A third-party logistics provider (also known as a 3PL) typically handles part or all of the shipping, storage and transportation-related services for companies. They may handle the entire supply chain management for a given company, or they may handle only part of it. Typically, they provide integrated transportation and warehousing services, and they can size these services so that they are based upon a particular business' demand and market conditions, as well as the delivery service requirements for the materials and products handled.
Types of Third-Party Logistics Providers
• Standard
This type of 3PL performs very basic activities such as warehousing products, filling orders, and distributing products. Most of the firms who perform these services don't just do 3PL functions.
• Service developer
In addition to the standard 3PL services, this type of provider also gives customers the ability to secure their goods, track and trace them, provide specific packaging, and so on. With this type of provider, one focus is on "economies of scale" to lower costs.
• The customer adapter
This type of 3PL provider comes into a specific company and takes over all of a particular company's logistics-related activities. They focus on improving the logistics so as to lower costs, but the service itself remains the same. In general, customer bases for this type of provider are pretty small as compared to those of the service developer, for example.
Determining Whether or Not You Need a Logistics Provider
If you need help coordinating your supply chain, or any logistics area of your business whereby supply is not keeping up with demand, you may find a third-party logistics provider useful. It's becoming much easier today to work with third-party logistics providers, due to the increased prevalence of e-commerce and the Internet environment, as well as the deregulation of many transportation services.
Another situation in which you might need a third-party logistics provider is if you simply don't have the time to handle the transportation, warehousing, packaging, and shipping of goods yourself. 3PL providers also can give you "just in time delivery" services, can assemble goods for you prior to packaging, and give you security options. One example of a third-party logistics provider that's becoming increasingly popular is DHL.
Which Third-Party Logistics Provider Do You Choose?
There are lots of third-party logistics providers to choose from, but some are better than others. Are you going to want to help warehousing, packing, and shipping goods? Are you going to want "just-in-time" delivery? Many of the larger third-party logistics providers can customize their services to your needs. For example, there's the aforementioned DHL as well as FedEx and UPS. In addition, these larger providers can also help keep costs lower than some small providers can, because their very scope means that they may very well be able to provide you with exceptional services for lower cost as compared to a smaller provider.
Third-Party Logistics Provider Software ?
More 3PL providers are also providing services like functioning as the liaison between customer and supplier. If this is a consideration for you, it's another way to outsource some of your more "nuts and bolts" business functions so that you can concentrate on other things.
Evaluating Third Party Logistics Providers for Yourself
What's their track record?
Again, older more established companies who've gotten into 3PL work are going to have a more established track record than smaller companies are. This doesn't necessarily mean they're better, but it's something to consider when you're deciding which provider to go with.
In addition, in general, there are fewer third-party logistics providers to choose from than there have been, because most are consolidating. Larger competitors like FedEx and DHL are swallowing up smaller providers. Therefore, before you sign on with a smaller company, make sure you check and see that the company itself is stable. If your 3PL provider is at risk of acquisition, it's probably better to go with someone else.
Warehousing Today, Full Supply Chain Management Tomorrow?
If you have any intentions at all to fully outsource your entire supply chain at some point, make sure the 3PL company you choose has the tools you need to do so. Check that they have the appropriate software, enough vehicles, proper inventory, warehousing and storage, and scale, Exeter, to handle your eventual transition team using their services fully. Even if the only thing you're doing at this point is taking care of some shipping needs, it's going to be smoother if you can stay with the same 3PL provider as your business expands. You don't want to have your business exploding and suddenly have to switch 3PL providers in midstream, which will slow things down.
Conclusion
Third-party logistics providers can be a great way to streamline your business so that some or even all of your supply chain needs are met with just a click of the mouse on your part. In some cases, too, third-party logistics providers can even manage customer service in regard to shipping. However, before you give this type of control over to a third-party logistics provider, check to make sure that the one you want to use has all the tools and capability necessary to handle everything you'll need. In addition, you'll want to make sure that your 3PL provider is a stable company in and of itself, so that your supply chain needs will continue to be met well into the future. The last thing you want to do is to have to switch 3PL providers just as your business is exploding. With a little homework, though, you should be able to find a 3PL provider that's scalable and can meet your needs exactly, for a reasonable price.
