The steady growth in e-commerce has led to a new dimension of logistical support, which goes by the name of Third Party Logistics, or 3PL, as it’s known in the industry. In order to understand 3PL, let’s examine a typical online purchase, which involves three parties – The manufacturer – The customer – and the delivery contractor, and with 3PL, that delivery firm also packs and stores products, and while the online seller is busy processing orders, the 3PL provider takes care of absolutely everything else, delivering the packaged goods to the customer’s door. That said, let’s now look at the pros and cons of using such an organisation, starting with the benefits.
The Benefits of Using 3PL:
- Significant Savings – The 3PL provider is geared up for packing and delivering, and they would have state of the art technology that is employed to enable a very high efficiency, especially when you compare the cost with your existing set up. One major plus with 3PL warehousing is you do not have to lease expensive premises, as the provider stores all your stock, and with an efficient transportation network, there is much to be saved there.
- Handle Transportation Administration – If you are sending products all over the world, there will be all sorts of documents needed, and the 3PL provider is always abreast or regulation changes, which occur very frequently.
- Online Tracking – No one wants a customer asking where their goods are, and with GPS technology, your 3PL provider knows exactly where every package is at any given time. As their client, you can track anything at any time, all you need is a device and an Internet connection. Refer to articles containing a detailed explanation on how GPS tracking actually works, which might help some people gain a better understanding of the system.
- Minimal Investment – With a third party taking care of everything, you have no need to lease warehouse space or hire packers, and this is ideal for the small venture that doesn’t yet have the capital to make that kind of investment. If, for example, you were penetrating a new market in a third world country, and wished to secure warehouse space over there, your 3PL provider would be able to help.
The Downside to Using 3PL:
- Loss of Control – There aren’t many aspects that are not favourable for the online seller, but using one will result in you not having the same level of control over shipping arrangements, but, then again, if the 3PL provider is on the ball, this would not be an issue.
- Developing a Dependency – With the 3PL company handling everything, everyone is happy, and as you have downsized your operation to no longer include packing and transportation, you are very much at the mercy of the 3PL provider. If you are using an established provider, this is not really an issue, and they have stood the test of time and have all the resources necessary to grow with your company and maintain that high level of service your customers are used to.
For many young and growing businesses, third party logistics offer a comprehensive solution, and with tailored services, you only pay for what you need.