What is 3PL Warehousing?
Third-Party Logistics (3PL) providers offer various services such as warehousing, order-processing, cross-docking, inventory management, packaging and freight forwarding. 3PL (Third Party Logistics) is a service outsourced for the company’s warehousing and distribution needs.
3PL transforms your supply chain into a cost-effective and responsive one, enabling the business to focus on its core activities. 3PL combines all these services into one offering under one roof.
How does 3PL leverage your business?
When the business expands logistics handling might be a challenging task. Here come 3PL service providers for all your warehousing needs and the growth of your business. As a business owner it’s essential to understand how 3PLs operate to optimize your business.
Third-party warehouses are operated outside the company by a commercial provider. Third-Party Logistics helps you to achieve considerable reductions in costs. Third-party warehousing is the most cost-effective choice for business owners.
Often 3PLs own their facility and equipment and they keep a large workforce on hand to manage any order amount, even during peak seasons. 3PL utilizes economies of scale because the costs are much lower than those of individual purchases and hire. Firm’s benefit from cost-sharing as they need not own their warehouse or assets reducing operating costs. 3PL’s offer an array of value-added services such as kitting, customized packaging, assembly, blister packing, labelling, product destruction, reverse logistics, international trade compliance etc. There’s a never-ending list of services 3PL provide but this may vary from company to company.
Let’s look at some of the advantages of using a 3PL provider for optimizing the business:-
- Cost Savings: – 3PL providers have better contacts with freight companies than individual shippers. Since they work with many customers they likely get reasonable concession based on volume and order frequency. Warehousing has several costs attached to it such as maintenance and operational costs. 3PL providers reduce all such expenses giving another reason why businesses should use these services. With the use of latest technology they are able to do accurate inventory forecasting to save costs.
- Flexible Scalability: – Fluctuations in demand throughout the year is a significant issue that businesses face. 3PL companies help to cope with this uncertainty in the market. You do not have to commit to capital; for doing this 3PL companies alleviate the risk of delay. Also, with 3PL providers the firm may test new markets without significant warehousing space or investments.
- Enhanced customer experience: – 3PL providers have a vast distribution network that allows fast shipping in every country corner. With the increasing trend of same-day or next-day delivery; shipping speed is also a significant factor in a firm’s reputation which is now looked upon by 3PL providers.
- Mitigate risk: – Shipping delays do happen a lot of times. 3PL providers take responsibility for such delays and even make alternate arrangements to fulfil your orders on time. For international business, 3PLs even does documentation, customs, duties, and other stuff that cost grand and cause delay for shipments. Especially if you’re just a beginner who would be better to take care of your logistics needs than a company that specializes in logistics?
In 2019, the global third-party logistics market was at USD 830.99 billion with a compound annual growth rate (CAGR) of 8.3% expected from 2020 to 2027. The market’s expansion is because of globalization which has prompted many businesses to outsource their logistics to third-party providers.
What are the latest trends in 3PL Industry?
Since businesses’ growth is now dependent upon advancement in technology it is of utmost importance that 3PL providers take advantage of technology and implement it within their logistics channel. Many logistics service providers strive to increase their operating efficiency by the continuous adoption of new technologies. Let’s look at some of the technology and other trends that are dominating the 3PL industry:-
- Robotics:- Many third parties (3PL) begin implementing mobile robots to boost their competitiveness for e-commerce by 2020. It is estimated from Robotics Industries Association data that 485,000 logistics robot units will be sold in total, up by 18% annually, the compound growth rate between 2019 and 2021. (CAGR). Due to COVID 19 pandemic 3PLs leveraged robots to manage increased e-commerce demand without jeopardizing employee safety; the adoption of robotics accelerated in 2020.
- Analytics: – Shippers make more data-driven choices and 3PLs will start to anticipate their analytical skills in 2020. In the 2020 24th Annual Third-Party Logistics Report 94% of shippers believe analytics help ensure timely fulfilment and full visibility of the order and delivery. 3PL businesses have started creating data science teams to ensure that data converts to concrete insights. 3PL suppliers would have end-to-end visibility and traceability across the supply chain by having access to more robust data in a more straightforward way.
- Internet Of Things (IoT):- The visibility of the products in transit gets enhanced by embracing an IoT community. The supply chain system of third-party logistics currently traces goods in transport using tagging chips that transmit identity, location, humidity, and pressure and temperature information. By using RFID (Radio Frequency Identification) tags IoT eliminates the physical limitation. The data on the attached products are informed. The connected fleet administration function also uses GPS to monitor data across connected fleets in other countries.
- Augmented Reality (AR):- It enables people to simulate their actual circumstances with sensory inputs generated by a computer. The AR technology helps managers collect vital fleet information and detects possible harm in advance. It is also used extensively in warehouse layout designing.
- 3D Printing: – There is a growing potential for 3D printing. It is the provision of goods that depends on our economy, as does its manufacture. On-demand printing will eliminate the need to keep stock while reducing storage and transportation costs. Without going through production lines in factories, you can print the most complex items. The related time, labor and expenses do not reduce the need for output in large quantities.
- Cross-Border Commerce: – Consumers are conveniently shopping from retailers abroad. Forrester research expects 20% of e-commerce in 2022 to be cross-border shopping with revenue of up to 627 billion dollars. However, in the light of the 2019 trade wars and recent geopolitical instability, cross-border logistics will continue to challenge shippers. The developments that would promote more foreign trade are 3PLs which keep a more versatile supply chain in line with geopolitical changes, cross-border freight outsourcing to guarantee delivery in time, improve efficiency and increase the profit margin.
- Integration of the supply chain: – All players across the value chain are synchronized to produce the best results. In 2019 further convergence will occur through data exchange, information-based strategies and probably an increased move towards blockchain technology that encourages all stakeholders to become more visible, transparent and accountable.
What is the responsibility of the 3PL provider?
Many 3PL warehouse companies are entirely responsible for their premises, equipment and people in the logistics industry. This is an ordinary practice following the International Logistics Warehouse Association guidelines (IWLA). 3PLs can create integrated supply chains for businesses to maximize customer support and identify cost savings, thanks to their scope and depth of supply chain management expertise.
Third-party logistics suppliers also ensure that their customers’ supply chains stay operational through cyclical or unplanned market ups and downs. This willingness to adapt strategies to changing situations keeps businesses competitive and customer-focused. As market demands rise, the organization will quickly scale up transportation and labor to meet the demand.
3PL is responsible for correcting any errors it renders. If a product is delivered improperly, it is the work of Third-party logistics to send the right product and return it to its inventory. When the 3PL partners may not correctly load goods for transport or harm the products, the 3PL may be liable following the contract parameters. The 3PL shall not be responsible for damaging the interests after the product has been adequately loaded or signed by the driver. If the product gets harmed in-transit, the 3PL is liable under contract parameters.
In the case of products, the 3PL is not liable for damages due to acts of God and usually has a broad coverage of liability for all other product categories of which the precise limits are specified explicitly in your contract. For product degradation or repairs to some extent, the 3PL is financially responsible for most cases. The consumer and his insurance cover shall be the central part of the responsibility.
The company centralizes its logistical planning and avoids the costs of maintaining multiple teams in various geographical locations with the assistance of a 3PL. They may then analyze their entire supply chain for economies of scale and freight consolidation opportunities using a centralized approach.
How to choose the right 3PL service for your business?
Because of the wide range of 3PL services available it becomes very challenging to choose the best among them that suits the company’s core operations. You must collect the precise details of your company’s real 3PL expense. Here are a couple of items to remember with your 3PL partner selection:
- Pricing: – The main aim to reach out to a 3PL provider is to save money on your shipping costs. Although the costs and services differ significantly between 3PLs, you can choose the best one by concentrating on the costs of the services you’ll use the most.
- Scalability: – Choose a 3PL to handle your current stock volume but also to manage it if you unexpectedly add a bunch of new stock, raise stock volumes or have a big sales boom. This factor is very crucial because you want to select a 3PL that manages and runs your company at full pace.
- Location: – The location of your 3PL provider’s facilities may have a significant impact on the time it takes for your goods to meet your customers. Your company’s clients may be concentrated in a specific area or you may be ready to expand to a national level. Inquire about the locations of possible 3PLs’ facilities, the areas they serve, and the time it would take to ship from each. Depending on your requirements you might want to go with a regional or national provider.
- Reputation of 3PL provider: – Examine References from other customers using the 3PL provider and reports on the business’s success over recent years. Search for sources and statistics on deliveries in time versus delays and how 3PL companies compensated for problems. See what customers think about them – customer case studies and quotations are a strong 3PL service predictor.
- Technology compatible: – You should probably choose the company that is equally state-of-the-art and integrates with your inventory tracking software, whether you are using a cloud-based inventory management system or something else. Make sure the technology of a 3PL provider works with you.
Why Stockarea is the best 3PL partner for your business?
Stockarea provides you with optimal warehousing contracts, covering all your 3PL needs. Choose from a range of optimal location, optimal storage methods and distribution models to store your goods efficiently. From Startup to enterprise, we have you covered. Customize your warehousing solution as per your need, along with the scalability, security and flexibility required by your business. Stockarea provides warehouses of all size and functions at an affordable price and along with your convenience. For more info, visit https://stockarea.io/.