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Partnering with 3PLs can reduce costs, lower capital investment, change fixed costs to variable, improve shipping times and provide scalability during peak periods.
Fremont, CA: For many years, third-party logistics providers have been essential for the success of various industries by helping businesses simplify supply chain operations. From consumer e-commerce to traditional retail, pharmaceuticals and beyond, the benefits of working with 3PLs are increasingly evident. However, while 3PL fulfillment offers many benefits, it might not be the best choice for every company.
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Benefits
One of the primary benefits of using 3PL services is that they hold a great promise for substantial cost savings. With the amalgamation of multiple clients under one roof, 3PL companies can invest in sophisticated technology and automation that is too costly for individual businesses. This includes warehouse management software, voice picking technologies, automated picking solutions and conveyance systems. 3PLs can bring down the cost per order and increase the speed of order fulfillment, which companies cannot achieve internally in many cases. 3PLs also use volume carrier discounts to reduce shipping costs, increasing cost efficiency.
Another major advantage of 3PL logistics is the reduction of capital expenditures. Companies can avoid investing in new or upgraded warehouse facilities, warehouse management systems, and automation technologies. This way, businesses can direct their resources to core competencies and customer service rather than to costly and time-consuming infrastructure projects. Outsourcing these functions to 3PLs helps companies avoid the risks associated with project timelines and cost overruns.
The 3PL services allow flexibility in converting fixed costs into variable costs. In-house fulfillment operations often involve significant fixed investments in facilities, material handling equipment, and IT systems. 3PL providers allow businesses to scale their costs based on transaction volumes. This flexibility is particularly beneficial during peak periods, like the holiday season, when order volumes can increase dramatically. 3PLs can easily absorb such peaks by increasing staff and warehouse capacity, eliminating the hassle of hiring and training temporary workers.
The high expectations of delivery times from large retailers such as Amazon and Walmart are sometimes provided through same-day or two-day shipping. Small and medium-sized retailers can respond by teaming up with 3PLs with warehouse facilities strategically located nationwide. So they can reach a huge chunk of the population in just two days by using land transportation. These 3PLs ensure customers get their product faster at lesser shipping costs and enable the business houses to provide value-added service. Third-party logistics enable companies to focus on core business areas like marketing, merchandising, and e-commerce analysis.
For most manufacturers and retailers, fulfillment is not one of their core strengths. They can enter new channels, like e-commerce, without diverting attention from their main operations by using 3PL services. The benefits of using the services of 3PL providers include cost savings, reduced capital investment, flexibility, improved shipping times and the ability to focus on core business activities.
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