The Top Functions, Pros, and Cons of 3PL Logistics

Struggling to keep up with shipping demands, warehousing, and customer service? You’re not the only one. Many businesses face the same challenges, which is why third-party logistics (3PL) providers are becoming a popular solution. A 3PL partner can handle your logistics, allowing you to focus on growing your business.

However, deciding whether to hire a 3PL company involves many factors. Does it make financial sense? Do you have the internal resources? Will it improve efficiency? While there’s no magic answer to determine if it’s time for a 3PL, some common signs can help guide your decision, which you will learn in this blog!

What is 3PL?

Third-party logistics (3PL) companies provide support for various aspects of a business’s shipping operations. They manage the entire process of moving goods from manufacturers and distributors to the end customer. 3PLs are often used in outsourced logistics and supply chain management to handle a company’s shipping and fulfilment needs, which can include:

Materials procurement
Inventory management
Customs Brokerage
Freight auditing
Payment processing
Shipment tracking

Because of these comprehensive services, 3PLs are typically integrated into a company’s warehouse management and transportation operations to ensure a smooth and efficient delivery workflow.

Four Functions of 3PL Providers

  1. Shipping and Receiving

Shipping and receiving 3PL providers manage the entire shipping process. They often use technology, such as a transportation management system (TMS) or integrated freight management services, to streamline and automate tasks like freight payment and accounting. These providers handle carrier relations and manage freight data, offering real-time visibility and transparency throughout the shipping process.

  1. Transportation

Transportation 3PL providers handle the actual transport of goods between locations. For instance, they manage inventory shipments from a company to its buyers. These providers often collaborate with other transportation firms to fulfil their duties efficiently.

  1. Warehousing

Warehousing 3PL providers specialize in storing and distributing goods. Integrated into a company’s warehousing and transportation procedures, they offer customizable solutions for storage, distribution, and transportation. This type of 3PL is one of the most common, helping businesses manage their inventory effectively.

  1. Distribution

3PL providers also offer a range of distribution and wholesale services, including outbound order fulfilment, picking and packing, custom labelling, and manufacturing. By outsourcing distribution, companies can efficiently manage large quantities of products and allow their employees to focus on core business tasks.

Advantages of 3PL

Many businesses turn to third-party logistics (3PL) providers for various reasons. Outsourcing logistics can save time and money while enhancing customer experience. Here are some key advantages of working with a 3PL:

  1. Scalability

3PL providers can adjust a company’s space, labour, and transportation needs based on the required services. This flexibility allows manufacturers and suppliers to expand into new markets with ease. By optimising logistics functions, 3PLs help businesses grow more efficiently.

  1. Time and Cost Savings

3PLs boost efficiency by eliminating the need for businesses to invest in warehousing, transportation, and technology. This frees up resources for manufacturing, strategic planning, and other core activities. The expertise of 3PLs can lead to significant cost savings and better business growth.

  1. Expansion

3PL services facilitate business expansion into new markets, including emerging countries. With their established supply chains, compliance procedures, and global accreditation, 3PLs make it easier to enter new territories and improve customer service.

Disadvantages of 3PL

Despite the benefits, using 3PLs also comes with risks. Here are some common drawbacks:

  1. Loss of Control

Partnering with a 3PL means relinquishing some control over logistics. Companies must trust 3PLs to meet service level agreements (SLAs), which can impact customer satisfaction. Poor B2B integration software can disrupt the exchange of critical information, and sharing proprietary data with a third party can be risky in case of a data breach.

  1. Cost

While 3PLs can save money initially, external factors like tariffs and weather can drive up costs. Over time, the expenses of 3PL services may surpass those of in-house logistics. Establishing a cost-effective partnership with a 3PL can be challenging and may result in escalating costs.

  1. Business Understanding

3PLs may not always meet the specific needs of highly regulated industries or businesses requiring specialised services like cold storage. With many clients, 3PLs might not provide the attention and support your business needs. It’s crucial to choose a 3PL that understands your goals and can efficiently support your logistics and distribution requirements.

When Should You Consider a 3PL?

If your company is growing faster than expected (which is a great problem to have), rising costs for labour, manufacturing, facilities, and staff can quickly become overwhelming. A 3PL logistics company can help alleviate these growing pains, saving your internal resources. It can spare you from numerous logistics headaches, as well as save time and money.

For example:

Access to advanced technology without making a significant financial investment.
Robust inventory solutions to streamline the flow of goods, optimising resource consumption and delivery.

So, most inefficiencies in your logistics can be dealt with just one solution, which is 3PL logistics. Ask yourself this honest question: Do I need to manage these workflows internally? You will know the answer yourself.

Final Word:

3PL providers offer valuable infrastructure, transportation, and expertise that can benefit enterprises of any size or industry. The conclusion to use a 3PL relies on your specific business requirements. So, if you need to explore this opportunity deeper, reach out to a reliable 3PL logistics provider in your area, such as Carrabbas Group.