Running a business can be incredibly rewarding, but doing everything yourself can take a toll on both your pocketbook and your mental bandwidth. Luckily enough, there are Third-Party Logistics firms (colloquially called 3PLs or TPLs) that can bear even the heaviest of your logistical burdens. Taking the responsibility out of your hands in such vital areas as shipping, packaging, assembly, warehousing, supply chain management and network integration, business owners and operators have come to realize the numerous advantages of engaging the services of an experienced TPL. In this article, we will explore third-party logistics advantages and disadvantages and what they mean for the future of your business.
Scalability and Flexibility
Two of the most important advantages of using third party logistics is scalability and flexibility. The fact is: a company is only as successful as its product is desired. Seasonal upswings in sales are as widespread as sporadic downturns. Being saddled with a warehouse full of products that can’t be moved, staffed by a team of employees that are idle, all because it’s not yet the holiday season and sales are low is a common enough tale in the business world. The option to ride out these low times and not be financially overburdened is one of the main reasons that 96% of Fortune 100 companies turn to third-party logistics providers. The advantage of being able to scale labor, space, and transportation services to your company’s specific needs cannot be over exaggerated. Working with your company and helping to reliably track your warehousing, inventory management, and shipping needs throughout the fiscal year, a TPL can scale operations in these areas according to the turning tides of the market’s appetite for your business’ goods. Understanding the cost in time, money, legal fees and paperwork that many businesses are forced to deal with when they expand, it is easy to see why so many successful companies choose to leave much of their scaling in the hands of a third party logistics provider.
Experienced TPLs will be able to help your business grow outside of your local area of operation. Worldwide distribution, transportation, and inventory management facilities will allow a TPL to get your business moving in even the most far-flung of markets. The logistical difficulties you would otherwise encounter bringing your business to the other side of the country or into foreign marketplaces will now be squarely in the hands of a TPL. The advantage of no longer being forced to train and hire new staff or purchase warehouse space in an unfamiliar area can alleviate the financial and stress of expanding your supply chain into new territories.
Supply Chain Optimization
Whether your business is expanding, contracting, or is simply desirous of a more efficient way to move product, TPLs bring to bear a whole slew of cost-effective strategies to implement your specific needs. Logistics professionals will be constantly monitoring the performance of your supply chain, searching for and removing redundancies and efficiencies that cost money and time. Implementing logistical software and new technologies to monitor your supply chain from a bird’s eye view perspective, a good TPL can pinpoint the problems that plague your business’ most vital function: getting your product into the hands of the customer. If you are finding that your supply chain is rife with inefficiencies and mishandling, then the answer to your troubles may very well be to engage a TPL.
One of the most obvious third-party logistics advantages is the utilization of complex algorithms and software to monitor and assess your supply chain. 3PLs have access to some of the most cutting-edge technologies in the world. Considering this is an industry that rakes in over $750 billion annually, the tech world has a vested interest in providing new ways to improve logistics software. These programs have become the lifeblood of the logistics world, monitoring everything from the weight of freight to the space available in any given warehouse. Most TPLs will provide up to date software to your business in order for you to keep tabs on what is happening in your supply chain.
Being able to get your product from point A to point B often includes a number of stops along the way. Where your own company may not be able to maintain warehouse space in every market region, a 3PL should have the required facilities from which to collect and ship your product. Having a vast network of warehouse facilities is one of the keys to supply chain optimization. Ensuring that your product is shipped and received in a timely manner, it is essential to have local inventory and distribution. Owning your own warehouse space can often be a burden, especially if your product is seasonal or you are in the midst of scaling. Too much, or not enough, space can cost money, time and put a wrench in production. Being able to utilize the warehouse space of a 3PL can make a huge difference, especially since you should only be paying for the space your product takes up, rather than the entire facility. An extensive warehouse network also makes the delivery to far-flung markets far more lucrative and feasible as your 3PL can store and deliver product from a local hub, rather than relying on cross-country shipping.
Of the numerous advantages to using third-party logistics, the most obvious is, of course, taking over your shipping services. In our modern era, delivery is king. Web stores and retailers either live or die by their ability to get their customers the products they want in the least amount of time and with the least amount of hassle. All too often a company will be thrown into the maelstrom of overnight success and not be able to satisfactorily meet the demands of their new reality. If you do not have the resources or know how to personally oversee your product’s journey from the assembly line to market then you need to utilize third-party logistics.
One of the seemingly most obvious but underutilized third party logistic advantages for supply chain optimization is LTL (less than load) shipping. In a nutshell, this is when a third party logistics firm takes your inventory from point A to point B in a truck with other companies’ products. The fact is, much of the time you will not require an entire truck’s space to move your product. Paying for the entire truck while not utilizing its entire capacity is a waste of money and resources. LTL shipping takes the guesswork and overspending out of shipping freight by combining shipments. What could otherwise be a confusing and time wasting task for those without logistic expertise, in the right hands, LTL shipping can be an impressively efficient and well choreographed money-saving way to optimize your shipping. Utilizing experienced drivers, sophisticated technology, and well-trained loaders, LTL shipping services can deliver your product into the hands of retailers and customers in a timely and cost-effective fashion.
People change their minds. It happens. Some of the time the product is to blame, at others it’s the customer. Either way, having a reasonable return process is essential to maintaining customer satisfaction and loyalty. 3PLs are well–versed in dealing with returns and taking responsibility for goods damaged during transit. They also have access to a wide variety of damaged goods and second-hand retailers so you do not necessarily have to lose out completely when a product is returned damaged or used.
Save Time and Money
Saving time and money are the number one goals of any savvy business owner. The financial burden of investing in your own transportation, storage, logistical technologies, and staff in order to expand to new marketplaces can be crippling. All too often, companies on the verge of success have found that the cost is too much for them to bear. Hiring logistical staff, renting or buying warehouse space and attempting to navigate the perilous waters of worldwide delivery services can lead to a huge investment in time and money that your business needs to save. Taking these essential services out of your hands and placing them in the capable mitts of logistics professionals can do much to mitigate such costs. Meanwhile, there is also the added benefit of third-party overwatch. Having seasoned professionals and the newest technologies scanning your supply chain for inefficiencies and mistakes, TPLs can take what was a source of frustration and turn it into a well-oiled, cost-effective supply chain.
No Labor Cost
One of the biggest advantages of third-party logistics is that you will no longer have to oversee a vast amount of employees. You are effectively removing yourself from the paperwork and paystub arena and putting the responsibility of overseeing your drivers, loaders and warehouse workers into the hands of a TPL. This will inevitably allow you to free up capital and resources to focus on your sales force, product manufacturing and research and development.
In a word: this is what they do. A successful business requires focus. Whether you’re building computers or baking muffins, the sale of the product should be the number one goal. TPLs allow you to focus on your product by taking the heavyweight of supply chain management out of your mind’s eye. This is what they do, after all. This is their business. Engaging a TPL is only the beginning, building trust is the next step. If you trust that your supply chain needs are being met, if you do not have to constantly wade through the sea of nuts and bolts inherent in managing it, then you will be able to keep your eye on the metaphorical prize: sales.
It cannot be overstated how advantageous it is to no longer have to worry about your supply chain. Knowing that your needs are being met by seasoned logistics professionals, you can invest your time into bettering your product and galvanizing your sales force. This symbiosis cuts two ways, as third-party logistics firms get more business from successful businesses. When weighing whether or not to engage such a firm you should be on the lookout for TPLs that reward growth. The cold hard numbers are often the backbone in making any business decision, but relationships and loyalty can be just as important. The TPL for the right price may not always be the best decision. There are huge advantages to finding a TPL that will work and grow your business.
Third Party Logistics Disadvantages
The downside to outsourcing your logistics is fairly obvious: lack of control. If you have built your business from the bottom up it can be difficult turning over such high priority responsibilities to a faceless third party. This is why doing your due diligence is so important when selecting the third-party logistics firm for you. You are looking to remove the burden of having to manage shipping, storage, and delivery, not to add to your already full plate with miscommunication and damaged goods. Researching the top 3PL providers available, finding out if their optimization strategies are right for you, and (possibly most important) if they are utilizing up to date technological advancements to implement these strategies can mean the difference between satisfaction and aggravation. You are, after all, entrusting a third party with your product. If they have a history of late delivery, damaged freight or inefficient practices it may be better to look elsewhere for your logistical needs.
Finding the TPL for You
The prospective advantages and disadvantages of third-party logistics should be explored by any business. What can these providers bring to the table that you cannot accomplish yourself? Are they technologically up to date? Do their prices and strategies save you time and money? Will they allow you to scale and or be flexible with the ebbs and flows of the marketplace? A good third-party logistics firm should be able to answer all these questions while easing the strain on your wallet and your mind. You are looking to save money; you’re looking for reliability and trust. A good TPL should be able to deliver on all of these fronts as well as effectively get your product to the customer.