BUSINESS SPOTLIGHT: Can Your Business Benefit From a 3PL Logistics Provider?

3PL is short for third-party logistics

If your business is growing, you may be at a point where you need to decide whether or not you should invest in things like a new warehouse or if it would make more sense to look for other solutions instead.

One of those solutions may be a 3PL provider. Can your business benefit from a 3PL logistics provider?

Let’s take a look at what 3PL companies are, what they do, and how they could help your business.

What is a 3PL Provider?

3PL is short for third-party logistics, which are companies that can assist with a wide variety of things like shipping and fulfillment. Each 3PL may offer different services, but some examples of what a 3PL may include are:

• Warehousing
• Transportation
• Inventory management
• Payment
• Freight audit
• Distribution
• Customs brokerage
• Shipment tracking
• Materials procurement

What is 4PL?

When you’re looking for 3PL providers, you will often come across the term 4PL. What is 4PL, and how does it differ from 3PL?

4PL is fourth-party logistics, which is basically a step above 3PL and targets the entire supply chain process. A 4PL company might help coordinate between a business and several different 3PL companies for the most efficient method of moving goods. If you have extensive or complicated shipping and transportation needs, you may benefit from a 4PL to help coordinate everything.

Benefits of 3PL

Working with a 3PL can have a wide variety of benefits for your company, including:

• Save money and time. If your business is growing quickly, working with a 3PL can help you grow much more quickly and at a lower cost than investing in things like additional warehouse space, transportation, technology, and employees.
• Scale more easily. With a 3PL, you can increase or decrease your warehouse space as needed. This is especially useful for companies that have a seasonal inventory – Why maintain a large space all year when that space will only be full for a couple of months a year and remain mostly empty the rest of the time?
• Grow into new regions. A 3PL company can help you expand into a new region without the need to build a warehouse and set up distribution by yourself. The 3PL provider is already set up and operating in whatever market you’re looking to break into. 
• Gain knowledge and experience. There’s a lot to know about shipping and distribution, and you can learn from your 3PL provider as they help you navigate the complications of goods transportation, especially if you ship any goods internationally and need to deal with customs and more. International shipping can be more complicated than you expect.

Disadvantages of 3PL

3PL is great for many businesses, but it does come with some downsides and isn’t right for every company. Some disadvantages of 3PL include:

• Costs. While a 3PL can reduce your costs, you also don’t have any control over costs. Things like over-regulation, tariffs, and weather can affect the costs, and there isn’t anything you can do about it. Also, at a certain point, it becomes more cost effective to handle your own logistics rather than paying a 3PL to manage everything.
• Loss of control. Giving up control of your deliveries to a third party can be nerve-wracking. A 3PL may also have access to proprietary information of yours that may become more vulnerable to attack.
• Business understanding. A 3PL can handle most traditional shipping needs, but if you need something special, like cold storage or meeting strict regulations, then giving up control to a 3PL may not meet your needs.

Can Your Business Benefit From a 3PL Logistics Provider?

There are a lot of factors to consider before deciding whether your company would benefit from a 3PL. A few things to think about include:

• How fast is your company growing?
• Does it make financial sense?
• Will your company become more efficient?
• Would you be better off handling everything internally?
• Do you want access to modern technology without investing directly in it?
• Are you dealing with chronic inventory capacity problems?

As you can see, 3PL is a great solution for many businesses, but it isn’t the best solution for every business. There are many factors to think about before choosing a 3PL to help grow your company and manage your logistics needs, but there is a pretty good chance your business can benefit from working with a 3PL company.

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