What exactly is 3PL or a Third-Party Logistics System?
Third-party logistics (3PL) refers to the use of external companies to manage and provide logistics services for a company’s supply chain. This involves a number of steps such as inventory management, fulfillment, warehousing and the most obvious ones – pickup & delivery etc.
Just like painting your own room can leave a mess, hiring an expert painter will be far more practical, and will bring out a better wall texture and possibly even better wall designs. Similarly, a third-party logistics company have their business model focused upon logistics expertise; thus, they’re usually far more efficient, resourceful, and cost-effective at their respective job. Especially for services such as same-day delivery, reverse logistics, bulk shipping and hyperlocal services which require a lot of manpower.
This is a win-win situation for the outsourcer and the logistics company. All this results to a state wherein the customers are better fulfilled and trust the company more, because of its robust delivery system. As a result, the company can utilize its scarce resources and assets for all operations other than logistics.
Types of Third-Party Logistics Service Providers
Here are some different types of third-party logistics companies, each specialize in different functions of logistics.
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Full-service:
Full-service 3PL companies provide a range of logistics services, including transportation, warehousing and storage, inventory management, and customs clearance. Example: Blue Dart and DTDC.
Transporters:
Transportation 3PL companies specialize in managing the movement of goods from one location to another, often by truck, rail, air, or ocean. Example: VRL Logistics and Allcargo Logistics.
Warehousing and storage services:
Warehousing and storage 3PL companies manage the storage and handling of goods in a facility, including picking and packing orders for shipping. Example: Mahindra Logistics and Agarwal Packers and Movers.
Inventory management services:
Inventory management 3PL companies handle all aspects of inventory control, including forecasting, demand planning, and replenishment. Example TVS Supply Chain Solutions and Ecom Express.
Customs clearance:
Customs clearance companies offer services to help businesses navigate the complexities of importing and exporting goods across international borders. Example DHL Global Forwarding and Kuehne + Nagel.
Packaging and labeling services:
Packaging and labeling 3PL companies handle the design, production, and application of labels and packaging materials for products. Example Uflex and Essel Propack.
Reverse logistics partners:
Reverse logistics 3PL companies specialize in managing returned or excess products, including processing returns, repairing or refurbishing goods, and disposing of products that can’t be sold. Example: GoJavas and First Flight Couriers.
A logistics aggregator like Shipyaari streamlines all such logistics functions on one platform. Shipyaari services over 28,000 pin codes, has partnered with 20 courier partners pan India and internationally, and has catered 20,000+ clients since 2013.
Access to expertise
Expertise counts the most when it comes to 3PL. It takes a lot of time to become an expert in a specific field of activity, and building specialized connections across different location. By partnering with a third party, you get all the experts of logistics at one place, in addition they are always up-to-date on the latest advancements in technology and infrastructure, which makes the operation more efficient.
Cost effective
3PLs are more cost effective. Over time they have built a great network within the industry, this lets them offer better rates. Since their supply chain mechanisms are already in place, they are much easier to use compared to setting up the whole system.
Flexibility and scalability
The ability to provide organizations with the flexibility and scalability to utilize resources based on current business demands is a key benefit of third-party logistics providers. In other words, working with a 3PL makes it simpler to manage the high and low seasons as they can assist you in quick responses to changes in demand. Without taking on additional risk or work, they can also scale resources like transportation, manpower, or space, based on inventory requirements.
Working with a 3PL company also makes it possible for firms to expand without restrictions into new areas. A 3PL company’s support and industry knowledge are beneficial to those trying to grow to new areas, whether locally or worldwide.
Improve customer services.
All the aforementioned advantages of 3PL companies would lead to better service, improved response times, timely deliveries and brand reliability. Therefore, this results to a satisfied consumer, translating a better brand reputation.
Growth and Maximize profits
Handing over logistics part to a third party allows companies to focus on growth, using their resource more on core functions of the businesses. As logistics is a very time-consuming function that also require constant monitoring.
All these factors lead to an efficient supply chain management system. Benefits such as faster deliveries, reduced RTO costs, accessible expertise, enhanced scalability, a higher delivery ratio, are all features of any good 3PL service provider. This improves brand perception, leading to customer satisfaction & customer acquisition. Thus, maximizing profits.
Future of 3PL
3PL is an essential part of the supply chain management. There are many companies that provide expertise in different segment of logistics, from packaging/labelling to final delivery, all can be outsourced nowadays. Technological and machinery advancements have allowed AI take over many functions of logistics, making it error free, and effective.
It is difficult to predict the exact future of 3PL, as it will depend on a variety of factors including economic conditions, technological advancements, and shifts in consumer demand. However, some trends that are likely to shape the future of 3PL include:
Increased use of technology: 3PL companies are expected to continue adopting and leveraging technology to improve efficiency and accuracy in their operations. This could include the use of automation and artificial intelligence to optimize routes, manage inventory, and track shipments.
Greater focus on sustainability: As environmental concerns become increasingly important, 3PL companies may be expected to adopt more sustainable practices in their operations. This could include using more fuel-efficient vehicles, implementing recycling programs, and reducing waste.
Rising demand for last-mile delivery: With the growth of e-commerce and the increasing expectations of consumers for fast and convenient delivery, 3PL companies may see a surge in demand for last-mile delivery services. This will likely require companies to invest in technologies such as drones and self-driving vehicles to meet this demand.
Increased specialization: As the logistics industry becomes more complex, 3PL companies may focus on developing specialized expertise in certain areas such as healthcare logistics, retail logistics, or cross-border shipping.
Overall, the future of 3PL is likely to be driven by a combination of technological advancements, shifts in consumer demand, and a focus on sustainability
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