If your company is at the point where you’re thinking about outsourcing, the term “3PL” may have come up. You may have heard that 3PL companies can save your company money, but you don’t know how.
How will it save you money? In a word, “efficiency,” but it’s more than just improved metrics. Working with a 3PL provider means that your company benefits from the resources and experience of the 3PL company that you may not have access to individually.
What 3PL Companies Can Do For You
3PL, or “third-party logistics,” is about a number of things that help your company’s operations by outsourcing the supply chain to a company that does nothing else. From transport and warehouse to receiving, packing and shipping, a 3PL company can do all or part of your supply chain. This includes complete order fulfilment, talking on the phone to customers, and dealing with returns and refunds.
Time Is Money
What are your employees doing all day long? Are they working to generate revenue (or support the people who do), or are they up to their ears in packing and shipping? If you’re only shipping a few packages a day or a week, it may not be a problem. But if your business is growing and you’re sending out more packages, or you need to hire someone to cover it, that’s going to cut into productive, money-generating time.
A 3PL company already has the essential systems in place to take care of everything you need from the start.
Saving Money With 3PL
Supply chain isn’t your company’s core competency, but it is for 3PL companies. When you outsource your supply chain, a 3PL will save your company money by:
- Warehousing product for you
- Shipping and transport of your product
- Hiring labor for the warehouse (shipping and receiving)
- Minimizing risks of damage, delay and losses
- Investing in the newest logistics technology available, such as order management systems that track your product and packages
- Hiring supply chain experts with industry experience
- Planning and analysis of your supply chain
- Monitoring your logistics performance to minimize loss, reduce bottlenecks and assess and reduce risks
Providers also leverage their collective customers’ spending to increase an individual shipper’s buying power. Because a provider has access to a wider network of resources, they can negotiate volume discounts on your behalf that you wouldn’t be able to get for yourself. Result: increased savings on shipping, transport and other services through volume discounts.
Flexibility With 3PL
You can scale the services you need, especially if your business has seasonal variations (like more orders around holidays.) When you have a lower inventory, you can reduce services and costs. When your inventory increases, you can still take advantage of the 3PL service your provider offers without a big cost increase.
Flexibility is especially helpful when orders have slowed, or you’re updating a product and are getting ready to re-launch. This is a better option than having and keeping your own warehouse and staff, when you may lose money during slower periods.
Who Shouldn’t Outsource to 3PL Companies?
If your cash flow is limited, you may not be able to outsource—yet. Bootstrapped startups may have to use time as well as money to get the business going. Consider working with a 3PL once cash flow is a bit more established and you have more orders to ship.
Of course, when choosing a 3PL provider, you should always do due diligence, and talk to more than one provider, and don’t just go with price. Understand what you’re getting for the price, as well as what kind of service you can expect to receive. Not all 3PL companies are the same, so it’s important to know what they can and can’t do for your company.
Let 3PL WorldWide Help In Connecticut
With warehouses in both Connecticut and California, we have both sides of the country covered. 3PL WorldWide can handle everything in your supply chain from transport to warehouses to shipping and customer returns. Contact us at (888) 456-1920 or use our online contact form to talk about outsourcing your company’s supply chain so you can concentrate on your business.