The Basics of Third-Party Logistics

Choosing to outsource certain business functions doesn’t mean your team can’t handle things by themselves, nor does managing the transition to third-party labor have to be a hassle. In many ways, third-party logistics (3PL) services can be a crucial part of maximizing the efficiency of your business and getting the most out of your existing workforce and assets.

In a nutshell, 3PL services are meant to take over some or all aspects of supply chain management on behalf of an individual business. Everything from picking and forecasting to point-to-point transportation can be outsourced to experts that know every in and out of individual supply-chain processes, leaving you and your workers with more time, money, and energy to focus on other critical business needs.

For most companies, the decision to seek logistical assistance from a third-party company is a matter of weighing the likely pros against the potential cons. To make the best decision for your warehouse’s needs, it is important that you understand the basics of third-party logistics and the benefits it could provide your business.

Benefits 3PL Could Offer Your Business

For many businesses, the most important deciding factor when choosing whether to utilize a 3PL service is how much an outside company’s help would cost. While upfront expenses may increase slightly, virtually all 3PL solutions provide an overall benefit to users in terms of net costs, as dedicated third-parties negotiating on behalf of multiple companies can often get much better order and service pricing from individual providers within a supply chain.

Utilizing third-party logistics also gives your business more flexibility, not only in adjusting to peaks and valleys in demand, but also in your ability to test the waters in new markets without having to fully commit your own resources and workforce. Likewise, retaining expert help from a third party gives warehouses the opportunity to maximize productivity in unfamiliar fields and efficiently resolve problems that an in-house team working alone might not be able to prioritize.

Most of all, though, what 3PL services represent to warehouse managers is a reduction of individual risk at whatever stage(s) of the supply chain they help with. Specifically, third-party logistics would bear liability for any unforeseen incidents that crop up along the parts of the supply chain they manage. For example, a company that hires a flex laborer through a service like HapiGig does not have to worry about providing benefits to the worker, such as healthcare coverage.

Potential Downsides

Like any solution to workflow problems, using 3PL services is not flawless. It is possible that slotting third-parties into your supply chain could increase the physical distance between you and certain services or inventory, as well as decrease the direct control you have over those parts of your supply chain. It’s worth reiterating that retaining any external service does require spending some money upfront, which will need to be budgeted and managed in the short-term to yield the most long-term benefits.

That being said, the positive aspects of third-party logistics usually outweigh the negative ones in both financial and practical ways. Ensuring you have access to the best logistical solutions available for your business – or even just enough flex labor to cover a sudden demand surge – could make a huge difference in the long-term sustainability and profitability of your warehouse.