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What is a 3PL & How Can They Benefit Your Business?

What is a 3PL & How Can They Benefit Your Business? | Transportfolio

Maybe you’re a relatively new business. Maybe you’ve only recently grown large enough to warrant the need for more transportation options. Whatever the reason, if you’re searching for a third party logistics provider (3PL) for the first time, you’ll want to have a keen understanding of what they are and how they work before choosing one to help with your logistics challenges.

So what exactly is a 3PL?

So what exactly is a 3PL? | Transportfolio

At the most basic level, 3PLs offer logistics services to support certain aspects—sometimes all aspects—of shipping operations. Typically, 3PL providers are integrated into a company’s warehousing and transportation procedures.

By scaling and customizing services, 3PLs can best meet your specific needs. It’s always up to you just how much a 3PL helps with. A 3PL can provide a single service for your supply chain or deliver a bundle of services that extend across multiple aspects of your supply chain. These services work with you to provide visibility to all aspects of the supply chain. Additionally, leading 3PLs create value in ways that enhance your operational, financial, and end customer performance.

3PL vs. 4PL

3PL vs. 4PL | Transportfolio

Third party logistics and fourth party logistics (4PL) are both purchased professional services that help businesses plan and execute logistics services. What is the difference between third party and fourth party logistics you ask? A 4PL most often focuses on the design and execution of business processes and oversight of the moving parts of a business’ supply chain, oftentimes collaborating with multiple 3PLs (transportation and warehouse 3PLs), asset based carriers, and warehouses utilized by the business. Whereas, as an underlying service provider, 3PLs tend to focus on discrete functions of supply chain operations.

A quick definition of fourth party logistics is below:

What is 4PL?
Fourth party logistics—more commonly abbreviated as 4PL—is when a company uses an integrator that brings together resources, capabilities, and technologies to streamline the design and execution of a company’s supply chain.

If you choose to work with a 4PL, they will supervise your transportation and warehouse 3PLs along with any asset-based carriers and warehouses you use. This oversight helps ensure your goods are moved efficiently throughout the entire supply chain. Generally, 4PLs target the complete supply chain process, are often involved in each component, and can act as a single point of contact for all involved parties.

Key examples of 3PL: The major functions

Key examples of 3PL: The major functions | Transportfolio

Transportation
When it comes to transportation, 3PLs can engage carriers, consolidate less than container load (LCL) or less than truckload (LTL) freight, keep track of freight payment and insurance documents, and work with private fleets. Working with a 3PL can also help lower your transportation costs while driving efficiencies and developing solutions for complex supply chain challenges. And with connectivity to various phases of supply chain operations, 3PL providers are often able to provide real time visibility to your inventory as it is in motion.

Global shipping
Shipping globally can be complicated and stressful on businesses. A 3PL can take control of your global shipping logistics like customs, freight forwarding, and consolidation to relieve your allocated time and money for those processes. As a representative of a client’s business, 3PLs also work to require all trade compliance requirements are met, costs are managed, and execution goes as planned.

Information technology
A 3PL often uses information technology to manage ecommerce, customer relationships, transportation, and warehouse operations. Tools like electronic data interchange (EDI), application programming interface (API), and cloud-based systems are the most popular tools trusted by 3PLs. No matter which tool is utilized, the goal is to provide increased visibility to supply chain processes as well as shipments in transit.

Biggest advantages of 3PL

Biggest advantages of 3PL | Transportfolio

Working with a third party logistics provider offers many advantages. Let’s take a closer look at the benefits of using a 3PL.

Gain expertise and knowledge
Supply chain logistics can be complex; fulfillment, warehousing, and shipping all come with major challenges. When it comes to supply chain logistics, 3PL organizations are experts and can impart clients with their experience and connections to quickly streamline processes.

Additionally, 3PLs can give insight into issues that can come up when shipping internationally. Such issues include documentation, customs, duties, and differing shipping regulations. Working with a third party logistics organization can also relieve the stress of trying to comply with international shipping protocols.

Save time and money
Using a 3PL can potentially eliminate the need to invest in warehouse space, technology, transportation, and employees to carry out logistics processes, allowing for more focus on your core competencies.

Additionally, 3PLs can make organizations proactively aware of supply chain mistakes that could be costly and risky. By providing industry forecasting, 3PLs also help optimize inventory levels and save on inventory holding costs.

When working with a 3PL, organizations can also save time by receiving the expertise needed to carry out supply chain logistics efficiently.

Scale operations and be more flexible
When a company uses a 3PL, they are able to scale space, labor, and transportation according to current inventory. Additionally, 3PLs are often able to ease the transition between seasonal periods and industry fluctuation.

When growing into new markets, a 3PL aids growth in new regions. Typically, 3PLs are always looking for ways to improve aspects of supply chains and therefore have the tools and technologies necessary to make adjustments. Management software can analyze and monitor supply chain procedures to eliminate inefficiencies. Engaging 3PL services are likely to result in continuous improvements being made to your logistics process.

What to consider when selecting a 3PL provider

What to consider when selecting a 3PL provider | Transportfolio

There are countless third party logistics providers to choose from, and choosing the correct one for your business is essential. It is important to remember that, when you work with a 3PL, you are adding an extension to your business, so choose wisely.

Here are a few things for you to consider when making a 3PL decision:

Business volumes
Evaluate your organization’s inventory and typical business volumes. Choose a 3PL that can handle your current operations and scale should your processes increase or decrease.

References and past performance
See references from the 3PL’s current customers to get a real sense of what it’s like to work with them. Pay attention to their ratio of on time versus delayed deliveries, how they handle problems, and how they communicate with their clients. It is a good sign when 3PLs have long-standing relationships with their clients; it means they build positive, productive connections.

Technology
Look at the technologies your business uses and pick a 3PL that is compatible with them; you want to be sure that your chosen 3PL can work as seamlessly as possible with your current business operations.

Additional 3PL resources

Additional 3PL resources | Transportfolio

For more information about the benefits a 3PL can provide to your business, check out these links:

Outsourcing Generates Supply Chain Efficiencies: Toshiba, the electric motor company, lacked visibility to international shipping costs and services, hindering their international supply chain growth goals. Learn how working with 3PL C.H. Robinson helped the company outsource supply chain operations, resulting in year over year cost savings.

The Benefits of Carrier and 3PL Collaboration: Carriers choose to work with 3PLs for a variety of reasons. Hear from Leonard’s Express CMO Mike Riccio about why and how his company chooses to align themselves with strategic 3PLs.

4 Lessons Learned on the Path to Supply Chain Efficiency: As businesses grow and expand their capabilities, it is vital to pay attention to the stress it can put on logistics processes. A 3PL can help relieve these stresses. Hear Blue Ridge Product Solutions’ President James Addison’s four tips for supply chain expansion.

Final thoughts

Final thoughts | Transportfolio

Third party logistics providers can offer expertise, help streamline supply chains, and save time and money. Trusting 3PL experts with your shipping logistics can really make a difference in the way your business functions and allows you to focus on increasing your overall value to customers.

The bottom line? Your supply chain strategy needs to meet unique demands. Learn how C.H. Robinson brings 3PL solutions to overcome challenges in your industry.

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