In its simplest form, a 3PL (Third Party Logistics) firm coordinates and manages functions for a smooth transfer of output and production. These firms are a valuable asset to the companies that utilize them as they add value and expertise to the supply chain. They take the hassle out of logistics through the optimization of supply chains and on-time deliveries at a lower cost to the companies.
Many companies are using 3PL companies to:
- Reduce costs: Logistics firms offer lower transportation rates and can help reduce return goods cost and lost sales. 3PLs have buying power due to the volume of freight they deal and usually offer reduced rates from the carriers.
- Gain expertise: 3PLs are very industry-focused, and therefore they are extremely knowledgeable about what works best for their customers. They have technology that is able to produce advanced reporting and inventory management — tracking the entire logistics process.
- Create continuous optimization: 3PLs have the ability to make modifications to each connection in the supply chain when needed. Therefore, the company benefits from the continuous improvements made to their logistics process when they outsource to a logistics firm.
- Save time: 3PLs save companies the time they would normally spend carrying out the management of their supply chain. Logistics firms also save them from costly mistakes that could take an ample amount of time to fix.
- Increase space and productivity: If the company is seasonal, 3PLs give them the opportunity to eliminate some of their warehousing space, transportation, and labor when needed. On the contrary, during the company’s peak months, they are able to utilize more space.
When companies choose to work with a 3PL provider, they fully reap these benefits as the 3PL truly becomes an extension of their team.