What is 3PL logistics? And how can it benefit your business?

TK Wang

Introduction

Welcome back to our Sourcing 101 series where we break down the basics and arm you with actionable info so you can source like a pro. 

Today, we’re talking about 3PL.

3PL, or 3rd-party logistics, is the practice of outsourcing areas of your supply chain to a 3rd party.  

Running a business is a complex endeavor, and as a business grows, so too does its complexity. Outsourcing key areas of your supply chain can help you improve efficiency, reduce costs, and fully capture opportunities for growth when they arise. 

In today’s post we’ll take a closer look at 3PL and talk about some of the benefits of adopting this as part of your strategy. 

So, without further ado, what is 3PL logistics and how can it benefit your business? 

Let’s dive in. 


What is 3PL?

3rd party logistics is all about outsourcing. More specifically, it’s about tapping into existing infrastructure and technology to automate your order fulfillment and inventory management. Like the invention of the shipping container in the 1950s, modern technology is reinventing the way businesses organise their supply chain.

Amazon is at the forefront of this revolution and its FBA (Fulfilled By Amazon) service typifies the trend to outsource key areas of the supply chain for even the smallest businesses.



We offer programs that enable sellers to grow their businesses, sell their products on our websites and their own branded websites, and fulfill orders through us.

       - Amazon

What are the benefits of 3PL?

Streamline your business

Outsourcing key areas of your supply chain to a 3PL provider allows you to spend more time doing what you do best. As a sourcing agency we see businesses big and small struggle to set up critical systems like warehousing and shipping. Warehousing and inventory management is a 3PL provider’s bread and butter.

Reduce costs

Employing 3PL distribution is often seen as an additional cost that a small business simply can’t afford. But, in many cases, using a 3PL model will save you money. How? 

For the same reason a sourcing agency like Epic Sourcing can get you the best pricing on products or materials from a low-cost region like China. Leverage! 3PLs have leverage because they represent multiple clients. This gives them access to better pricing. In the end the costs might be the same, or even less, for a better solution that saves you a lot of time.

Tap into expertise

Using a 3PL supplier gives you access to some serious expertise. Shipping, logistics, warehousing; supply chain management can get complicated. The benefit of a 3PL solution is that you’re outsourcing to people that have the experience and the know-how to get it done right.

We’ve talked a lot about the benefits of outsourcing on the Epic Blog (like here), and it forms a big part of our ethos at Epic Sourcing. After all, engaging the services of a sourcing agent is often a small business's first foray into outsourcing key areas of the supply chain.

Improve your customer experience

3PL management allows you to tap into a vast distribution network, improving shipping times and minimising disruptions. If you’re supplying products to customers all over the country (or even the world), you’ll be able to keep stock in multiple locations operated by your 3PL. The result is fast, affordable, and reliable shipping. And that means happy customers.

Manage your inventory 

A good 3PL service will allow you to stay on top of your inventory. You can track inventory levels at fulfillment locations in real-time and sync this with your online store so you never get caught out.

Reduce risk

The Suez Canal blockage, a global pandemic, container shortages… if you’re shipping products around the world you’re probably well aware of the potential for supply chain disruptions. This can be a stressful situation and one that can cause some serious problems for a business without the resources to smooth things over. 

3PL providers have access to a large distribution network, so if there’s a breakdown in your supply chain they have the resources and the contacts to remedy the situation. Fast.

What are the downsides of using 3PL?

It’s not all pros! Let’s get real with a few cons.

Control

Perhaps the biggest con relates to control. Whenever you outsource part of your supply chain you lose a little bit of control over it. If things do go wrong (and let’s face it, sometimes they do) you’re reliant on your 3PL supplier to remedy the situation. If the problem appears on the radar of your customer, they will be contacting you, not your 3PL provider. 

Quality control

The dropshipping model is truly revolutionary in the world of sourcing, but the most important drawback is distance between you and your product. If you’re outsourcing your manufacturing, your warehousing, and your shipping, this can increase the likelihood of running into quality control issues. This is one of the reasons we encourage clients to conduct QC inspections at key stages in the sourcing process.

Is a 3PL right for my  business? 

Taking the leap can be a big decision. Here are some things to consider:

  1. Volume

There is a certain charm to packaging up items on your living room table and sending them off to your customers. The moment this starts becoming unmanageable, or your ability to spend sufficient time on your business is compromised, it might be time to entertain the idea of a 3PL provider.

  1. Your customers want fast, affordable shipping

Guess what. They do. If you’re shipping products far and wide, you might need to keep stock in multiple locations to ensure your customers are getting your products fast. 

  1. You’re having trouble navigating the supply chain

This can be particularly evident when you try to enter into new markets. We touched on this above, but one of the main benefits of using a 3PL provider is that you tap into their expertise. If you’re struggling to create a system that works for your business, it might be time to call in the experts.


Need help finding a 3PL provider?

We work with a number of top 3PL providers across New Zealand and Australia. If you need advice on engaging the services of a 3PL supplier, we can help. 

For advice on which 3PL is right for your business, book a Free Consultation and we’ll help you find a solution that works for your business.

Better sourcing everybody!

TK

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