A 3PL or third-party logistics provider gives outsourced logistics services which could be anything that involves management of one or more aspects of procurement and fulfilment services. In business, 3PL has a broad meaning that denotes any service contract that involves storing or shipping items. A 3PL service may be a single provider, for instance, a transportation or warehouse storage, or a system-wide bundle of services taking care of supply chain management.
How Does It Work?
Here’s how 3PL arrangements operate. Let us consider a book publisher. They hire writers, editors and graphic designers to produce publications. At the same time, it may not want to take care of the customer ordering process or the transportation of book shipments. The book publisher then uses a fulfilment centre to process online orders and hires a trucking carrier for hauling freight. The fulfilment centre and the carrier are both 3PL providers. A 3PL provider can fulfil and ship book orders too. By using a 3PL provider, a book company could use supply and distribution services only as required, thus bringing down costs more effectively while focusing on its core area of producing books.
There are many benefits of third-party logistics
- Lower cost of goods sold: If you purchase goods upfront, you pay the wholesale price. The more you buy, the lower your costs and higher the profit margins.
- Flexibility in product sourcing: Using an eCommerce fulfilment business model makes it more accessible to source products from more than one manufacturer. All the items are stored in the same warehouse, so orders including products from multiple suppliers can ship in the same box, saving shipping costs.
- More control over logistics operations: You can choose an order fulfilment partner that provides the services expected by your customer.
- Faster order fulfilment: You can choose a 3rd party logistics service with warehouse locations to deliver your order quickly.
- Easier returns processing: The 3rd party logistics warehouse which shipped your products could provide customer service and seamlessly process returns. This boosts customer satisfaction, allowing you to put products back into the inventory quickly.
3PL system has certain disadvantages as well
- You may lose the skills and infrastructure you might want to develop.
- It can be challenging to find a trustworthy 3PL.
- You may need to sacrifice some control over your image and customer service.
- Send inventory to a relatively unknown third party.
Key Elements of 3PLs
Third-party logistics providers offer supply chain management to companies and, at their core, offer much more. The basic tenet of 3PLs is enhancing customer experience because they aren’t limited by in-house competencies like owning warehouses or transportation. Outsourcing providers invest in customers as they make fewer physical assets. Instead of using in-house services, fostering long-term, mutually beneficial customer-provider relationships is what 3PLs are about. Companies choose 3PLs for flexible capabilities like customisation, comprehensive benefits, and management expertise. Companies stick with 3PLs as they exceed expectations. There are three main elements of 3PLs.
Goals
The flexible and scalable nature of 3PLs allows you to create mutually beneficial goals, which are essential for customer-provider relationships. Shared goals and cooperation unite customers and providers, setting them up for success. The establishment of mutual goals helps providers create solutions for customer challenges. Without shared values or a concrete purpose, conflict can occur. Joint decisions regarding success in your supply chain are essential for day-to-day operations and long-term performance. An outsourcing provider’s performance will only be as good as their customer’s supply chain performance, which is why it is in a provider’s best interest to conceptualise the most effective and low-risk solution.
Innovation
Today’s supply chain is evolving fast, and companies must adjust their logistics strategies irrespective of the industry. Customers expect logistics providers to add value to their company, which means constant innovation. Mostly, shared goals are contingent on ongoing improvements. The provider can enhance solutions in real-time thanks to the dedication to innovation and optimisation. A 3PL hands-on approach to improvement lends itself to innovation in a firm’s supply chain, which adds value. 3PLs invest primarily in intangibles, like technology and industry expertise. As third-party providers outsource to a network of service providers, allocating resources to overcome unique challenges and engineering optimised solutions is possible. Supply chain experts and robust provider networks are indispensable to achieving goals to improve supply chain management.
Communication
Communication is key. The quality of communication and interaction of a 3PL is a good indicator of their outsourcing performance. 3PLs are strategic in communicating goals and expectations. However, beyond that, transparency between each other’s operations is vital for the partnership. Sharing situational challenges and achievements is essential for an affluent, long-term customer relationship. 3PLs have a communicative nature which develops a relationship between companies and providers. 3PLs are famous for exceeding customer expectations in case of communication as they cannot, themselves, operate without a load of knowledge about a customer and their company. Similarly, a company wouldn’t perform well with ill-informed supply chain management.
At MegaSpeed Cargo, we ensure that your products ship smoothly to different global destinations. Our vast experience, owned offices, agents, and partners mean reliable 360-degree logistic solutions and services. Ship various products from Dubai to multiple destinations around Africa and the world in the most reliable and economical way.