Through careful specialization, 3PL logistics companies are uniquely equipped to advocate on your behalf, ensuring you are making the most efficient and cost-effective decisions for your business. They are also up to date on industry laws and regulations and can be focused on your logistics needs, while you remain focused on running your business.
Most companies find that customizing their supply chain process is critical to achieving their business goals. Creating a flexible and responsive transportation and distribution pipeline is increasingly important in a modern world where clients want options and where things can change overnight. As a leading logistics company, we’ve answered some common questions about our industry in order to help you select the right provider for your needs.
Third party logistics, sometimes called 3PL logistics, is a form of supply chain management. These third-party companies are hired to oversee and manage various elements of the distribution, warehousing, fulfillment and transportation process.
The 3PL provider model features three key components: the consumer, the shipper, and the logistics provider. The logistics company can be responsible for managing all stages of the logistics process, including auditing, tracking, and even managing inventory. This relieves the manufacturer of certain forms of liability and can reduce associated personnel costs. The logistics company specializes in exactly that – logistics! - which is why they are often able to take the lead on problem-solving, helping you get the best value for your money, and helping you scale your operations globally. Their expertise allows them to oversee a range of logistics related services which include courier services, air freight, truckload services, and warehousing and fulfillment services.
How do I know if I need a 3PL Logistics provider?
There’s no single rule to determine whether your business would benefit from third party logistics, however, there are a few questions to ask yourself that can help determine whether it is time to outsource your logistics. First, determine the volume and frequency of your freight/products/etc. distribution and ask yourself whether you are managing the process in the most cost-effective manner. If you are unsure, then perhaps a call to a local 3PL logistics company might shed some light on the answer to that question. Very often, hiring a 3PL logistics provider can save you money on drivers, vehicles, insurance, warehousing, and software/technologies associated with distribution.
Is managing your logistics preventing you from running your business efficiently? Think honestly about the past few months and whether you’ve had time to do everything you need to do for your business. How much time was spent on problem-solving or dealing with logistics emergencies? Having a logistics provider on your side means someone else is going to be dealing with those problems.
Think about all aspects of your supply chain, whether it be transportation, warehousing, and/or fulfillment. Considering every aspect of your logistics pipeline will give you more insights into your current expenditure.
While most third-party logistics providers perform similar functions, some companies choose to specialize in one aspect of the supply chain management process. In order to select the right 3PL logistics company for your business, you’ll need to identify your primary needs and match them with the most appropriate provider.
Many people believe that ‘transportation’ is synonymous with logistics. However, the truth is, some third-party logistics providers specialize exclusively in transportation. In this case, we define transportation as the actual movement of freight/products/etc. between two locations. Transportation-based 3PL providers will ensure seamless transportation between factories, warehouses, retailers, and even directly to consumers. To evaluate potential transportation-based providers, consider their shipping methods, network coverage, customer references, pricing and industry experience.
Warehouse and Distribution Based
One of the biggest logistics challenges is warehousing and distribution. Managing this process is increasingly difficult for a company providing national or international services, and warehouse solutions are a crucial piece of the 3PL logistics puzzle. Large warehouse networks offer increased flexibility because they enable you to fulfill orders more quickly and establish inventory reserves across a variety of locations. Furthermore, companies with this specialization may offer discounted shipping rates due to the volume of orders they handle daily.
For many national and multinational companies, logistics providers are necessary to perform the massive amounts of supply chain movements they contend with daily and on an international scale. High-volume distribution networks require ongoing optimization and support, which can only be accomplished by a third party, and sometimes multiple third-party vendors across different continents. Of course, outsourcing 3PL logistics services is a big decision, with unique advantages and disadvantages.
Advantages to Outsourcing Logistics Services
The primary benefits of outsourcing logistics services are specialization and automation. Both are key elements of efficiency.
Specialization creates optimized processes. It helps to streamline operations and limit the bottlenecks that tend to arise from multinational shipments. In an increasingly global economy, outsourcing logistics services makes it possible to fulfill documentation and customs requirements without sacrificing expediency.
Automation naturally limits your overhead. Without the responsibility of leasing warehouse space and managing personnel, businesses can focus on growth and efficiency. 3PL logistics companies leverage their industry expertise to improve efficiency for their clients. These logistics providers maintain ongoing access to the most advanced technology and facilities. As a result, they can provide cost containment solutions and increased visibility into the operational process.
Disadvantages to Outsourcing Logistics Services
While outsourcing logistics services can facilitate business growth, there are some disadvantages. The primary disadvantages are front-loaded pricing and the inherent loss of full organization control.
As you search for the right 3PL logistics provider for your business, you’ll notice that most companies charge start-up fees. These start-up fees are necessary to justify the cost of onboarding. When you begin working with your provider, you can expect that software integration and account management programming will be immediate expenses. However, it’s important to remember that the value of 3PL logistics becomes quickly clear as you have less headache and a partner to help you navigate your supply chain needs. Short-term onboarding expenses can be daunting but may pale in comparison to your long-term savings.
How many shipments do you receive from your factory or distribution center each month? Do you ship your orders domestically or internationally? Is workflow repeat/scheduled and/or ad hoc? Is it time-sensitive? Are there security issues or critical protocols that must be followed? These are just some of the critical questions and considerations that you must address before selecting a logistics provider. To help you identify your volume and performance needs, consider the following:
When do your customers expect orders?
As your business evolves, it’s important to maintain a focus on creating an exceptional customer experience. One major component of the customer experience is meeting and exceeding delivery expectations. With the widespread popularity of Amazon, many consumers view 2-day shipping as standard procedure, however this may not be the case in certain industries. The faster your customers expect delivery, the more warehouses and inventory you’ll require. When you consult with potential 3PL logistics providers, take the time to discuss how they will help you preserve and enhance the customer experience.
What kind of pricing model is viable for your business?
Your ideal 3PL logistics provider will be able to provide efficient, affordable service and ongoing cost containment solutions. However, you should be prepared for up-front fees to support the onboarding process. Third-party logistics management may not produce immediate savings but having a partner with in-depth knowledge and supply chain expertise should provide long term value.
How do you want to handle unexpected events?
Although this question sounds broad, it is actually very important! Your 3PL logistics provider will make every effort to ensure the swift and successful delivery of your freight/product(s)/etc. However, in the case of unexpected events - who should assume responsibility and liability?
Insurance claims and service issues are the most frequent points of contention. Both parties should agree to an insurance plan and understand the exact limits of coverage. Furthermore, you might also arrange for a warehouse credit to be applied to your account if shipments are lost, damaged, or delayed.
Do you have any integration requirements?
Before beginning a logistics partnership, discuss any programs that must be integrated. You’ll likely have an existing inventory management and order processing system in place. If you intend to continue using that software, make sure that it is compatible with any programs used by your logistics provider.
Most 3PL logistics providers have their own proprietary software to help manage the supply chain. For example, we developed our transportation management systems (the Expak Performance Suite or “EPS”) to ensure a secure and timely chain of custody for our client’s goods. EPS’s foundation is focused on three central principles: Effective Communication, Business Intelligence, System Innovation.
Within the logistics industry, you might encounter the phrase ‘4PL logistics’ or fourth party logistics providers. Fourth-party logistics providers are really a subset of 3PL’s, the primary difference being that 4PL’s subcontract with other 3PLs to perform the physical services.
This typically means that the 4PL company is involved in every aspect of the supply chain process, collecting data and tracking progress to provide valuable, high-level organizational feedback. The benefit of working with a 4PL company is that they are asset agnostic, so they are flexible to find you the perfect providers to meet your specific needs.
4PL logistics providers fulfill all the functions of a 3PL logistics company. Additionally, they take on tasks such as coordinating suppliers, integrating supply chain technologies, and communicating real-time information. Through careful management, they help businesses improve customer satisfaction and contain costs by identifying inefficiencies. The breadth of work performed by 4PL logistics companies solidifies their role as operational partners for large corporations.
How do I know if I need a 3PL or 4PL logistics provider?
If you’re trying to outsource with a 3PL or 4PL logistics provider, think about which one really serves your needs. Perhaps you have a strong inhouse team of logistics experts. If this the case, then a 3PL provider may be the perfect partner for your logistics needs. Whereas if you want to outsource your entire supply chain process, you may prefer a 4PL logistics partner that has the culture and flexibility to adapt to your needs. 4PL logistics partners can be nimble and adapt as you grow to find new facilities, while also having the knowledge and experience to challenge and propose alternative ways of working that may create more value.
What should I look for in a 4PL logistics provider?
Remember, 4PL companies should operate as a seamless extension of your team! Trust and transparency are critical. For that reason, many 4PL partnerships emerge from existing 3PL relationships. As your business grows and evolves, a 4PL acts as the singular point of contact, managing information, supply chains, and warehouse operations.
Third party logistics providers can give your business a competitive advantage by increasing efficiency in your supply chain management process. Logistics specialists are uniquely qualified to deliver both individual and corporate level solutions, allowing you to focus on your core competencies. Whether you’re operating globally or within an emerging market, third party logistics providers offer scalable solutions designed to help you achieve your potential.
At Expak Logistics, we are a 4PL logistics provider. Since 1966, we have expanded and refined our services to include small package shipping via fixed route scheduled delivery, dedicated fleet services, air freight, LTL services and more. Our deep-rooted expertise in all aspects of logistics and unparalleled standards of excellence is what makes Expak Logistics the first choice for companies seeking low cost, flexible and simplified solutions to their distribution and supply chain needs.