance. Specifically, as the supply chain grows more complex, many businesses find it advantageous to leverage the expertise of 3PLs to handle logistics functions so they can focus on core competencies.

What is a 3PL?

why companies use 3pl providers

A third-party logistics provider manages warehousing, transportation, freight forwarding, order fulfillment, reverse logistics, and other supply chain activities on behalf of client companies. Rather than handling these complex logistics operations in-house, businesses outsource them to 3PLs that have the advanced technology, extensive carrier relationships, and supply chain know-how to expertly coordinate global shipping, inventory management, and multi-channel order processing. These considerations are why companies use 3pl providers instead of trying to manage all these functions on their own.

As specialists in warehousing, distribution, and transportation solutions, 3PLs enable companies to scale operations, enter new markets, and meet customer delivery expectations in a dynamic business landscape. They provide flexible, scalable fulfillment and shipping solutions tailored to each company’s requirements.

Benefits of Using a 3PL Provider

why companies use 3pl providers

Reduce Logistic Costs

By leveraging the economies of scale 3PLs enjoy from working with multiple clients, businesses can reduce overall logistics costs associated with operating their own fulfillment centers and managing transportation. In addition, outsourcing to 3PL providers also converts fixed costs into variable costs, resulting in a more predictable, cost-efficient model.

Access Advanced Technology

Top 3PL providers offer cutting-edge warehouse management systems (WMS), transportation management systems (TMS), inventory management software, and other technology to gain end-to-end visibility and control across the supply chain. This technology is invaluable for forecasting, inventory optimization, and providing exceptional customer experiences.

Focus on Core Business

Rather than directing valuable resources toward managing logistics operations, companies can shift focus to critical functions like production, marketing, and product development by partnering with a 3PL provider. The 3PL becomes an extension of their business, handling vital but non-core supply chain activities.

Improve Customer Service

By leveraging 3PL transportation networks and technology solutions, businesses can ensure on-time order delivery, provide real-time shipment tracking and visibility, process returns, and enable emerging delivery options to effectively serve customers. They also gain access to additional services like kitting and assembly.

Enter New Markets

3PL providers empower businesses to expand into new domestic and international markets by handling complex import/export processes, customs brokerage, final-mile delivery to global locations, and localization expertise to navigate regulatory environments. Their global warehouse networks and logistics capabilities facilitate scalable market growth.

Meet Customer Expectations

Today’s on-demand economy requires fast, flexible delivery options. So, 3PLs enable businesses to provide same-day and next-day shipping capabilities to meet and exceed rising customer expectations. Additionally, their technology also supports real-time order tracking and visibility.

Improve Supply Chain Agility and Resilience

By coordinating transportation across extensive carrier networks, 3PL providers enhance overall supply chain resilience for clients. Their ability to quickly reroute shipments and leverage alternative solutions prevents disruptions to inventory and order fulfillment flow. They add flexibility and continuity that supports growth.

How 3PL Providers Streamline the Supply Chain

why companies use 3pl providers

One of the reasons why companies use 3pl providers is to help with supply chain management. Through technologically advanced, strategically located fulfillment centers, 3PL providers offer warehousing, pick/pack processes, kitting and assembly, and value-added services to swiftly fulfill online orders, retail replenishment orders, and manufacturing production orders. They also split large orders as needed to optimize transportation.

Shipment Consolidation and Distribution

To maximize transportation efficiency, 3PL providers consolidate less-than-truckload (LTL) shipments from multiple clients into full truckloads. They also optimize delivery routes, leverage aggregated volumes for lower shipping rates, and handle global distribution challenges. This reduces freight costs and environmental impact.

Real-Time Tracking and Visibility

why companies use 3pl providers

Utilizing shipment tracking interfaces and supply chain data analytics, 3PL customers can closely monitor order status across the fulfillment lifecycle for this purpose. This includes inbound inventory to warehouses, order processing stages, carrier status updates, and final delivery. Enhanced visibility facilitates proactive issue resolution.

Reverse Logistics and Returns

why companies use 3pl providers

Returns processing and reverse logistics present significant challenges, especially for e-commerce businesses. For those reasons, 3PL providers simplify, accelerate, and reduce costs associated with RMA approvals, refunds/replacements, transporting returned items, inspecting for damages/defects, and managing asset recovery.

Beginner’s Guide to Third-Party Logistics (3PL)

The world of e-commerce is always changing, understanding the roll of Third-Party Logistics is integral to keeping up. This beginner’s guide to third-party logistics (3PL) will delve into the essential aspects, offering insights into fulfillment services, warehousing, and much more.

Read More…

Choosing the Right 3PL Partner

With an array of 3PL providers to choose from, conduct thorough research to select one that best matches your business requirements, operational workflows, technology needs, inventory profiles, transportation lanes, and customer expectations. In essence, carefully assess their range of supply chain services, existing client base, customer service standards, operational performance metrics, stability and years in business, advanced technology capabilities, and global warehouse footprint. This helps ensure an excellent long-term strategic partner to streamline your supply chain.

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