Third-party logistics or 3PL in supply chain management works as a support system for e-commerce businesses to run their pick, pack, and ship procedures so these businesses don’t have to invest their time in the technicalities and working patterns of the supply chain.
The primary advantages of third-party logistics companies are that they offer lower costs, save time, and enhance overall supply chain operations.
But, what is the need to hire a 3PL company when you can run logistics all by yourself?
The idea is partially acceptable in the case of a startup or a small business wherein the inventory costs and order frequency are low. However, if you are a growing business, consider investing in a third-party logistics partner to avoid spending more than the revenue you generate.
To get the hang of what exact roles do 3PLs play, how they progressed during the pandemic, and how to find a 3PL for your company, continue reading this value-puffed article.
What Is 3PL And How Does It Work?
3PL is a service extended for e-commerce businesses so you can rely on their expertise for warehousing, inventory, and shipping management. Third-party logistics offer full visibility, transparency, and healthy communication between all the parties involved in the supply chain.
Third-party logistics help your business grow by regulating order fulfillment. When you hire a 3PL supply chain company like LOCAD, you will get quality services like warehouse and inventory management, picking, packing, rapid deliveries, and returns.
With the growing demand for a sustainable supply chain system, third-party logistics companies are moving toward framing a set of organized steps in the supply chain that keeps the sustainability aspect at the forefront.
This includes all things in and around bettering the environment, some of which include minimization of packaging materials that are not eco-friendly and moving towards sustainable forms of transportation (discussed in detail ahead).
What Is The Role Of Third-Party Logistics In Supply Chain Management?
Third-party logistics essentially helps manage and streamline the processes involved in the supply chain. 3PLs usually take on the responsibilities from inventory governance all the way to speedy delivery.
1. Warehousing
Your 3PL will start by stocking the warehouse with your products and managing the same via a digital inventory so that you can have real-time stock updates.
2. Inventory management
The 3PL does all the stock and order-related calculations, along with organizing the inventory for further processes. The idea is to keep the data updated and the warehouse organized.
3. Picking
When a customer places an order, the picking team gets ready to begin the work. The 3PL locates and collects the order from the warehouse and keeps it ready for the next step, packing.
4. Packing
The packing team gets the packing material such as bubble wraps, papers, and cardboard ready to ensure the product remains safe through intact packing.
5. Shipping
Once the team has packed the products, the orders are then made ready for shipping. Third-party logistics takes care of the proper labeling, which also doubles up as a source of promotion of their services to the consumers.
6. Returns
When you partner with a reputable 3PL company like LOCAD, handling returns is as smooth as the delivery process. You can take advantage of the easy return policy and speedy, hassle-free order returns.
Sustainability: A 3PL’s Role In Your Supply Chain
A sustainable supply chain aims at producing goods with maximum utility and minimum or no wastage at all. A large percentage of businesses are adopting the same techniques for their supply chain developments and so the need for 3PLs that focus on sustainability has increased manifolds.
Along with being sustainable, third-party logistics in supply chain management requires extreme flexibility to meet the emerging needs of e-commerce brands and digital customers.
3 Factors Of A Sustainable 3PL
1. Environment-friendly packaging
Keeping in mind the health and functioning of our ecosystem, it is important to use recyclable and eco-friendly packaging. This will help reduce the pollution and environmental footprint of your company.
Eliminating the use of environment-harming packaging substances will bring you one step closer to having a sustainable 3PL.
2. Effective transportation
An ideal third-party logistics in supply chain management would be familiar with transportation costs, time management, and fuel-efficient practices. They would also balance the mode of transportation for quick delivery without sacrificing quality.
There are a plethora of ways to carry out the effective utilization of transportation expenses. One smart way would be to build shipping houses in different geographical locations for fast delivery.
3. Limiting Carbon Dioxide production
The extensive transportation of goods from one center to all the customer locations is a major factor that causes the release of carbon dioxide into the atmosphere.
Signing up with LOCAD helps you minimize fuel consumption and lower carbon dioxide emissions while delivering orders to your customers.
Benefits Of 3PL In The Supply Chain
Third-party logistics (3PL) services have become an integral part of modern supply chains, providing numerous benefits to businesses across various industries. Here are some key advantages of incorporating 3PL in the supply chain:
1. Cost Efficiency
By outsourcing logistics operations to a 3PL provider, businesses can reduce costs associated with warehousing, transportation, and inventory management. 3PL providers have expertise in optimizing supply chain processes, resulting in improved efficiency and cost savings.
2. Scalability and Flexibility
3PL providers offer scalable solutions that can adapt to the changing demands of businesses. They can quickly adjust storage space, transportation modes, and workforce capacity, allowing businesses to scale up or down as needed without major investments.
3. Expertise and Technology
3PL providers possess specialized knowledge and advanced technology systems to manage complex logistics operations. They stay updated with the latest industry trends, regulations, and best practices, enabling businesses to leverage their expertise and gain a competitive edge.
4. Enhanced Focus on Core Competencies
By outsourcing logistics functions to a 3PL provider, businesses can focus on their core competencies, such as product development, marketing, and customer service. This improves overall efficiency and allows businesses to allocate resources where they are most needed.
5. Improved Customer Satisfaction
3PL providers streamline operations, leading to faster order fulfillment, accurate inventory management, and reliable delivery. This results in improved customer satisfaction, enhanced brand reputation, and increased customer loyalty.
6. Global Reach
For businesses operating on a global scale, 3PL providers offer extensive networks and expertise in international logistics, including customs clearance and cross-border regulations. This enables businesses to expand into new markets with reduced complexity and risks.
3PL Supply Chain’s Role In Post-Pandemic Growth
The outbreak of COVID-19 brought out some unexpected fluctuations in the supply chain advancement. Be it the storage of goods or timely shipping, e-commerce businesses were struggling to meet the demands of the customers. There was a growing need for third-party logistics.
The 3PLs industry scaled to new heights during the pandemic period. Businesses needed an external helping hand so that they could focus on business development, and 3PL companies came to their rescue.
Some major roles of the 3PL supply chain in post-pandemic growth are:
1. Digitalization
Before the pandemic, the idea of digitalization was into play on a much smaller scale. It is during the rise of covid that the need for physical presence to carry out the work was somehow reduced and replaced by adopting digital practices.
However, the need of the hour then has become a necessity now. From storing data to counting stocks, company administrators have adopted digital practices to make the process less time-consuming, efficient, and simply effortless.
2. Warehouse Automation
With the automation in the warehouse and inventory arena of the supply chain, we can note that there is a visible alteration in the efficiency and costs included.
Warehouse automation also offers increased visibility to businesses where the supply chain is concerned.
All you need to know about warehouse automation
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3. Consumer-Focused Chain
The whole idea of creating the supply chain, keeping in mind the customers’ needs is also something the third-party logistics are trying to implement after covid.
The companies recently figured out that the more public-centric their services are, the more a business is inclined towards investing in their packages.
4. Increased Flexibility
It would not be untrue to state that the pandemic has compelled industries to mold themselves and push their limits. Hence, We can see a direct increase in flexibility on the part of 3PLs.
How To Choose The Best 3PL Company For Your Business?
Choosing the right 3PL company can be a task and so, we have come up with a list of qualities that your business should look for in a third-party logistics company:
1. Technically active
The post covid scenario has compelled businesses to make use of technology in every way possible. An ideal 3PL company must have the required tech stack to simplify the supply chain management system and relay timely updates to your business.
2. Good customer reviews
When in doubt, go with the ratings! Customer reviews and ratings are the best deciding factors when choosing the ideal 3PL fit for your industry or business. Going through case studies will also help you in deciphering the genuine consumer-company relationship.
3. Globally located
The greater and more widely scattered a 3PL company chain is, the better it is for the e-commerce business in concern with shipping. Building multiple fulfillment centers in different locations is a bonus that is also profitable, capital-wise.
4. Flexible with volume fluctuation
A good 3PL brand must be comfortable and flexible in unanticipated conditions e.g. sudden increase in stock. The abrupt volume alteration should not impede their operations if your 3PL company has a pre-reserved bandwidth for incoming stocks.
5. Sustainable
If your third-party logistics company is managing the course of the supply chain while keeping in mind the sustainability aspect of every step, then it is the one you should go for.
Top 3PL supply chain companies
Here is a list of the top trusted 3PL supply chain companies that your e-commerce business can consider
1. FedEx Supply Chain
FedEx is one of the most trusted 3PL companies with executives that offer smooth transportation of goods along with taking complete care of supply chain management.
2. LOCAD
LOCAD is essentially the go-to third-party logistics company that provides a 100% fulfilling business experience and guarantees the proper functioning of services like warehousing, picking and packing on the same day, and much more.
Experience fulfillment by Locad today!
3. Logsta
Another such 3PL company is Logsta which works on fully automated systems. They are popularly known for their commendable transportation process.
4. RedHawk Logistics
If you are looking for an inexpensive alternative, then definitely consider going for RedHawk Logistics since they claim to offer their services at much lower costs.
5. Rakuten Logistics
Rakuten Logistics is one of the most reliable third-party logistics brands that is indeed known for inducing incomparable growth for your e-commerce business.
Conclusion
The role of third-party logistics (3PL) in supply chain management is crucial for businesses aiming to optimize their operations and stay competitive in today’s dynamic marketplace. 3PL providers offer a range of services, including transportation, warehousing, inventory management, and order fulfillment.
By outsourcing these functions to specialized experts, businesses can focus on their core competencies while benefiting from cost efficiencies, scalability, advanced technology, and global reach. The expertise and resources provided by 3PL providers streamline supply chain processes, enhance customer satisfaction, and drive overall efficiency.
Embracing the role of 3PL in supply chain management can ultimately lead to improved operational performance, increased profitability, and sustainable growth for businesses in a rapidly evolving business landscape.
How does 3PL improve customer client supply chain?
3PL improves customer-client supply chain by providing efficient and streamlined logistics operations, including order fulfillment, inventory management, and reliable transportation, resulting in faster delivery and improved overall supply chain performance.
What can 3PL do to improve customer satisfaction
To improve customer satisfaction, 3PL can focus on timely and accurate order fulfillment, effective communication, visibility throughout the supply chain, and proactive problem-solving to meet customer expectations and deliver a positive experience.
What is the importance of 3PL?
The importance of 3PL lies in its ability to optimize supply chain processes, reduce costs, improve efficiency, provide specialized expertise, and offer scalability and flexibility, enabling businesses to focus on core competencies and meet customer demands effectively.
Can 3PL be effective supply chain partners?
Yes, 3PL can be effective supply chain partners by offering specialized logistics knowledge, extensive networks, advanced technology systems, and the ability to adapt to changing business needs, ultimately enhancing supply chain performance and driving business growth.
What are the four types of 3PL?
The four types of 3PL are transportation-based 3PL (providing transportation services), warehouse-based 3PL (offering warehousing and storage facilities), forwarder-based 3PL (offering freight forwarding and customs clearance services), and financial-based 3PL (providing financial and insurance services related to logistics operations).
