Why Use a 3PL (Third-Party Logistics)? Pros, Cons & Benefits

Due to its numerous advantages, the use of 3PL (Third Party Logistics) has been on the rise in recent years.

For businesses looking to save time, money, and resources… outsourcing their logistics operations to a third-party provider is becoming an increasingly popular choice. From managing inventory, to ensuring timely delivery of goods, 3PLs provide businesses with an experienced and reliable partner that can help them avoid the operational headaches that come with warehousing and distribution. 

In this blog post, we’ll discuss why businesses should consider utilizing a 3PL for their shipping and logistics needs. We’ll explore the various cost savings that can be achieved by outsourcing these services as well as the peace of mind that comes along with having an expert handle your logistics operations. 

Ultimately, businesses will learn why leveraging a 3PL can make a substantial difference in their bottom line and overall success rate without sacrificing quality or customer service levels.

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Why should I use a 3PL?

Most companies that deal with inventory prefer to outsource to a 3PL – since they can put dedicated focus on regular operations. Taking on warehouse + distribution responsibilities (often) puts too much burden on a company that is looking to grow and scale.

Advantages of a 3PL

Manage inventory + order fulfillment (at cheaper costs)

Using a 3PL company can be an invaluable resource for businesses operating in the ecommerce market. 

By using a third-party logistics provider, businesses are able to outsource their inventory management and order fulfillment to experienced professionals who know how to maximize efficiency and accuracy. 

This type of service allows business owners to focus on their core competencies, such as marketing and sales, without having to worry about hiring staff or managing logistics operations.

A few points to note:

  • In addition to saving time and effort, 3PL services can also greatly improve operational performance. 
  • Companies that outsource their logistics services often experience increased customer satisfaction due to prompt delivery times and high accuracy rates. 
  • Furthermore, outsourced providers are usually more technologically advanced than in-house teams, so they can provide cutting-edge solutions that would not be available otherwise. 
  • For example, many 3PL companies employ sophisticated tracking systems that allow customers to monitor their orders in real-time. 

This level of transparency helps build trust with customers by giving them access to accurate information about their purchases throughout the entire process.

Furthermore, 3PLs can also help businesses reduce costs related to warehousing and shipping expenses. Since 3PLs have access to a wide network of carriers, they’re able to find better deals on shipping costs than most companies could obtain on their own. 

Additionally, outsourced providers often offer discounts for bulk orders or volume discounts due to their relationships with major carriers. 

Finally, outsourcing order fulfillment gives companies access to specialized expertise that may not be available internally; this includes warehouse design consultation services which can streamline processes and maximize space usage for maximum efficiency gains. 

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To sum it up:

  • Outsourcing provides increased operational performance thanks to improved customer satisfaction levels as well as cost savings associated with discounted shipping rates or bulk order discounts. 
  • 3PLs often bring specialized expertise in warehouse design and logistics optimization which can further streamline operations while increasing accuracy at the same time. 
  • Ultimately, using a 3PL is an excellent way for businesses operating in the ecommerce market to save time and money while still providing excellent service levels for customers every step of the way.

Track shipments and ensure on-time delivery

Using a 3PL company for your logistics needs provides many advantages – one of the most valuable being their ability to track shipments and ensure on-time delivery. 

Losing track of your shipments is a huge supply chain mistake – especially as an e-commerce or Amazon seller.

By keeping accurate records, third party logistics companies are able to know exactly where each shipment is in real time, meaning they can adjust plans if needed in order to ensure on-time delivery. This means that customers who need goods and services delivered in a timely manner will be able to trust that their order will arrive as expected when they go through a 3PL provider.

  • A reliable 3PL’s ability to provide customized solutions that meet the specific requirements of each customer is extremely useful when it’s time to grow and scale. 
  • This might include custom packing and shipping services, or specialized tracking technologies. 
  • These personalized solutions allow customers to get exactly what they need while still enjoying the benefits of having one partner manage their entire supply chain. 
  • Plus, these solutions often come with additional features such as automated notifications of delays or other issues, so customers can stay up-to-date throughout the process.

Overall, using a 3PL company for your logistics needs offers several advantages over other methods of shipment tracking and delivery. Their ability to track shipments and ensure on-time delivery reduces stress for customers who are depending on their goods arriving on time. Their tailored solutions allow customers to get precisely what they need from one convenient source without sacrificing quality or service. 

With all these benefits, it’s no wonder why more businesses are turning towards third party logistics providers for their supply chain management needs.

More time to focus on core business activities

Using a 3PL company can be beneficial for many businesses, especially those who don’t have the resources to handle their own logistics. 

It allows companies to outsource their warehousing, transportation and other supply chain activities. This means businesses can free up their time and focus on growing their core business by developing new products, expanding into new markets, fine-tuning marketing strategies or targeting new customer segments. 

Also keep in mind:

  • Not only does outsourcing your logistics operations help with time management but it can also provide cost savings. 
  • Logistics are expensive, so outsourcing to a 3PL company that has economies of scale will save money when it comes to warehousing costs and transportation fees. 
  • Additionally, a 3PL company brings expertise in the field of logistics operations which will ensure goods are delivered efficiently and on schedule. 
  • Working with a 3PL provider can bring additional benefits such as access to state-of-the-art technology for tracking goods in transit, specialized software for managing inventory levels and sophisticated shipment tracking systems. 

All these advantages make it clear why so many companies opt for partnering with 3PL companies for managing their supply chain operations. The convenience of having someone else handle all these activities enables them to focus on growing the core business and maximizing efficiency. 

As such, using a third party logistics provider is an effective strategy in helping businesses reduce costs while increasing productivity and staying ahead of the competition.

Expand into new markets

Using a 3PL company to manage your supply chain can be a great option for small and medium businesses looking to expand into new markets. Working with a 3PL can save you time, money and headaches that come with managing the entire process yourself.

  • One of the biggest advantages of using a 3PL company is the ability to move quickly into new markets (without having to invest in a lot of additional infrastructure or personnel).
  • A 3PL has existing relationships with carriers, warehouses and other resources that allow them to scale up or down as needed. 
  • This allows businesses to rapidly expand their reach and access new customers without having to incur the costs associated with building out their own full-scale supply chain operations. 

A 3PL also provides businesses with more control over their supply chain management – by allowing them to customize their services according to specific needs (such as setting delivery dates and times or requesting special handling instructions for fragile items). 

Why Use a 3PL (Third-Party Logistics)? Pros, Cons & Benefits

Because the 3PL is independent from your business, they are able to provide an unbiased perspective on areas where improvements could be made – something which is not possible when dealing solely internally. 

  • It’s also worth considering that experienced 3PL companies are well versed in compliance regulations both domestically and internationally, providing peace of mind regarding proper customs documentation and tax classifications. 
  • If your business plans on expanding its global reach, working with a 3PL can simplify matters significantly due to their advanced knowledge of international trade rules and regulations. 
  • In addition, since the majority of international shipping involves multiple parties coordinating efforts across many countries, the added layer of support provided by 3PLs helps ensure those processes go smoothly while keeping goods moving quickly and efficiently across borders. 

Grow and scale at faster rates

Since 3PLs specialize in warehousing, fulfillment, shipping, and returns… they have the experience, resources and expertise required to ensure that all parts of the supply chain are running smoothly. 

This is especially important for businesses that experience rapid growth or fluctuating demand. 

By outsourcing the logistics to a 3PL provider, scalability can be achieved quickly without having to worry about hiring additional staff or making large capital investments into new systems or facilities. 

  • Another advantage of using a 3PL is that they can provide access to high quality warehouses with advanced security measures such as video surveillance and protective locks. 
  • They also usually have specialized personnel who can handle a variety of tasks related to product distribution and inventory management – such as kitting and value-added services
  • By delegating certain critical functions of your business operations to an external provider, you are able to focus on more important aspects such as marketing or product development. 

Working with a 3PL gives you access to their technology infrastructure which includes web-based systems for tracking orders and shipments in real time as well as sophisticated analytics for understanding customer behavior patterns more effectively. 

Overall, by leveraging the resources available through third party logistics providers, businesses can reduce their costs associated with inventory management – while gaining access to cutting edge technology in order to optimize their processes further. 

Furthermore, since these companies are experienced in dealing with unpredictable market conditions and managing large scale operations on behalf of their clients, it’s much easier for businesses to rapidly expand and adapt accordingly when needed. Ultimately this helps them gain a competitive advantage in the marketplace while allowing them enough flexibility so they can continue innovating without getting bogged down by operational issues.

Disadvantages of a 3PL

Communication timing

At times, you might have to deal with delays in communication – even with a dedicated account manager.

Keep in mind – 3PLs have multiple clients, and dedicated account managers will often have more than 1 client to manage. That being said, 3PLs with dedicated account managers typically still offer faster communication than regular support from other 3PLs.

But, if you’re considering running your own warehousing/distribution within your own company, you’ll likely have instant communication with your point of contact, since it’s an employee within your company. There are, of course, no other clients your warehouse crew is serving – it’s 100% dedicated.

To sum it up:

  • There can be a lack of responsiveness or transparency when it comes to communication and customer service. 
  • This could mean they don’t respond quickly enough when issues arise or they don’t communicate effectively with clients on the status of orders. 
  • This can lead to costly delays which could have an impact on customer satisfaction and create negative feedback for the company.
Why Use a 3PL (Third-Party Logistics)? Pros, Cons & Benefits

Some 3PL companies are unreliable

The potential downsides to using a 3PL company doesn’t just involve delays in communication. 

Third party logistics companies may not be as familiar with the needs of your business as you are, which can lead to incorrect and inadequate solutions for your supply chain and logistic needs. 

They may be unable to provide the customized solution that fits your specific requirements, or they may be unable to guarantee the quality of their service. It’s difficult for a 3PL to fully “get to know” every client they serve, especially with the regular churn rates that come with client work.

A few more points to consider:

  • There is no one-size-fits-all solution when it comes to 3PLs. 
  • Some of them have less experience and expertise than others, which can lead to mistakes and delays in shipments, estimates that are not accurate or pricing that isn’t competitive. 
  • Plus, some 3PLs may be unable to provide the specific services you require or fail to adhere to industry standards for safety and security. 
  • This can create a potential liability risk if something goes wrong during transit – or even with overflow warehousing.

Less control over inventory and fulfillment

When dealing with a third-party provider, there is always a risk associated with relinquishing control over your supply chain to someone outside of your organization. 

This could mean that should anything go wrong along the way, it is difficult to hold them accountable for any mistakes or missteps. 

Consider this:

  • Handing over control of your supply chain means that you are relying on someone else’s expertise and technology to get the job done correctly. 
  • With limited knowledge and insight into how they conduct their operations, it is possible that they could make mistakes.
  • They can also take shortcuts and cost-saving measures, which could have serious ramifications for the integrity of your inventory. 
  • This could lead to stock shortages or delays in deliveries which would have a negative impact on customer satisfaction levels. 

Although some providers offer some level of quality assurance or contractual guarantees, these may come at an additional premium and often lack teeth when it comes time for compensation if something does go wrong. 

Using a third party logistics company carries many risks related to control relinquishment, cost effectiveness and quality assurance. Although there are some potential advantages (such as efficiency gains) which should not be ignored, businesses must weigh up all factors carefully before making any decisions about outsourcing their supply chain operations.

Are third-party logistics services cost-effective?

Typically, third-party logistics (3PL) services are cost-effective for businesses that ship a high volume of goods. 3PLs offer companies the ability to outsource their shipping and storage needs, which can save them time and money. However, it’s important to do your research and compare prices before selecting a 3PL provider, as costs can vary depending on the size and scope of your business.

What are the risks of using a 3PL?

There are a few potential risks when using a 3PL service:

  • First, it’s important to make sure that you’re working with a reputable and reliable company. Otherwise, you could run into problems with lost or damaged goods, late shipments, or other issues.
  • Second, it’s important to be clear on what services the 3PL will be providing. Will they simply be handling the shipping and logistics for your products, or will they also be responsible for inventory management and order fulfillment? Make sure you know what services will be provided and what responsibility falls on your shoulders.
  • Finally, it’s important to understand the cost implications of using a 3PL service. In some cases, the 3PL may charge more than it would cost to handle shipping and logistics on your own. Make sure you understand the costs associated with using a 3PL service before making any commitments. 

3PL services can be an invaluable asset for businesses of all sizes, but it’s important to take the time to research potential partners and understand the risks involved. With the right partner, you can benefit from greater efficiency, cost savings, and improved customer service.

Here are a few more tips on due-diligence:

  • Make sure a 3PL is reliable and able to meet all of your needs before signing any contracts. 
  • Be extremely clear on expectations and specifics, and approach initial discussions with high preparation.
  • Take their customer reviews into consideration, as this can be a good indication of how responsive they are when it comes to resolving issues. 
  • Doing so will ensure that you receive the highest quality service possible from your 3PL partner.

Final thoughts on the upsides and downsides of using a 3PL

By taking advantage of their specialized expertise and expansive network of partners across the globe, businesses can benefit from: 

  • Improved service delivery times
  • Better control over inventory levels
  • Access to innovative technologies
  • Ability to customize products or services
  • Cost savings
  • Improved compliance with government regulations
  • Improved safety record for employees
  • Increased customer satisfaction
  • Greater flexibility in meeting customer demands

Ultimately, third party logistics companies represent an invaluable asset for any business wishing to maximize its operational efficiency and cost savings within its supply chain operations.