What is a 3PL Service and How Can it Help Your Business?

3PL Service

3PL is short for third-party logistics and it is the key to keeping your supply chain processes running smoothly and efficiently.

The term “third-party” simply refers to a company outside of your business that will manage the distribution and fulfillment of your company’s products. Nearly all of the Fortune 100 companies use 3PL services, and 86% of all Fortune 500 companies do as well.

This means that the most successful companies use third-party logistics for their supply chain management.


What Does A 3PL Service Provide?

A 3PL provider should provide four essential services for your supply chain: Transportation, Shipping and Receiving, Distribution, and Warehousing.

3PL providers should manage the transportation of your inventory from the factory to the warehouse and/or warehouse to the buyer. Some 3PL providers manage global freight and can handle the logistics to import your product including handling the taxes and duties. Some companies that specialize in transportation only 3PL services include DHL, UPS, FedEx, and USPS. These providers are often used when same day shipping or overnight delivery is needed.

The most common type of 3PL providers offers warehousing, shipping, and distribution services in addition to transportation needs. Many 3PL providers can provide temperature controlled warehousing and shipment including refrigerated trucks.

If your business is really booming, your 3PL provider can help you optimize your logistics network, conduct freight auditing, and provide tools for tracking, tracing, and monitoring your inventory.


Signs Your Business Needs to Hire A 3PL Service

Most businesses realize too late that they need a 3PL provider. They get backed up on orders, customers are getting upset, and freight claims are not getting processed. Once they’ve become overwhelmed, or are losing business, they end up hiring a 3PL to get them out of their hole.

Business owners can avoid the weeds altogether by hiring a 3PL service before this happens to manage their supply chain.

More than 20 Orders Fulfilled Daily- You need the volume to have a margin that allows for premium shipping expenses.

Your 3PL service should be able to increase the volume of your fulfilled orders to put more profits in your pocket and expand your supply chain.

You Need More Warehouse Space- Storage is an expensive, yet necessary part of your fulfillment expenses. Renting a warehouse is always an option but it is an investment that can drag a business into debt.

A 3PL provider can often also a cheaper alternative that allows flexible space options throughout the year, so you’re never stuck with more space than you need or not enough space during your busy season.

Recent Spike in Business- Are expecting a spike in business for the holiday season? Getting a 3PL provider in place three to four months before you expect to need them is ideal for managing your supply chain and establishing a good business partnership before the busy season.


Advantages of Hiring a 3PL Service

When you make a commitment to using a 3PL service, you are gaining a dependable logistics partnership. A partnership which can maximize your profits and take the burden of supply chain management off your shoulders. Some of the other advantages include:

Professional Expertise- An experienced 3PL service provider will know and understand all the industry practices, trends, and regulations. These companies stay up to date on the latest technologies and software, advancements in logistics and warehousing, and transportation. Let the professionals handle your supply chain so that you can focus on business.

Expand Your Resource Network- Your 3PL company should be able to offer you access to vast resource networks. These networks are where the magic happens and allow the supply chain to be streamlined; becoming more cost-effective and profitable.

Your 3PL provider may also have exclusive discounts for volume. If so, take full advantage of these to build relationships within the network. Doing this will further help to minimize your overhead costs and provide quick service as you build stronger connections.

Free-Up Capital- A 3PL company eliminates your need to invest in transportation, storage/warehousing, and technology. Additionally, it removes the need for a full shipping and receiving staff as your 3PL service provides all these services, and usually for one cost. This advantage frees up capital and time that you can invest in other areas of your business.

Fewer mistakes and freight claims are filed when companies use 3PL providers which also saves money and insurance costs.

The flexibility of Services- One of the best advantages of a 3PL is the flexibility in services that you are paying for. Why pay for a large warehouse that you won’t fill in your off-season?

3PL providers offer flexible pricing that can evolve and change with your business needs. This practice can save you a lot of money in the long run and help you plan your quarterly spending more appropriately.


Final Thoughts

3PL providers are the best solution to your supply chain management needs. With Redwood Logistics, you receive top notch customer service that provides more than just your transportation needs. Drop us a line here at Redwood today and let’s talk about how we can add value to your supply chain!