Many business owners often focus on strengthening their core business to provide their customers with the best purchase experience. But due to high customer demand and intense competition, business owners rarely have time to monitor product circulation.
Yet, monitoring the product circulation remains critical for business owners to ensure the availability of their goods to ship to customers. Therefore, to reduce their workload while ensuring a sufficient quantity of goods, many business owners outsource their supply chain management to 3PL companies.
Outsourcing your logistics activities to 3PL companies will help you stay ahead of the competition if you’re a business owner. These 3PL companies provide various services that will allow you to ship goods to your customers more quickly and without the need for you to own the infrastructure.
Before we get into the logistics of 3PL management, let’s understand the basics and what your business needs so you can increase your deliveries efficiently and improve your customer experience.
What is 3PL?
Third-party (3PL) logistics companies are intermediaries between businesses (e.g., eCommerce, direct-to-consumer (D2C), and online retailers) and their customers. Typically, they provide these businesses with goods packaging, storage, and transportation services.
Since 3PLs handle the above-mentioned services, businesses can eliminate these tasks from their workflow and instead spend that time focusing on improving their business strategies.
With the increasing customer demand for fast and reliable last-mile delivery, outsourcing these supply chain stages (i.e., goods packaging, storage, and transportation) to the logistics experts will reduce the hassles of managing the activities in-house.
When should businesses consider 3PL services?
Businesses might need to consider 3PL services when they wish to reduce the amount of effort they spend on infrastructure procurement. That way, they can focus on strengthening their core business and developing innovations that help them strive in the market.
Besides, as business owners work on strategy, marketing, etc., they will most likely have less time to manage their supply chains, which require just as much recognition as their internal strategies. On the other hand, managing the supply chain internally will waste more time and money as they need to provide warehouses to store their products, handle the transportation, packaging, and more.
Since juggling between strengthening the core of the business and managing the supply chain is counterproductive, business owners can bring 3PL service providers on board to handle the logistics for them. Outsourcing logistics activities will also help save time and money because 3PL services have existing warehouses, fleets, and delivery management systems.
Building an internal logistics team includes time spent on recruitment, hiring, compensation, benefits, training, and more. Working with 3PL service providers will also be advantageous in terms of lowering overhead costs associated with establishing the entire logistics team internally.
Finally, 3PL providers are experts in the logistics industry. As a result, business owners, including those who run e-commerce and retail, can rest assured knowing that they can provide their consumers with reliable delivery and return services.
How do businesses and 3PLs maintain their relationships?
A good, productive, and profitable relationship on both sides is integral to any partnership — and that’s the case with businesses and 3PL management service providers too. There needs to be common ground between client expectations and how the 3PL intends to meet them using its services and features.
However, shippers continue to have high expectations for logistics and supply chain management, making it more challenging for 3PL service providers. To ensure they provide great service, 3PLs must constantly improve their technological and digital capabilities to optimise their network and provide efficient delivery.
Fortunately, relationships between shippers and 3PLs are still quite positive. According to a 2022 report, 89% of shippers said their relationships with 3PLs are mostly positive. On the other hand, 98% of 3PLs stated that they have successful customer relationships.
Based on the statistics, we can also conclude that 3PL services will remain valuable in the long run. More and more businesses will require their supply chain management to be covered to ensure that their buyers have good experiences.
Difference between 1PL, 2PL, 3PL, and 4PL
After understanding what a 3PL is, it’s time to compare it to other types of logistics schemes, such as 1PL, 2PL, and 4PL. As explained below, these logistics schemes handle supply chain lines in different ways:
1PL, or first-party logistics, is a goods transportation scheme where businesses directly ship to their customers without any middlemen. It means they will handle all the supply chain stages internally, including manufacturing, storing, and delivering goods to customers.
2PL or second-party logistics are transportation companies with their own delivery fleet, helping goods owners to ship out goods on behalf of them.
The focus of our article today, 3PL, or third-party logistics, is a type of service that helps businesses with goods packaging, storage, and shipping. Businesses that use this service can focus on internal strategies and outsource supply chain management.
4PL, or fourth-party logistics, takes 3PL logistics a step further by managing 3PLs, procuring resources, logistics technology, and warehouse infrastructure for businesses.
Types of 3PLs
The majority of 3PL providers offer services focused on specific aspects. The businesses can eventually choose the service that suits their needs, as explained below:
- Full-service providers
Full-service providers offer end-to-end solutions to their customers by having multiple fulfilment centres spread across various locations. They will also ensure that the shippers (i.e., businesses) have the right items at the nearest warehouses to reach the buyers faster.
In a time where quick order fulfilment has become the norm, businesses can rely on full-service providers to comply with reliable last-mile delivery that satisfies and retains their customers.
- Warehousing, Fulfilment, and Distribution providers
Inventory warehousing, order fulfilment, goods packing, and shipping are the common tasks for 3PL providers. However, this type of provider specifically focuses on larger warehousing with multiple distribution centres. They will also work with businesses to provide reliable transportation services to reach buyers quicker.
By opting for this provider, businesses can give a better shopping experience to their customers as they can receive or return goods in less time with greater security, which has become the norm for last-mile delivery.
- Transportation 3PL
Transportation-based 3PLs operate their fleets to transport goods between several locations. They may, for instance, ship goods from manufacturers to warehouses and other distribution centres. They may also arrange transportation from a company directly to the buyer.
Due to their specialisation, a transportation-based 3PL can also work with a freight forwarding company to handle goods movement. Think of companies like UPS, FedEx, and USPS — they are all different kinds of transportation 3PL.
- Financial and Information 3PL
Aside from the requirement for product warehousing and distribution, many large businesses will also need to optimise their logistics network.
This is where financial and information-based 3PLs may assist them by offering accounting and cost-control services in various areas such as freight forwarding, inventory monitoring, management, and many others.
Challenges faced by 3PLs
The majority of 3PL companies are experts in the field of logistics. That’s why they will most likely have enough knowledge, experience, and workforce to provide their clients with reliable inventory management and transportation.
However, that doesn’t mean that they have no problems to innovate around. The following are some of the common challenges they must overcome to deliver trustworthy services to their clients:
- Time constraints
The goal of 3PLs is to help their customers by reducing lead time. To do so, they must maintain clear communication with the warehouse team, shipping agents, couriers, and many more promptly.
Failing to manage time effectively will result in delayed shipments. In the worst-case scenario, 3PL providers may receive harsh complaints and lose the trust of their clients.
- Poor visibility of their delivery partners
A 3PL provider, as a company, typically has departments that handle various tasks, one of which is the drivers who are in charge of delivering goods. Often, when the drivers are on their shifts, these providers frequently have no control over their performance, leading to undetected issues.
If they continue to have no control over driver performance, they risk experiencing an increase in the number of shipment delays. Customers may get upset by this issue since they expect deliveries to be prompt.
- Increasing fuel price
According to Reuters, retail gasoline and diesel prices in many countries worldwide reached an all-time high in March 2022. The news stated that the price has risen to around S$80 per barrel since the end of 2021.
Unfortunately, this issue is beyond 3PL’s control and requires them to re-strategise their operations to manage their costs.
- Cluttered documentation
Often, a 3PL provider will receive orders through various channels, such as telephone, email, text message, etc. If they continue to disregard proper order records, they risk making mistakes such as incorrectly inputting the number of items, shipping address, and other required information.
- Lack of reporting systems
Reporting systems are essential for tracking a company’s performance. A 3PL provider that lacks a reporting system may miss out on the opportunity to evaluate their performance and risk repeating the same mistakes in the future.
7 Key Features That Will Help 3PL Companies
Fortunately, the common challenges that 3PLs face regularly are solvable with the help of specialised logistics software. You might want to work with 3PL services that offer the following seven key features from a reliable logistics software:
- Fleet Tracking
This feature is useful for resolving various issues, such as ensuring that drivers are not idling for too long, addressing issues that arise on the road immediately, and maintaining that drivers are complying with pre-determined routes to avoid unnecessary fuel consumption.
- Delivery Notifications
Delivery notifications allow 3PL to automatically send out messages to their customers, including a tracking URL and ETA calculations. This feature will help customers independently check on their delivery status without nudging the shippers.
Since this feature notifies recipients when to receive their goods, businesses can also reduce the amount of failed deliveries. Failed delivery is one of the factors that can increase shipping costs, particularly fuel consumption.
- Partner Management
Partner management eases communication between 3PLs and their delivery partners. By utilising this feature, businesses can also maintain control over the movement of goods, ensuring that the goods arrive safely at their final destination.
This feature also enables 3PLs to transfer orders to their delivery partners, who can then choose whether or not to accept the tasks. Besides that, drivers can complete their jobs more quickly as they will automatically receive ePOD when they deliver the goods to their destination.
- Route Optimisation
Route optimisation reduces fuel consumption by strategically planning to fully occupy fleets and optimise travel routes so enterprises can transport goods in the same direction more efficiently.
Besides optimising fuel usage, route optimisation will also reduce lead time, something that enterprises are trying to achieve to comply with customers’ demand for fast order fulfilment.
- Order Management
Order management empowers businesses to consolidate their orders into a single place, regardless of how they are received (e.g., phone calls, emails, and text messages). Consolidated orders reduce cluttered documentation, often leading to errors when entering order information.
- Electronic Proof of Delivery
Electronic proof of delivery (ePOD) is a substitute for paper-form proof of delivery. It eliminates the need for paperwork, which can be clunky at times. Aside from reducing paperwork, electronic proof of delivery speeds up the invoicing process because businesses no longer have to wait for drivers to submit proof of delivery at the end of the day.
- Reporting and Insights
Businesses can improve their logistics performance and make data-driven decisions with the help of reporting and insights. They can access the live dashboard to gain insights for a specific time range and then use them to generate reports, make scaled decisions, and improve efficiency.
Scale your logistics operations with us
We understand how difficult it can be to solve logistics problems, whether you’re a 3PL service provider or a business owner. That’s why, at Yojee, we offer you all-in-one SaaS solutions to address your concerns of providing the most reliable supply chain management to enhance your service quality.