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Deciding how you’re going to handle logistics and manage your supply chain is an important decision – one that will have a significant impact on your business.
Third party logistics (3PL) providers are companies that provide a warehouse for storage, assembly, packing, shipping, and support for your customers when they place an order from your business. The alternative is leasing a warehouse and building a team to handle everything in-house.
Before you decide, consider the following pros and cons of partnering with a 3PL.
Supply chain management is crucial, and the logistics industry is highly competitive. The result – plenty of viable options for you to consider when looking to partner with a 3PL.
3PLs provide a level of flexibility that’s nearly impossible to match in-house. As opposed to leasing an entire warehouse and hiring staff, you only have to pay for the storage and resources you need at any given time.
Not only does this give you the ability to scale up or down by seasonal demand – you also don’t have the long-term financial commitment of in-house logistics because you can walk away at any time.
Outsourcing to a 3PL saves you all of the time and hassle associated with logistics. You’ll be able to get your supply chain flowing much quicker than if you were to handle logistics in-house.
All you have to do is send your customers’ orders to your 3PL partner, and they’ll handle the fulfillment of those orders for you. In fact, that process can even be automated through EDI, and you won’t even have to mess with it at all.
Instead, you’ll have more time to focus your energy on other areas of your business.
Partnering with a 3PL provider eliminates the learning curve that most business owners face when building and optimizing their supply chain. In addition to having your 3PL do all of the work, they will also show you how they operate and the best practices for supply chain management.
It’s in scenarios like these where small business owners are introduced to EDI and other technologies that help businesses operate efficiently. Even if later on you decide to handle logistics in-house, it’s always an intelligent idea to learn from the experts first.
Free shipping (or cheap shipping) is an important differentiator between companies in the eyes of consumers. Unfortunately, small businesses typically can’t afford to provide free shipping because the rates they get are too expensive.
However, 3PLs can get volume discounts that they pass on to you and ultimately, your customers.
No business solution is 100% perfect, so we have to discuss the cons of partnering with a 3PL.
The biggest downside to outsourcing your logistics to a 3PL is the initial investment. All of that convenience and expertise comes with a price.
In the early stages of a small business, stakeholders are usually forced to decide between investing time or money. If you have the time to handle everything yourself, maybe you can put off partnering with a 3PL a bit longer to save cash.
Although your 3PL provider does work for you and you can influence how they handle your supply chain management – you have to be able to rely on them to do the job right, even when you aren’t looking.
Some business owners can’t stand the idea of not having full control of every moving part in their operation, which simply isn’t possible when outsourcing a significant segment like logistics.
When searching for the perfect 3PL, what is the likelihood that they will be in the same city, or even state, as you? Depending on where you live, it might not be an option.
Most of the time, this isn’t going to be a problem. After all, they’re only a phone call or email away.
However, if serious problems arise, it will be frustrating not to be able to visit the warehouse in person right away.
Your 3PL partner will be responsible for a crucial segment of your business – supply chain management. Your customers will be directly affected by the quality of service they deliver.
This is great when your 3PL executes well, and your customers are singing your praise. However, when orders get damaged, shipping is delayed, and customers have other issues – guess whom they’re going to blame? You.
The good news is there are plenty of high-quality 3PLs out there, and assuming you’re using EDI to exchange data for orders, errors should be kept to a minimum.
Take your time in comparing 3PL providers and ask for referrals. If you’ve determined partnering with a 3PL is right for your business, and you’ve done your homework on the provider you choose, you should be good to go.