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Many businesses in today’s economy are utilizing a 3PL partner. For many industries, they are now pivotal for business success. If you’re looking for better online order fulfillment, warehouse management or distribution, you should look no further than a 3PL. No matter if you are a new business or a long-established business that’s looking for a way to handle growth, a 3PL can be the ideal solution.
3PL partners provide logistics and transportation services for businesses across all types of industries. The services provided include warehousing, truckload shipping, fulfillment (pick and pack, kitting), and more. The goal of 3PL partners is to maximize the productivity and efficiency of a supply chain.
Our detailed guide below provides you with all the information you need to make an informed decision when choosing a 3PL partner.
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When you have to move large amounts of cargo, you want a service that will enhance your financial and operational performance. And that’s where a 3PL partner comes in. Directly working with you to ensure that your services are customized and scaled to fit, the shipping process will be far more efficient in the long term.
When you work with a 3PL partner, you will decide what stages of the supply chain they will help you with. 3PL services can be anything from a single service, to full supply chain management. With truckload shipping, they will use state-of-the-art technology and premium carriers to ensure that your truckload freight is delivered to its destination on time and as efficiently as possible.
3PL stands for third-party logistics. 3PL companies offer businesses logistics services including outsourced supply chain management, warehousing, distribution services, and more. Providing businesses with a cost-effective and efficient service, they can streamline operations so that you will no longer have to worry about late deliveries, poor warehouse management or ineffective supply chain management. Typically specializing in integrated operations of transportation and warehousing services, a 3PL will meet the demands laid out by their partners.
A billion-dollar industry, many companies around the world use a 3PL in their operations. Due to the growth in online sales and consumer demand, 3PL services are continuously growing and evolving.
The 3PL market has grown exponentially over the years. To show this growth, the table below displays the revenue earning of the market from 2010 to 2020. The table also displays the projected revenue from 2021 to 2023.
|
Year |
Revenue Earned (In Billions of U.S. Dollars) |
|
2010 |
127.5 |
|
2011 |
135.5 |
|
2012 |
142 |
|
2013 |
147 |
|
2014 |
157.8 |
|
2015 |
161.2 |
|
2016 |
166.8 |
|
2017 |
184.3 |
|
2018 |
213.5 |
|
2019 |
212.8 |
|
2020 |
231.5 |
|
2021 Projected |
260.2 |
|
2022 Projected |
278 |
|
2023 Projected |
297.2 |
The way that a 3PL works will differ depending on the company that you choose and the requirements that you need to be fulfilled. However, there are four main categories that a 3PL could fit into, according to Industry Today:
A customer adapter 3PL may be more commonly referred to as a full service 3PL. This type of 3PL can adjust their services to the varying needs of the businesses that they work with.
A 3PL is frequently hired to provide supply chain management and logistics for companies. Aimed at designing and delivering a comprehensive workflow, some 3PLs also offer domestic and international transportation, customs brokerage and warehousing, while others will offer logistics solutions for an omnichannel manufacturer, an e-commerce company or a retailer.
Transportation
Outsourced 3PL providers can be responsible for the transport of goods between different locations. Frequently used by companies within the retail sector, they will guarantee that items are delivered while providing inventory shipment between the two parties.
To accommodate the shipping and receiving, the 3PL will use a variety of technology, including a transportation management system (TMS). Streamlining the efficiency and automating the routine, there will be a transparent improvement in logistics operations.
Warehousing
An outsourced 3PL provider that offers warehousing logistics will directly integrate its services with a businesses’ transportation and warehousing procedures. This is to ensure that goods are stored and distributed accordingly. Designing a fulfillment warehouse for a company so that they are customizable is a vital step. A business won’t have to worry about organizing storage, distribution and transportation for their goods.
Reverse Logistics
No matter what industry your business is in, it’s likely that at one time or another, products and materials will have to be returned. A reverse logistics company will make sure that items will return either to their original source or to a third-party handler that you have selected. In order to complete this logistic function, the 3PL will have to have a strong infrastructure and network in order to manage the services efficiently.
Customs Brokerage
This logistic function makes international shipping a lot easier. Working directly with Customs & Border Protection (among other government agencies), freight can be moved seamlessly between border crossings. With experience in both import and export customs brokerage, the 3PL will assist you throughout the international transportation process.
Trade Show Logistics
Trade show logistics is another function that 3PLs can offer. Not only does this involve managing your trade show from start to finish, but it also includes packaging, the storage of your goods and transportation. You can use this logistics function to ship your materials domestically or internationally.
Supply Chain Management
Effective supply chain management is essential for both small and big organizations. Optimizing efficiency and giving the business a competitive advantage among others within the industry, it’s vital that it’s controlled by a 3PL with experience.
If you opt for a supply chain management service, your customers receive their products within the set time frame. The management itself will consist of different steps, beginning with forecasting and demand planning.
Distribution
A select number of 3PL organizations will also offer distribution services, including order fulfillment, custom labeling, pick and pack, and kitting. By outsourcing these services, your employees can focus on core business tasks while knowing that the distribution and wholesale sector is in good hands.
White Glove
This service will ensure that all of your shipments are handled with special care. If your business has high-value and/or high risk shipments that require special care and handling, white glove service is something you should strongly consider. White glove service typically entails additional manpower and special equipment to manage sensitive freight.
Information technology
A 3PL will often use information technology in order to manage e-commerce services, maintain relationships with their customers and in warehouse and transportation services. From application programming interface (API) to electronic data interchange (EDI), they use the technology to achieve a better level of supply chain visibility.
A third-party logistics company’s role is to provide a business with a cost-effective, time-effective and efficient solution to their supply chain operations. Integrated or bundled together, these services allow goods and services to be created, stored and transported. Assisting your business through each step of the process, they are deemed to be invaluable for businesses within different sectors.
The particular role within your business will depend on what expectations you have laid out and what the 3PL itself can offer.
Third-party logistics and fourth party logistics are often referred to alongside each other due to the similarity between the two. Both professional services help a business to plan and deliver logistics services, they can collaborate or work separately.
A 3PL will directly focus on the logistical functions of operations within the supply chain, whereas a 4PL service will predominantly focus on the initial design and execution of a business’s processes. They will also have oversight control of the moving parts within the supply chain.
For a complete breakdown of the differences between the two, check out our article 3PL vs 4PL: A Complete Comparison.
A 4PL (or fourth party logistics) is a business that brings together suitable resources and technologies to streamline the planning and execution of a business’s supply chain. Supervising the transportation and warehouse process while collaborating with a 3PL, they work to efficiently move your goods in each stage of the supply chain. Taking more control of your company than a 3PL, they are often used by new companies or those that want less input within their business.
There are many benefits that you can reap from working with a 3PL. Of course, the main advantage is that they will take control of your supply chain operations – which will spare your time up so that you can focus on other aspects within your business that are going to further your growth. However, that’s not the only benefit that you can take advantage of when outsourcing with a 3PL:
One of the main reasons as to why so many businesses are seeking out a 3PL is the cost savings. By outsourcing warehouse operations and more, you will save money that you would have spent on hiring staff and maintaining a warehouse. If the 3PL also offers inventory forecasting services, you will be able to adapt shipping rates and increase your order volume with optimized stock levels. This cost effectiveness is incredibly useful if you are just starting out or if you are looking for a way to cut down on costs.
A 3PL will have the technology and tools to guarantee a high-quality service that improves your supply chain. As they are a specialized company that has years of experience, they will also have the expertise in ecommerce. If you’re unsure as to how order fulfilment, shipping and warehousing works, it’s a good idea to hand the responsibility over to an expert who will focus on increasing the value of your business.
If your business sells products internationally, you need a global logistics solution that will ensure that shipments are delivered smoothly. A 3PL will simplify this process, allowing your business to grow. From handling the documentation to dealing with customs brokerage, your international customers will receive their products without any issues. With an in-depth knowledge of international shipping, a 3PL could be the answer to your shipping needs.
If you are unsure as to whether a 3PL is right for your business, you should ask yourself the following questions:
If you have answered no to any of these, it might be a good idea to seek the advice of a 3PL provider.
Need a 3PL to manage your medical supplies? Check out our article on choosing a medical device logistics company.
While there are benefits that come with outsourcing your business’s logistics needs, it’s important that you consider some of the drawbacks that come with the process:
Those are the two main downsides of working with a 3PL. Many businesses will refrain from working with a 3PL as they think that they won’t be able to check quality control or because they want to further their own knowledge of the process.
For the latter, it’s important to know that as a 3PL already has the expertise, you don’t have to spend the time, effort and money getting up to date with the inner workings of transportation and warehousing logistics. You can instead spend your time on other crucial aspects – such as marketing, HR and development. Taking the strain off the process, you can be assured that you are working with a company that knows the industry and is aware of all of the appropriate regulations.
So you might be wondering - how do I find the right 3PL for my business? Well, the process is a lot easier than you think – despite their being many 3PL companies to choose from internationally.
To make the decision a little simpler, here are some steps that you can take:
Research Thoroughly
The first thing you should do is research 3PL providers thoroughly. By doing a quick search, it will become clear which 3PL has the expertise and knowledge to efficiently carry out the task at hand. If you have any doubts you should consider:
Useful Fact: In 2013, the U.S Congress passed legislation which increased the broker surety bond price to $75,000 for those who want to become a transportation broker. These new requirements mean that only legitimate shipment companies will now apply for the bond – rather than a large number of less reputable brokers that applied when it cost only $10,000.
Consider what you will use them for
Although it might be tempting to use a 3PL for a backup in case you have a last-minute transportation requirement, it’s a good idea to think about how you will use them throughout the supply chain. Whether you want to use them for one service (i.e.) white glove or for a more comprehensive service, you should pinpoint exactly what you want to gain from using their services before inquiring.
Once you have thought about this, you can directly inquire with them and they will explain the next course of action.
Ask what they specialize in
As with most businesses, a 3PL can specialize in certain industries. From consumer goods to technology and chemical industries, they might have specific strengths. When you work within a certain niche industry, it’s vital to find a 3PL that will collaborate with you. So when you are trying to find the right 3PL for you, ask about their strengths and whether or not they are a suitable fit for your requirements.
There are certain things that you should take into consideration when choosing a 3PL. A decision that shouldn’t be taken lightly, the 3PL you choose could be the difference between business success and business failure. To make the process a little easier, here are the top 5 considerations:
By evaluating your organizations business volumes and inventory, you will get a good idea as to which 3PL will be able to handle your operations. Through this evaluation, you will also be able to determine whether or not the 3PL will be able to handle an increase or decrease of volumes – depending on how your business is performing in the future.
Whether you do this on your own or with the help of a 3PL advisor, it’s vital that you focus your attention on a maximum of three or four 3PLS. By narrowing down the search, you will be able to create a thorough evaluation that will show which one is suitable. If you try to evaluate more, not only will it take up time that you might not have, but it will complicate the process as it will make it harder to see which 3PL stands out from the crowd.
A great way of picking out which 3PL is the right fit, is by paying close attention to the type of technology that they use. If they use technology which will collaborate with your business's technology, then they could be the choice for you. Some 3PL’s, including R+L Global Logistics, are able to custom build technology tools that fit with your business goals and objectives. Beyond technology, you also need to ensure that other features that you need are available. For example, if you need a warehouse with cross docking capabilities, make sure the provider you're speaking to is able to offer this.
When it comes to 3PLs it’s not just about the price. while many 3PL companies will offer fulfillment services alongside other logistic functions for a low-price, it doesn’t mean that their service is up to par. To determine whether they are worth the price, ask them about whether or not they use external carriers and what the process is. A reliable and reputable 3PL will use carriers which are fully insured, have a good safety rating and have an established business history.
When you have chosen a 3PL, pay close attention to how your overall bottom line changes. If you have obtained a low-cost 3PL, it might result in customer service issues which will cost your business more money in the long term. It can also affect your company image, resulting in your customers seeking the same service elsewhere. When you have a legitimate, high-quality 3PL however, your ultimate number should improve due to the swift processes they are maintaining and updating. This can result from improved operations budget, better fulfillment, increased sales, and more.
If you’re looking to improve your operations, a strategic 3PL partnership might be the answer. A successful partnership will include a combination of trust, loyalty and respect. And the way in which to garner this is by using strategic planning and tools in order to elevate your business and increase your overall sales.
To obtain operational efficiency within your business, you will need to find a partner that can successfully provide you with suitable operational costs, a comprehensive approach and the determination to bring components to the partnership that will add value. They will also have to guarantee a more streamlined process, whether they have responsibility over domestic or international shipping.
Examples of the added value components are:
3PL services will provide a business with the resources and expertise it needs in order to thrive, as well as achieving their KPIs.
If your business has particular environmental objectives, you can find a 3PL that optimizes their distribution networks so that it’s more eco-friendly. From consolidating routes, to using equipment that’s designed to reduce emissions, the partnership will ensure that your environmental goal is sustained.
If your business is rapidly growing, it might be time to consider a 3PL partner – especially if it’s looking as though you might require a truckload service domestically or if you need an international delivery service. You don’t want to put your brand at risk because of delayed or cancelled orders after all.
Ask yourself the following questions:
If the answer is no, it might be a good idea to start researching 3PLs. By partnering up with a 3PL you no longer have to worry about running out of storage space. If you're concerned with a lack of space in your warehouse, take a look at our article How to Manage Warehouse Inventory
If the answer is yes, the assistance of a 3PL might be just what you need. Taking control of order fulfillment, the process will run far more smoothly as your business continues to grow.
If the answer is no, look to a 3PL. They will be able to scale transportation and labor in accordance with your inventory.
If you’re struggling with any of these problems, R+L Global Logistics can help you solve them.
You will need to maintain a fruitful and positive relationship with your 3PL partner if you want to achieve success in the venture. A successful relationship brings with it many benefits that you can reap – in order to grow your business and thrive within your industry. If you are unsure as to how to achieve this, here are some of the tips that you can use:
Collaborate with them throughout the process
In order to have a good relationship, it’s vital that you keep your 3PL partner in the loop at all times. As they will be working alongside you to improve your supply chain, you need to make sure that you are frequently communicating with them in the case of any developments within your business. You should also keep them up to date about any new products, recalls of products and any substantial business growth that could affect your business operations.
Visit the warehouse regularly (if possible)
If your 3PL partner controls warehouse and transportation operations, it’s a good idea to make regular on-site visits. Even with frequent communication it can be difficult to get a clear picture of how your 3PL is operating.
By visiting them, you will be able to see how the supply chain process is developing and you will be able to create a better relationship – as you will be physically meeting the people that are working with you. If it’s difficult for you to physically visit your 3PL partner’s warehouse, utilize technology. Schedule regular “face-to-face” phone calls to see how your operations are moving along at the warehouse. Most warehouses also use inventory management systems, so be sure to check for that during one of your visits.
Set clear expectations from the onset
In order to have an acceptable performance from both you and your 3PL provider, you should try to set clear expectations from the beginning. Although a 3PL technically works for you, they should be seen as an equal partner. So in order to build on your relationship, as well as laying out expectations, you should ensure that throughout the process they know what they are doing and are aware of any changes within your business structure. Setting this tone early, will guarantee that both parties are on the route to success.
Appoint one point of contact
Often, a partnership will fail because there are ‘too many cooks in the kitchen’. When you have more than one point of contact, the communication can become jumbled. So, to ensure that you and your 3PL’s communication stays streamlined, it’s a good idea to appoint someone who is in a senior position to control any challenges or issues that arise within your supply chain. This way, your partner will be able to adapt their service and any issues can be assessed efficiently.
Alongside the above, you should also try to:
Are you seeking a reliable, fully-qualified 3PL partner? Then look no further than R+L Global Logistics. As a world-class 3PL provider, we offer both domestic and international logistics and transportation services. No matter the job, we have the skills and expertise to get it done. Offering cost-effective solutions, exceptional customer service and unmatched assistance, we will work with you to create a streamlined supply chain. As a member of the Cargo Network Services Corporation, Licensed Truckload Broker (DOT) and more, we have the knowledge and experience it takes to offer a truckload shipping service unlike any other.
Get in contact with us today and see why so many of our clients love what we do. Call us at 866-353-7178 or click “Get a Quote”
