As e-commerce continues to grow and supply chains become more complex and global, logistics is skyrocketing in importance. Customers want their purchases faster and cheaper, and the logistics power of behemoths like Walmart and Amazon is forcing all kinds of other businesses to step up their performance to stay competitive.
However, the 21st century logistics market presents more than its fair share of unique challenges, and the truth is that it’s often simply not realistic to address them in-house, particularly for small and medium businesses.
Outsourcing logistics to third-party logistics providers, known as 3PLs, is an increasingly popular option. What’s behind the surge in popularity for 3PLs, and why does it make sense for many businesses to use them? Here are seven reasons that outsourced logistics are taking over in road, rail, sea and air.
1. Helps leverage the benefits of experience and expertise
A 3PL will be able to provide a level of knowledge and experience that most companies won’t have access to in-house. Working with a good 3PL, a business can expect to have access to:
- Extensive knowledge of shipping laws and regulations.
- More experienced and knowledgeable drivers.
- Insider information on receiver locations and delivery windows.
- Streamlined, expert-designed systems that cut out waste and reduce cost.
- Faster and more accurate paperwork.
These benefits can substantially improve operational performance, and they’ll continuously create value throughout a shipper’s supply chain.
2. Reduces or eliminates the expenses of maintaining a vehicle fleet.
Maintaining a vehicle fleet can be incredibly expensive, particularly for businesses that need to ship using larger vehicles such as tractor-trailers. An in-house vehicle fleet usually means substantial investments in equipment, maintenance, training, fuel, taxes, inspections and safety equipment.
A 3PL has already made all of these investments as part of their core business model.
3PLs take on these considerable investments in capital and maintenance so that their customers don’t have to make them.
They can also use their expertise to stretch these resources farther through techniques such as LTL (less than truckload) shipping.
3. Allows businesses to focus on core competencies.
The logistics sector is complex and competitive, and it takes a long time to learn the ropes. Employees who have to become logistics experts in addition to their other duties can find their time consumed by delivery coordination, maintenance, billing–and the many other daily tasks of logistics management. Bringing logistics experts on board can work, but it’s unlikely to be cheap.
Using a 3PL’s services helps a business to cut out these expenditures. By using a carrier with ready-made capacity, a business can focus on its core competencies without having to worry about complex matters of logistics in which they might not have expertise.
4. Provides access to a well-developed network of resources.
Networking is everything in logistics. Operational performance depends on having access to a wide network of carriers and drivers, and creating that network requires a substantial investment of time, effort and money. Logistics partners also have to be vetted. It’s important to ensure that they have a broker license, carrier surety bonds, proper insurance and other credentials.
A 3PL has already done the hard work of cultivating resource networks across a wide area and a wide range of services. Businesses working with 3PLs get access to these well-built networks.
3PLs with a national or global reach also make it much easier to expand operations into a new area because they’ve already laid the groundwork by extending their network there.
5. Offers more scalable and customizable services.
Flexibility is invaluable for creating better logistics performance, so the ability to adapt and scale is another significant advantage of using a 3PL. In the e-commerce era, it’s common for many businesses to experience large and sudden swings in demand, and a business that relies on its own logistics capacity can be left scrambling for the ability to fulfill a key order on time.
Working with a 3PL means a business will have less trouble scaling up their services when needed, and they can also coordinate with the 3PL to ensure that they’re well-prepared for busy seasons. Specialty needs such as refrigerated shipping are also usually easier to find through a 3PL that can tap into their sophisticated resource networks.
6. Provides improved last mile solutions.
Last mile logistics has always been notoriously tough to master. It’s gotten both more complex and more important in the e-commerce era, when consumers expect packages delivered to their doors lightning-quick.
Businesses that need last mile logistics can easily find a 3PL that specializes in last mile solutions. What’s more, 3PLs often provide services that are in high demand among consumers, such as white glove delivery, and they’ll have more resources to bridge the last mile in remote areas that are tough to access.
7. Creates better options for dealing with obstacles.
Everyone who’s ever worked in logistics knows just how common it is to encounter a breakdown, a bout of inclement weather, a backed-up loading dock or any of dozens of other things that can go wrong. For a business that doesn’t have the resources of a 3PL, these challenges can cause huge disruptions in the supply chain and create destructive ripple effects.
For a 3PL, these problems are old hat.
A quality 3PL will have backup systems in place to address the many common hiccups of logistics, from dispatching roadside mechanics to rescheduling other shipments to accommodate a delay.
That kind of peace of mind is difficult to put a price on.
With the many excellent 3PLs available today, many businesses have found that it doesn’t make sense to devote time and resources to in-house logistics. A good 3PL can help a business remove the headaches of logistics so they can get back to what they do best while the 3PL leverages its technology, network and expertise. Teamwork powers the best 21st century businesses, and it’s increasingly apparent that a 3PL is an indispensable addition to many teams.