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What is Third party Logistics(3PL)?:Everything you need to know

Third party logistics

3PL stands for Third-party logistics. Nowadays 3pl logistics providers are playing a major role in the logistics industry. Here we are going to explain the concept of third-party logistics while more details regarding to 3pl.

What is 3PL?

  • 3rd party logistics commonly known as 3PL or TPL.
  • The simple explanation of 3PL is when considering a company, it is outsourced warehouse and distribution facilities from 3rd party. so the company acts as a client of 3rd party logistics provider. The company(client) does not maintain a logistics department or warehouses. Because that company has outsourced logistical activities from third-party logistics companies.

Firstly, you need to identify factors that you have to consider when starting a 3PL business.

Here list down 6 factors,

Factors affecting to start a new 3PL business

  1. Need to check warehousing demand that selected area
  2. Investigation about types of warehouse facilities customers need
  3. Analyzing competition in the selected area
  4. Differentiate your 3pl service
  5. Pricing methods and charging
  6. Value-added services you are going to do

What are the Functions of a 3PL service provider?

  • Warehouse facilities providing
  • Inventory management
  • Freight forwarding services
  • Shipping and distribution services
  • Packaging and labeling
  • Custom clearance for shipments
  • Order fulfillment and customer returns handling process
  • Procurement of goods
  • Route optimization and fleet management
  • Transportation and distribution services
  • And more.

Activities of 3PL providers vary with the contract agreement and 3PL company. So all of the above functions are not allowing every 3PL company. It may few of the above or one of the above lists. Please note that the above list is not for all of the tasks related to 3PL providers. Some other functions are available for some 3PL services.

Why do more businesses use 3PL logistics services?

When answering this question, the simple answer is, the logistics process is a more complicated and more stressful process in a business. For avoiding these stressful logistical activities more companies use 3PL logistics. When outsourcing the logistical process for 3PL companies, businesses can give more attention to their core business process than logistics activities.

For example: when demand is high or not enough storage facilities for a company they find a 3PL service provider. It may be more easy and low cost to the business. So most successful companies are used 3PL services.

Reasons for companies outsourcing logistics activities/finding a 3PL partner?

  1. When your company space is not enough
  2. When you need to enhance delivery efficiency- For example, free 2 days delivery
  3. Handling a lot of shipments in a month

What are the benefits of using 3PL?

  • Increasing supply chain efficiency
  • Cost reduces
  • Saving money and time
  • Can be access super resources and new technology – technological machines and equipment to handle the warehouse

What are the Disadvantages of 3PL?

  • Loss control-Out of control in logistics activities by a core company
  • The initial cost is high

What are the factors need to consider when selecting the right 3pl company for your business?

If your company is looking for 3PL services, you need to get a better idea of the business requirements and options available. Then you can select the most suitable solution for logistics. It should be affordable to your budget. The below list expresses another factor that should know when taking decisions for outsourcing logistics activities.

1. Type of the products

according to your product need to select 3PL service providers. Because 3PL companies vary in the services that they are offering.

For example,

  • If your goods are perishable, you need cold storage to keep your products.
  • Chemical or hazardous goods need specialized storage facilities.
  • According to the product and requirements, you can select the most suitable 3PL companies. Also, you need to find experience and reviews of that 3pl company relevant to your business product.

2. Location or place of the warehouse (3rd party logistics warehouse)

Distance means cost because more distance incurs more transportation costs. So it is essential for low distance. Need to consider the distance between the manufacturer and the warehouse or the distance from the warehouse to the final customer. It should be a better 3PL warehouse near to manufacturer or final customer. it can reduce unnecessary traveling. it saves money as well as time.

3. Availability of value-added services

When selecting the right 3PL partner for your business need to consider available services in addition to warehouse management. According to your requirement for the products, the 3PL service provider is in a position to fulfill other requirements also. Such as customized packaging and labeling, order fulfillment facilities, reverse logistics facilities, etc.

You must check the availability of special services which you want because all the 3pl companies are not capable of providing all the services which you want. Before agreement, you need to find out their value-added services.

4. Need to check customer reviews and the reputation of the company

After selecting a 3PL partner, you both need to go on a long journey. It is a long-term partnership. You need to contact and coordinate 3PL providers daily basis.so you must select a more flexible and trusted company.3PL provider handling is not an easy thing it should be critical and has more responsibility.

Because in your company one of the core functions is handling by them. So you need to find reviews from the customers. For that, you can talk with the companies which are already customers of that relevant 3PL company. Then you can take a decision regarding selecting that 3pl company.

5. Company’s future plans and strategies

With the 3PL partners, you need to go successful journey in the long term. so you need to consider that 3PL supplier is the most suitable partner for your business as well as your future and growth. Sometimes you need to adopt new technologies like software and apps that should support 3PL provider system. It may advantage to your company. For your future growth, your 3PL partner should match your requirements and plans.

7. Technology

When selecting the right 3PL partner for your business need to consider about technologies they use and what your company is using. It should be integrated with both companies’ systems. Before selecting a 3pl partner you ensure that their systems support your company system as well as that both companies work with that system.

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