How Does Third-Party Logistics Work?

Virginia Miller

September 8, 2024

In this article

Nowadays, many firms are worried about their supply chain management. They focus more on sending the product to the customer on time rather than on marketing, sales, and product development. If you need help with supply chain management, one of the best solutions is third-party logistics or 3pls solutions.

‍

It is quite understandable that when running a business, it is more costly to manage the supply chain as it requires more time, space, workforce, oversight, coordination, and monetary investment. So, let's check whether 3pl can be the right option for your business and how to select the best 3pl company.

What are 3PL Services and How Can They Benefit Your Business?

Third-party logistics (3PL) services provide supply chain management and logistics solutions to businesses. Outsourcing these functions to a 3PL provider can help optimize operations, reduce costs, and allow you to focus on your core business.

Key Benefits of Using a 3PL Provider

There are many advantages to using 3PL services, including:

Access to advanced technology and software to improve efficiency
Cost savings through economies of scale and optimized processes
Improved scalability and flexibility to meet changing business needs
Expertise in logistics and supply chain management
Enhanced customer service and faster deliveries

Who Can Benefit from 3PL Services?

Both large enterprises and small businesses can use 3PL to their advantage. Over 90% of Fortune 500 companies work with 3PLs. Small ecommerce businesses can also leverage 3PL to reduce fulfillment costs. Medium-sized companies use 3PLs to meet rising demand.

Services Offered by 3PL Providers

Some of the key services offered by 3PL companies include:

Warehousing and inventory management - Storage, tracking, and optimizing stock levels
Transportation - Planning routes, negotiating rates, trucking, shipping, air freight
Order fulfillment - Picking, packing, shipping customer orders
Reverse logistics - Processing returns
IT integration - Connecting systems for visibility and efficiency

Tips for Selecting a 3PL Partner

When choosing a 3PL provider, key things to evaluate include:

Technology capabilities
Experience in your industry
Ability to scale along with your changing needs
Range of services offered
Cost structure

Taking the time to find the right 3PL can lead to significant benefits for your supply chain and bottom line. Reach out to discuss your needs!

FAQs

What is 3PL?

3PL stands for third-party logistics. It refers to using external companies to provide supply chain management and transportation services.

How do 3PL services help my business?

3PLs can reduce costs, improve processes, provide flexibility to meet changing demands, and allow you to focus on your core business activities.

What services do 3PL companies offer?

Common 3PL services include transportation, warehousing, inventory management, order fulfillment, reverse logistics, IT integration, and more.

Who uses 3PL companies?

Over 90% of Fortune 500 companies use 3PL services. Small, mid-sized and large enterprises across many industries work with 3PLs.

How do I choose the right 3PL provider?

Evaluate 3PLs based on industry experience, services offered, technology capabilities, scalability to meet changing needs, and cost competitiveness.

What are the benefits of 3PL services?

Key benefits include reduced costs, improved efficiency and processes, increased flexibility and scalability, and enhanced customer service.

Are there disadvantages of using a 3PL company?

Potential risks include loss of control, integration issues with software and processes, and lack of real-time shipment visibility in some cases. Proper vetting and management can mitigate these.

How quickly can a 3PL provider implement solutions?

Depending on the complexity of integration required, 3PLs can typically implement solutions ranging from 2 weeks to 2 months after initial assessments and planning.