If you’re a start-up or small business owner, you clearly have a drive for success. In a market where over 80% of businesses fail, you have ventured into a realm where the stakes are high, and mistakes are lethal.  When it comes to supply chain management and analyzing cost vs. efficiencies, that’s where a third-party logistics partner (3PL) may come into the equation to help.

What is a 3PL

A 3PL has several main functions whether it’s inventory management, shipping, packing, receiving, warehousing, or assembly needs. They generally cover 4 major areas:

Transportation

Valuable carrier relationships with established companies is an essential cornerstone for the growth model of a business. Some companies will simply ship their own products and be done with it, but other companies may find extreme benefit in being able to keep track of freight payments, insurance docs, increased efficiencies, and solutions for extreme complexities that may be faced in several instances.

Global Shipping

Whether it’s the complicated customs, freight forwarding, consolidation, documentation, duties or different shipping regulations, shipping globally can be a real mess. End to end logistics gets more and more difficult to navigate the further the other end becomes. 3PLs can handle unknown costs, make sure trade compliance requirements are met and more.

Warehousing

This is the most prevalent connection to a 3PL company. Creating efficiencies and streamlining becomes a lot easier when a warehouse can handle cross-docking, short & long term storage, picking & packing, all in the same building. Most businesses will use warehouses as more of a fulfillment center or a distribution center, and this can make shipping a lot more simple.

Shipping & Receiving

Going hand in hand with warehousing, a 3PL will typically take care of the wholesale and distribution services like outbound fulfillment, labeling and manufacturing. When a 3PL is involved they can take care of freight payments and accounting services that come with shipping & receiving as well.

Why Would I Use a 3PL?

The number one question to ask is, “Do I want to micro-manage everything that goes on in the company?” Sometimes the answer is “YES!” and that’s fine. Overall, the advantages of using a 3PL are generally related to time and efficiency. Logistics companies can elevate businesses with:

-Expertise that a business owner or even transportation director don’t have. Creating efficiencies for the supply chain of a business is the number one reason a 3PL exists.

-Cost & time savings because all aspects of storing, shipping & receiving, paperwork, technology, and employee efforts are outsourced and taken care of completely.

-Scale operations opportunities so that a company can focus on growth instead of dealing with the ebbs and flows of market fluctuations and seasonal transitions. Having storage locations in different areas can help companies grow and increase in numerous markets.

-Technology like Electronic Data Interchange (EDI) or Application Programming Interface can help manage ecommerce, customer relationships, transportation, & warehousing.

The Disadvantages of Using a 3PL

There are times when the costs associated with a 3PL, even with all the time savings and efficiencies they can help to create, outweigh the services offered. There are also times when a 3PL may have so many different customers that their treatment of you and your business won’t be as thoughtful as you would do on your own. Lastly, the most difficult thing in life to deal with sometimes is a lack of control. It’s hard giving up the reigns to someone who hasn’t put their blood, sweat, and tears into your company the way you have.

Final Thoughts

It’s important to remember that 3PLs work, that’s why there are hundreds of thousands of freight brokerage companies and warehousing 3PLs. It’s important to take the time to analyze the time and energy spent on jobs that could be outsourced so that your company’s growth isn’t snubbed because of everyday logistics that could be outsourced.

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