Supply chain management is expanding by the day, and a lot of businesses are beginning to realize why they should leverage it in their businesses. Businesses that are already familiar with supply chain management and have implemented it in their business are finding ways to fine-tune what they have going.
Just so we are all on the same page, let’s quickly recollect what supply chain management entails before touching on third-party logistics (3PL). You may recall that supply chain management involves having every process involved in the supply chain under control — from communication (flow of communication from one end to another), services and goods from procurement to manufacturing, and delivery to end users.
With that in mind, we can now proceed to discuss third-party logistics; abbreviated as 3PL or TPL in logistics and supply chain management.
3PL: What is third-party logistics?
In logistics and supply chain management, 3PL refers to the use of third-party businesses or organisations to distribute, warehouse and fulfill or deliver your services. These third-party logistics companies or service providers are saddled with the responsibility of warehousing and transporting goods and services that can be customized to suit your customers’ needs under different market conditions.
The idea is for them to effectively bridge any gap in demand of your products and services and also ensure that the delivery service requirements of your goods are met.
Third-party logistics transcend handling logistics
Contrary to popular misconceptions, the scope of third-party logistics transcends handling logistics for businesses. It extends to value-added services that are related to the production and procurement of goods.
Before we proceed to the key benefits of third-party logistics; 3PL in supply chain management, let’s quickly add that 3PL tagetes specific/particular functions within the supply chain management like warehousing, transportation, and raw material procurement
What are the benefits of 3PL?
As we hinted earlier, 3PL companies provide targeted services within the umbrella of logistics. They offer services like warehousing, transportation, picking and packing, inventory forecasting, order fulfillment, packaging, and freight forwarding, among several other similar operations.
Here are top benefits of 3PL providers;
- Cost reduction
They leverage their order frequency and collective volume to negotiate better rates with carriers on behalf of customers. As such, saving their clients money — think cost reduction.
- Deliver better customer experience
Using 3PL providers allows you to deliver goods and services in good time because they have an established distribution network. Therefore, helping businesses to deliver a better experience to their customers.
- Mitigate risk
They (speaking of 3Pl providers) can help you mitigate unforeseen circumstances that can disrupt your supply chain. In the event that you encounter any abnormality in the supply chain, a 3PL provider is responsible for finding alternatives and solutions. As professionals, they are insured against the loss or damage of items or products.
Rounding off, other benefits of 3PL include saving time and money, helping businesses scale their operations, and being more flexible. Other applications of 3PL in business include managing same-day shipping, reverse logistics, and e-commerce platform integration.