The key to running a successful business is having the right team, vendors, systems, and processes in place to keep the business running effectively.
This is where using a third-party logistics company (3PL) has its benefits. In fact, if you’re not already leveraging a 3PL business for your logistics needs, then you’re potentially leaving money on the table and adding more work and stress for your team. A 3PL can effectively cut costs, improve efficiencies, mitigate risks, and drive more sales.
In this article, we’ll cover these benefits.
What are the benefits of a 3PL?
The right 3PL provider is your end-to-end fulfillment solution that helps with everything from warehouse management to inventory management. They pick, pack, and ship items. Here are some of the many benefits to utilizing a third-party logistics company.
Shipping cost savings
3PL providers work with multiple carriers on behalf of their customers. This usually puts them in a better position to negotiate shipping rates than an individual company. This is true even when the individual business is maintaining a high sales volume.
In North America, the 3PL market was recently estimated to be around $252.5 billion. That’s a large industry capable of influencing shipping costs. Not only does a 3PL have the necessary leverage, but the enterprise may not have the experience to effectively negotiate shipping arrangements.
Reduced operating expenses
In addition to lower shipping rates, companies that utilize 3PL services get to bypass several in-house logistical and overhead expenses, namely in the form of additional warehouses and team members. For every warehouse you own, you have to pay rent/mortgage payments, utilities, maintenance, and insurance. Not to mention, salaries and benefits for full-time warehouse employees.
Improved international logistics
If you’ve ever tried to ship an item to a friend internationally, you know how expensive and frustrating that experience can be – between high shipping costs, custom fees, delays at the border, etc. When you sell products everyday in many different countries, coordinating international logistics can quickly become a full-time job for multiple people on your team.
These challenges are only getting more complicated, especially with the new EU tax regulations that go into effect on July 1st.
This is where using a 3PL can eliminate a lot of the burden and hassles that come with international shipping and logistics. They have years of experience navigating this terrain and know how to put the right processes and controls in place. This allows you to expand into international markets without the upfront cost, risk, and time investment of tackling international logistics in-house.
While problems can occur at any point in your supply chain, shipping issues, such as missed carrier pickups or shipping delays, fall to the 3PL to resolve instead of your business. Any reputable 3PLs will have processes in place to take care of these issues and monitor the shipments to ensure any problems are addressed immediately.
For instance, the COVID-19 pandemic put a major strain on supply chains everywhere. Third-party logistics companies experienced around a 25% reduction in supply chain operations as a result. One way the industry responded was by adopting safer delivery practices like drones and autonomous vehicles. The time and effort used to address COVID-19 challenges were placed on the 3PL company, not the enterprise.
Focus more time on growth levers
Outsourcing your logistics can give you more time to focus on the important growth levers in your business – like demand forecasting. The same applies to your team.
Potential market growth
Working with a 3PL provider gives you a level of flexibility when it comes to expansion. If you decide to sell your product in a new region, your 3PL company can easily position you to make the shift. Access to distribution centers and warehouses means that you can ship your product wherever you want to grow your sales.
Consumers are predicted to retain many of the digital shopping habits they acquired during the pandemic. This means there’s good potential for online sales growth in 2021. Worldwide ecommerce growth is predicted to be at 14.3% this year, representing $611 billion in additional sales. Companies will need to focus on growing their market share to get a piece of the pie and this includes expanding their shipping reach.
Improved customer experience
A streamlined logistics process means a better experience for everyone involved – including the customer. 3PLs improve response times, brand reliability, and help reduce the risk of shipping issues that could frustrate the customer. This is important because a positive shipping experience that meets customer expectations is crucial to successful logistics.
It wasn’t long ago that waiting days or weeks for a delivery from an online purchase was normal. Shoppers have come to expect quick shipping thanks to Amazon’s business model and Prime shipping options. This shouldn’t come as a shock considering Amazon’s projected market share accounts for 50% of the total ecommerce retail market’s gross merchandise volume. They’ve effectively set a shipping benchmark for the industry that can be a challenge to keep up with. Especially for businesses that handle their logistics in-house.
Fortunately, 3PL providers are well-equipped to meet consumer demand for fast shipping. This means better customer satisfaction for your brand.