3PL, better known as third-party logistics, is a system where an organization or a third party provides services to companies related to inventory management and distribution. Most 3PLs work with companies or clients that don’t have their own logistics department. 3PLs play an important role in managing all logistics-related activities of the client or company.
Third-party logistics are not restricted to inventory management and distribution. They also perform some other activities like inventory storage, shipping and distribution, customs clearance and declaration, freight forwarding, warehousing, packaging, and more (depending on the arrangement).
Third-party logistics are the best collaborators for e-commerce merchants since they help them focus on other aspects instead of basic tasks like shipping, transportation, and much more. 3PLs are essential to any business’s growth and development and help companies adapt to an evolving landscape.
Why Do Companies Opt for a 3PL
The first and foremost reason is that it is not easy to establish a business. Any businessman must have good capital and knowledge about the market in which they want to work. The owner should study the market trends and how they can enter a new market and introduce their product to make it known to the people. After that, there is intense competition in marketing and sales drive to win customers.
Every business owner looks for external support to run their supply chain and manage their business more efficiently. Several advantages make third-party logistics attractive to companies. Some of the critical benefits of 3PLs are mentioned below:
- Expertise in logistics: They have more experience and knowledge in the field of logistics. Third-party logistics have an efficient transport system, a good understanding of economic policies, documentation, import & export-related matters, economic regulations, and international compliance, among much more. They have a broader network in the market of different regions and areas where they can introduce any goods without hassle.
- Cost-effective: These are cost-effective due to their vast service sector and policies. They have a more extensive network in the national and international markets than any company’s supply chain network. They are good at negotiations with clients and can offer better discounts and opportunities to new clients.
- Marketing insights: 3PLs are not just good at transporting; they also provide real-time insight into changing markets and what will work best with buyers. In fact, it is always best to opt for a 3PL that uses technology to retrieve data and statistics to help businesses gauge their market.
- Focus on core capabilities: Third-party logistics allow any business owner to focus on the core competency of their setup without involving in other less important stuff like shipping, distribution, retail management, transportation, finance, accounting, and so on. Any owner can quickly scale up their business using 3PL services with appropriate output.
- Enable merchandise development and flourishing market: Third-party logistics are mainly responsible for introducing the company’s and their product’s access in the national and international markets. They are experts at learning new emerging market problems and can easily handle them with optimized spending on transportation, shipping, warehousing, etc.
- Improve customer satisfaction: All of the above factors are responsible for customer satisfaction. All the qualities of 3PLs improve the response timelines and services, on-time delivery of the goods, and trust in the brand. In this way, every customer knows about the foundation of all businesses.
Myths and Misconceptions Around 3PL
There are many myths and misconceptions about third-party logistics, including warehousing, order fulfillment, outsourcing expenses, loss of control, etc. Continue reading to know more:
- Outsourcing expenses with 3PL: Partnering with third-party logistics sounds very expensive by looking at their services. However, the truth is precisely the opposite. 3PLs have a very well-managed setup for their services, including warehousing, transportation, distribution, accounts and finance, retail coordination and management, inventory management, and so on.
– They have their fixed prices according to the type of services required by the companies or clients.
– They don’t charge any extra money besides what they agreed on. – No hidden charges are associated with partnering with 3PLs, a common misconception.
Considering all the services in a package, collaborating with third-party logistics is quite an efficient and logical way to scale up enterprises without indulging in other activities like shipping.
- Problems in warehousing and order fulfillment: Businesses have a common concern regarding warehousing: they think warehouses are only made for storage purposes. Contrary to this misconception, the warehouses are also responsible for various facilities like packaging, docking, equipping, shipping, picking, inspection, and consolidating other goods.
Order fulfillment is critical, including assembling the order and shipping it off to customers. The 3PLs can easily manage it due to their extensive setup and expertise.
- Inferior customer service: It is very commonly stated that third-party logistics companies severely hamper customer service, giving the companies they work with a bad image. In reality, if you interview and hire the right 3PL, you can rest assured knowing your customers will get the best service possible, even from a third-party entity.
- Loss of control over company policies: Another myth. Third-party logistics have better insights into dealerships and supply chain management. These are actually hidden recipes for making any business successful. They provide a better and real tracking system of your proposed operations along with order fulfillment.
- Commitment for a long duration: This factor is somewhat partially correct. Most well-known third-party logistics always demand an agreement for a more extended period to avoid any financial inconvenience in the future. But, nowadays, there are also new 3PLs who are happy to work with short-term agreements, like seasonal or month-to-month agreements with customers, and they also don’t have such precise requirements and demands.
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Advantages and Disadvantages of Choosing a 3PL
Advantages: There are several advantages to choosing a third-party logistics company. The first and foremost is saving time and money while giving better services to customers at an affordable price. Other than that, there are many reasons for choosing 3PLs, some of which are given below:
- Lesser operational expenses: 3PLs have a strategic logistical framework, programming support, and practices to rapidly enhance their shipping and transport efficiency. They reduce the financial burden it takes to build an in-house logistics team, thus increasing cost efficiency.
- Adaptability: Third-party logistics are ideal for those looking for scalability alternatives. When the demand increases, every organization needs to scale up its business. Hence, it is very appropriate for a new company to choose 3PLs as they are economical and provide all the possible services.
- Less burden on a business: 3PLs have their own expertise in multiple fields. With the assistance of these partners, any entrepreneur can focus on other essential aspects of their business. It helps outsource operations to other companies while permitting them to use their assets and information.
- Efficient operations: 3PLs have better expertise, insight, and innovation than different organizations actually need. They can offer better services than organizations. Their main focus is to enable growth and provide better solutions in the minimum time.
Disadvantages: If anyone wishes to create their own logistics framework and operations, there are some disadvantages as given below:
- Restricted insight: Partnership with 3PLs sometimes affects your business performance due to loss of control over customer care services and reputation, too. You don’t directly control your business when you give your logistics activities to another company. Not having direct oversight is a problem, although you can talk with your 3PL partner anytime.
- Dependency: When you tie up with a third-partner logistics company, you give them all your logistics responsibilities, making you dependable on them. Each association needs a solid structure to stand and accomplish great business results. The most important thing is to choose a trustworthy and well-known supplier.
- Lack of common ground: At times, there may be a conflict between a business owner and 3PLs due to different priorities. It is also tough to find a 3PL organization that can cooperate on mutual business decisions along with mutual objectives.
Factors to Consider While Choosing a 3PL
Any business must consider a number of factors before they pick a 3PL. Here are a few of them:
- Location: It is always better to choose a 3PL that is strategically placed. For instance, 3PLs located near highways or delivery hubs will have to spend less on last-mile logistics. Hence, you will have to pay less, as well.
- Customer service: As already mentioned, it is a persistent myth that third-party logistics companies deliver poor customer service. To avoid turning this myth into a reality, before hiring a 3PL, check out the quality of their customer service facilities.
- Reputation: In the business world, companies’ reputation speaks for themselves. So, before settling on a 3PL, you should run a background check to ensure they are reliable and have positive reviews in the market. This also includes looking for any cases of financial instability and the like.
- Flexibility: You should also check to see if a 3PL has the infrastructure to handle bigger workloads during high-demand seasons. Otherwise, you might be stuck with a 3PL that is not able to perform when it is most required.
- Technology: In today’s time, businesses rely heavily on technology to get most of their work done. Similarly, even 3PLs employ much technology to be more efficient and optimized. So, choose a 3PL that uses the latest logistics software and is better acquainted with the technology.
Why Locad is the Best 3PL for Your E-commerce Business
Locad, the largest end-to-end fulfillment service in the Asia-Pacific region, has incredible features like flexible warehousing, a network of fulfillment centers spread worldwide, real-time insights into essential sales data, and so on. All these combine to give the best output to retail merchants. Discover a perfect logistics partner that strives to keep growing and moving in the Philippines e-commerce market without compromising on customer delight and order fulfillment..
To conclude, 3PLs are a blessing to businesses, both big and small. With many advantages, third-party logistics can be the cherry on the cake for any business. Now that you know these advantages and how to opt for a 3PL for your own enterprise, you can easily pair up with a 3PL that aids your brand’s progress in the Philippines.