The Key Advantages of Working With a Third-Party Logistics Provider

Posted on Jan 08, 2024 at 11:01 PM

Third-party logistics can be used by big and small businesses looking for external support and expertise to run and manage their supply chain more efficiently and access the market aggressively and competitively.

But what is third-party logistics, what are the benefits of 3PLs, and how do you select the right third-party logistics Partner? Well, that's what we'll learn about today. Please Read on.

What is Third-party logistics?

Third-party logistics refers to outsourcing the management and organisation of a company's inbound and outbound logistics operations, especially e-commerce logistics, including the organisation of materials and inventory, transportation, and delivery to the consumer.

The companies that provide these services work to provide the tools, programs, and infrastructures for the company that works to organise its supply chains to automate all the inbound and outbound processes.

Simply put, a company affiliated with an external source (the third party) and separate from the company that produces or sells the goods (the first party) receives the goods in its place and stores them in its warehouse. Then it packs, transports, and distributes it to customers (the second party) upon request instead of the parent company doing that.

Third-party logistics appeared in the 1970s and 1980s.

With the introduction and growth of e-commerce in the 1990s and 2000s, the term third-party logistics has become ubiquitous, and third-party logistics have expanded their services. The supply chain integration of warehousing operations, transportation services, and other various logistics.

What are the benefits of third-party logistics?

There are many benefits for companies as a result of using a third party to complete external buying and selling operations. The most important of these benefits are:

1. Business scalability:

So, say a company's business is increasing and needs to invest in a new warehouse that fits its budget. It hired new employees to run its logistics operations — it perhaps even paid to train them. The company identified the best delivery options and set up its supply chain to suit.

What next? Will the company be able to expand its scope of work? Undoubtedly, the infrastructure it has put in place will need to be reviewed when it takes the next step. The company may find that its new warehouse just isn’t suitable anymore.

The solution is to use third-party logistics to avoid the situation. One of the main advantages of third-party logistics is flexibility regarding business scale. It takes into account the most popular supply chain models used in business.

Companies wishing to grow must rely on these services because if the business sees a sudden surge, the companies will still have the ability to deal with increased orders and storage. Similarly, if these companies experience a dip in sales, you won’t have to worry about seeing any investments go to waste.

2. Access to expertise and efficiency:

Many businesses use third-party logistics because they don't know themselves or within their company. Business owners are likely to be passionate about their products and their industry - not necessarily about logistical compliance laws and policies.

The advantage of using a third-party logistics company is that they know precisely how to handle every part of the supply chain. Not only that, but these services provide solutions to problems with speed and efficiency that the business owner has never thought of.

At the same time that the logistics service provider is working on completing its work in supply chain management, the business owner can apply his expertise in another field to improve the work.

3. Reduce costs:

What business doesn’t like to save money?!

Business owners may think that working with third-party logistics will be too expensive. Still, it is entirely different because the provider is working to reduce costs in many areas, such as:

• Lower shipping rates due to the volume of orders they place.

• Securing warehouses for ready and suitable storage for all business sizes instead of spending time and effort searching for an appropriate warehouse at an acceptable price.

• There is no need for employees to work in warehouses, thus saving the cost of hiring employees and the financial losses resulting from their absence.

Instead of investing money in these areas, a third-party logistics provider can handle them more cost-effectively. In addition, those savings can be used in other areas of business development.

4. Improved customer experience:

The most crucial element of any business is the customer.

If customers are not happy, the business is likely to fail. If a third-party logistics company that understands the importance of customer service is chosen, then exciting profits can be reaped.

To improve customer experience, third-party logistics offers a range of options. Such as:

• Various delivery options at different prices and varying times are suitable for everyone.

• Free delivery and transportation the day after your purchase.

• Free exchanges and returns quickly and efficiently.

These things are not only expected by customers but are key issues they keep in mind when choosing where to make their purchases. For example, 67% of shoppers consider returns more convenient, while 88% see free shipping as more important than fast shipping.

5. Optimised inventory management:

An often overlooked advantage of third-party logistics is the opportunity to manage a company's inventory better. While logistical functions and transport management are usually the main reasons businesses use third-party logistics, much more must be achieved.

Most good third-party logistics companies include inventory tracking and management software that integrates seamlessly with the company's existing sales platform. This can include real-time inventory tracking, giving them a more accurate view of orders.

With these tools available, the business can be analysed and optimised according to these new ideas, and any improvement will be much easier to implement.

How do you select the right third-party logistics partner?

Third-party logistics partners are many and varied, so when a third party requires external assistance, many things should be considered before adopting a specific provider. Here's what they are:

• Determine the requirements to be delivered by the partner and the expected results while defining logistical priorities and responsibilities.

• Check if the third-party logistics provider can upscale operations if and when needed.

• Check if the provider can provide the customisations. Not all servers may be suitable for all types and sizes of businesses.

• Check if the provider can offer solutions for all supply chain stages or if it is focused on only particular stages.

• Ask for customer feedback as it best indicates a third-party logistics provider's performance and reputation.

• Check the company's financial health. The business should avoid any unforeseen disruptions and risks because the partner in third-party logistics cannot deliver the promised solutions.
  
  

Finally, 

This was our article to introduce third-party logistics. So, if you want more experience in logistics services, we recommend taking one of the online logistics courses.