If you are a seller, be it online or offline; logistics is one of the most important sections of your business. Logistics is all about warehousing, distribution, and delivery of your products. When a company’s business grows, managing its national or global logistics becomes increasingly more complicated and challenging. However, it is not something you can ignore if you want your company to succeed over the medium- and long-term.
Many businesses worldwide are adopting third party logistics. However, before you commit yourself, understanding the basics of 3PL logistics is very important. Here, we will discuss what third party logistics or 3PL logistics is and how it can be useful or even essential for your business.
What is third party logistics?
Put simply; third party logistics means having another firm in charge of your after-sales, i.e., warehousing and delivery of the product. The seller hands over the product to a 3PL logistics firm and they carry out the delivery.
Same companies choose to continue doing their own logistics, even as the business grows. This can sometimes mean an overburdening workload. When considering whether to continue running that side of the business yourself, you need to gain a deeper understanding the basics of 3PL logistics.
Is third party logistics good for your business?
As in most cases in the world of business, it depends. Handing over those duties to another firm can only happen if you trust them. This firm, a ‘third party,’ hence the name of the term, is hired to oversee and manage several different elements of warehousing, distribution, fulfilment, as well as the transportation process.
Taking on a third party to manage the logistics side of your business comes with both advantages and disadvantages. Before deciding what to do, it is important to be aware of these pros and cons.
Let’s look at some of the advantages first:
Advantages of 3PL logistics
The main benefits of handing over logistics services to an outside firm are automation and specialization. Both are important components of efficiency.
- Specialization optimizes processes. It helps to make operations more streamlined and limits bottlenecks.
- Automation limits your company’s overhead. You no longer have to buy or rent a warehouse and manage the people who work in it.
- You can focus on getting more sales and customers and expanding your business. All that time you currently spend on logistics you can dedicate to what really matters to you.
Disadvantages of 3PL logistics
Sucess in business depends on many factors, such as hard work, some luck, entrepreneurship, good customers, and a sympathic bank. However, for everything to function optimally, the owner, directors, the workforce, suppliers, and customers need to trust one another.
While your company has been in charge of logistics, it has employed its own workers, i.e., people it can trust. If you decide to outsource this part of your business, how can you be sure that they are as trustworthy as your workforce?
If anything happens to your goods during delivery, you will still be responsible. It will still be your job to refund customers, offer discounts, apologize, explain, etc. You need to be sure that your third party logistics provider informs you when anything goes wrong, and explains what happened truthfully.
Loss of control
To a certain extent, this disadvantage is related to the trust issue. If somebody else is in charge of warehousing, distribution, and delivery, you no longer have the same access to your goods. You need to make sure that quality control procedures in the other company’s warehouse are up to standard.
3PL logistics firms charge a startup fee. They say that a fee is necessary to cover the cost of onboarding. For example, your software and account management programming must be integrated with theirs – integration costs money.
If you contract a reputable and trustworthy 2PL logistics firm, your business will thrive like it has never done before. You will be able to focus on boosting sales and expanding your company. Within a few months you will have concluded that third party logistics was worth it.
Video – What is logistics?
If you find it hard to precisely define logistics, you must watch this Market Business News video.