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Why do companies continue to outsource more services to third-party logistics (3PL) providers?

Because they can offer a lot more than warehousing and freight, an effective 3PL relationship has become crucial to businesses of all sizes. According to a popular annual study of the sector by 3plstudy.com, the effective 3PL provides shippers a competitive advantage. Thus, outsourcing isn’t just about economizing. It’s about creating supply chains with an edge.

Third-party logistics providers focus on warehouse, freight, and logistics support operations. Consequently, their scale and expertise make it more cost-effective for companies to outsource than to manage logistics in-house. In fact, the 22nd Annual 3PL Study referenced above bears this out. This year, 61% of businesses surveyed increased outsourcing logistics, compared to 58% in 2017.

The survey shows businesses do use 3PLs for the services you would expect. For example, 83% of surveyed companies used them for domestic transportation, 66% for warehousing and 63% for international transportation. However, 31% used 3PLs to handle returns, 29% for product labelling and 20% to manage fulfillment.

A 3PL can help in a few ways to keep costs down while fulfilling orders for your multichannel business.
First, modern business means your customers can live anywhere. The omnichannel brings them to you from all over the world. So, how do you get your products to them as quickly and efficiently as possible? The logistics industry continues to build more distribution centers and increase efficiency. Thus, they can hold your products in far-off markets and get orders to your customers’ door wherever your customers live.

Secondly, as your business grows, the logistics of fulfillment may get more complicated. You have to manage orders across multiple channels and fulfill in more ways to more customers. Because competition forged today’s 3PLs, they haven’t just invested in logistics infrastructure. They’ve developed efficient logistics operations which, frankly, you could not replicate easily. So, not only can you use 3PLs for warehouse and freight, but also for kitting, labeling, handling returns and more.

Thirdly, regardless of your company’s size or how you sell, you need an efficient supply chain to keep costs down. A factor in inventory costs is what you pay for warehousing stock. For example, you can pay for a dedicated facility. However, a large increase or decrease in inventory due to demand can impact your bottom line.
Thus, you can end up paying for space you don’t need or be forced to look for more dedicated space to accommodate higher inventory. A 3PL charges you only for space and services you use, making it easier to manage your cash flow.

Ultimately, every efficiency in the supply chain contributes to lower costs and happier customers. The more visibility, automation, and control you have over inventory from production to logistics, the better your bottom line. (Insights from CIN7.com)

So, let us know what you think about 3PLS in today’s business operations in the comment box below.


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