If you are starting a new business or facing company expansion, it’s a good idea to consider engaging a third-party logistics (3PL) provider. A 3PL partner can organize shipping, warehousing and transportation of your goods.
A 3PL company is useful for reducing transportation and container costs and dealing with mandatory trade regulations paperwork. But there are several things to take into consideration before engaging a 3PL provider for your business.
What Is 3PL Logistics?
Third-party logistics companies provide a way for small- and medium-sized businesses to utilize an existing network for their supply chain. 3PLs are usually intermodal, meaning they use multiple assets, warehouses and vehicles to transport your shipments domestically and internationally.
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3PL vs. 4PL
A 3PL company focuses primarily on transportation and warehousing of goods. Third-party logistics providers navigate the complexities of freight forwarding, customs and shipping consolidation. Each step of the supply chain and transportation processes is kept transparent using information technology you can access.
A fourth-party logistics provider, or 4PL, has a larger stake in your company’s supply chain. A 4PL handles all 3PL management, as well as inventory, coordination and internal project management.
The 4PL model works best for large businesses who need someone to take complete control over the supply chain process by designing, streamlining and running the day-to-day logistics of moving cargo.
Benefits of a 3PL
- Help to streamline and strategize the transportation process
A 3PL utilizes the relationships they’ve established with transportation companies to move your goods from the manufacturer’s warehouse to your customers. The 3PL company finds you the most cost-effective and time-sensitive method for shipping, which is primarily by air or ocean when shipping overseas.
Once in port, if your goods need to be shipped to a warehouse, trucking companies pick up the containers from the port and move them to their next location, whether over a short distance (known as drayage), long-distance trucking or via railways. If your goods need to be warehoused until the next part of their journey, many 3PLs also provide this service.
- Allow your company’s supply chain to fit a pre-existing, established model
A high-quality 3PL can provide you with an effective transportation strategy, often seamlessly integrating your company’s supply chain into a broader, more established network. A 3PL provider has relationships with transport companies, warehouses, trucking services and drayage options around the world.
Each leg of the journey is coordinated by the 3PL company, which already has established supply routes. The 3PL team leverages its contacts within the supply chain to provide the best pricing for your cargo.
- Deal with global shipping logistics and compliance paperwork
A 3PL partner can be beneficial when dealing with the assortment of administrative paperwork required for shipping. The third-party provider handles insurance and customs documents for your company.
In addition to customs and tariffs, your 3PL processes the ship’s Bill of Lading, which is a legal document that stands as the contract, the receipt of loaded goods and the guarantee those goods are given to the recipient. In some cases, the Bill of Lading must be used to ensure the recipient first pays for the goods before they can be unloaded from the ship or port. This document can be lengthy and complicated. Your 3PL partner processes all paperwork on time so you can focus on other aspects of your business.
- Improve last-mile logistics
If you’ve ever wondered how technology can improve last-mile logistics, a 3PL company can use software to make more cost-effective choices with the data provided. Third-party logistics providers use technology to plan routes efficiently, manage driver schedules and even harness predictive analytics power.
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A third-party provider also presents the most effective strategy for compliance with international packaging rules. It puts specific employees in a position to pack the company’s products in UN-regulated shipping materials and custom cardboard boxes.
- Improve customer satisfaction
Third-party logistics help create a higher standard of visibility for your company’s products online so customers have a smooth-running experience when searching and ordering from your website.
Using an order management system (OMS), your 3PL partner can create a real-time and accurate product catalog for customers to scroll through online, with up-to-date information on availability and tracking status.
The provider also assures customers that your company is committed to maintaining a viable and healthy global climate. Environmental sustainability in the 3PL industry is a continuous and committed promise.
Should You Consider a 3PL Partner for Your Business?
A 3PL company provides many effective services for any business with a supply chain and a need for transportation. If you need to ensure your goods move through the supply chain in a cost-effective and efficient manner, and you don’t want the headaches of managing your cargo’s journey, a 3PL partner may be the right solution.
A 3PL provider can also fulfill a single purpose, such as maximizing the affordability of transportation for your company or helping with an effective warehouse organization.
Things to Consider when Choosing a 3PL Provider
No 3PL offers a one-size-fits-all solution for every business. In most cases, you want to choose a provider who understands your unique supply chain priorities.
You also want a provider who can grow with you, especially if you have expansion plans for your business. Your provider should be able to scale up their services to continue to deliver shipments to your clients in a cost-effective, efficient way.
Finally, your 3PL provider should have an established reputation with plenty of financial stability and a history of proven success. This partner should be continually investing in their human resources, equipment, technology and facilities so they are always offering the most optimal logistics solutions to your business.
