Understanding a Third Party Logistics Provider and Their Advantages

While the term third-party logistics services or 3PL is not new, it still remains ambiguous to many. Today an increasing number of companies are considering third-party logistics providers. These firms cater to companies to outsource and offer its services and knowledge of advanced logistics and management. They provide a comprehensive range of services regarding logistics of supply chain. This covers transportation, warehousing, picking and packing, order fulfillment, inventory forecasting, packaging as well as freight forwarding.

Types of 3PL providers

Not all these providers are same. They can be broadly classified into the following major types –

Asset-based firms – These companies have their own fleet of trucks, warehouses and personnel to operate their business. They offer a comprehensive set of logistics services with barely anything excluded. Major benefits with these types of firms are shorter cycle time, lower freight cost and visibility of pipeline inventory.
Non-asset based firms – They do not have any fleet or warehouse space of their own but provide outsourced logistics solutions and freight brokerage services. They often partner with large network of freight carriers of asset based type.
Warehouse/distribution based firms – These deal with warehouse and distribution services. Their functions cover labor and supervision, receiving goods, storing them and finally shipping. These help in lowering capital investment as well as lower fixed/variable cost ratio.
Financial based firms – Their services include freight payment and auditing and cost accounting and control. They also provide various tools for monitoring, booking, tracking, tracing and management of the inventory. Some of their functions include inventory finance, distribution finance, payment solutions and leasing. Major benefits of these are reduced cost as well as capital investment and improved cash flow.

Advantages of 3PL providers

Using these services can be advantageous for many companies. Outsourcing your logistics requirement saves time and resources and gives you numerous other advantages. Some of them are –

Gain instant expertise and latest knowledge in the field

Any reputable logistics provider would have complete knowledge about the industry best practices. It is part of their normal work chain to remain updated with the latest development in technology, manufacturing and logistics. Their company software is capable of not only advanced reporting and inventory management but is also transparent enough to monitor the entire process. They usually employ Just in Time practices which helps them ship the correct amount of inventory at the right time and location-based on your needs. Hiring these companies assures you that your logistics needs are being handled by seasoned and reliable professionals. Various aspects pg logistics like fulfillment, warehousing and shipping are a major challenge on their own. No matter whether you are just starting out or managing a big company, expert handling makes a big difference and leaves you to focus on other areas of work.

Resource network

Most of 3 PL providers have a vast resource network that can never be available with in-house supply chains. Using all of their resources, each and every step of the supply chain gets executed the most efficient and seamless manner. They can successfully leverage relationships and volume discounts leading to a lower overhead and fastest possible service. This availability of resources which are unavailable in-house is a huge advantage.

Saves time and money

Outsourcing saves you credible time and money. Utilizing 3PL(third-party logistics) services implies that you no longer need to invest in warehouse space, transportation, technology, trained staff etc. They are your best ally against costly mistakes and facilitate you to get your business to build a logistical network with lower risk and higher return. They also save you the time needed to execute supply chain. You need not worry about any paperwork, billing, audits, staffing, optimization etc.

Scalability and Flexibility

Any 3PL provider can easily scale space, labor, and transportation as per the inventory needs. This becomes advantageous for businesses having seasonal needs. This ability helps any company to scale up and down spaces and resources based on needs. It also helps you grow your business in new regions without any worries.