Third Party Logistics, also known as 3PL or TPL, is a common practice where external companies manage and handle logistics activities for businesses that do not have the resources or expertise to handle logistics in-house. This could include transportation, warehousing, and distribution. There are a number of benefits to 3PL, but the process may not be ideal for everyone. Below are a list of pros and cons to determine whether 3PL is a good fit for you.
Pro: You Don’t Have to Worry About Tedious Tasks
With third party logistics, you can worry less about the labor-intensive steps in distribution and inventory management while a team of dedicated professionals takes care of it for you. This allows you to track your inventory remotely and focus more attention on running your business. Additionally, it saves you labor costs.
Con: You Relinquish Some Control Over Your Inventory
Possibly the biggest con to 3PL is that you are not in-house to watch the process in person. It’s common that business owners want to be in control of their goods, however, that is not always possible with outsourced logistics. You are there watching in the background, so you feel in control of your products. Real-time tracking programs can help you monitor your inventory levels, deliveries, and incoming shipments while you are working with a quality 3PL provider.
Pro: The Specialists Are On Your Side
A great 3PL company will have knowledgeable professionals on their team. This saves you time having to hire and train people to do the tasks your 3PL company can do for you. Your distribution company should be experts which means that you don’t have to be one. It would be beneficial to gain more knowledge about 3PL practices, however, you can rest assure you will already have the experts on your side. This ensures your customers are receiving the services they need in an efficient manner.
Con: Finding Someone To Trust Can Be Hard
As reasonably expected, not all Third Party Logistics providers are created equal. To save yourself stress resolving problems that may arise working with a poor 3PL company, it is critical to take your time finding a good company in the beginning. Finding a trustworthy company means you can rest assured that your goods are being properly cared for. It may be a stressful process, but it will be worth it when you find a reliable 3PL company, such as Primo Corporations.
Pro: Save Money
3PL is a worthwhile investment that will consume some of your profits in the beginning. However, in the long run, most companies save money using 3PL providers for a few reasons. One being that 3PL providers can manage higher inventory volumes. This also helps to reduce the cost of labor across the board.
Con: Costly in the Beginning
Third Party Logistics can be an investment to initially start up. This may make it seem scary, but if you skimp on the cost of warehousing and distribution early, you will see the negative effects. It may change the way your company is viewed by your customers and it could hurt your profit margins. Ultimately, while a quality 3PL can be costly, there is a high probability you will increase your ROI and boost your customer satisfaction.
Often times, 3PL companies offer additional services that will help manage and grow your business. For instance, you might outsource your customer service and shipping needs. Doing so means you can focus on more important business activities.
Con: Bad Service Reflects On Your Company
Unfortunately, there are bad 3PL warehouses out there. Their inefficiencies could potentially make your company look bad. Your customers are more concerned about getting their products, so they will care less about who is getting those products to them and more about quality and efficient shipping. That is why it is important to do your research before choosing a 3PL.
Pro: You’ll Always Have Advanced Technology
3PL companies can often afford resources that you might not be able to. They have access to advanced technology that may not otherwise be available to you. Technology, such as transportation management systems, warehouse management systems, and real-time tracking capabilities. Working with a 3PL ensures that you are always staying up to date with technology that can benefit your business without having to invest in it yourself.
Is Third Party Logistics Right for You?
In most cases, the pros associated with Third Party Logistics outweigh the cons. As long as you find a great company in the beginning, you will more than likely experience benefits to your business. It is a great feeling to enjoy years of stress-free inventory management.
Primo Corporations offers 3PL services such as quality sorting and packaging. Additionally, Primo offers other comprehensive engineering services and large scale manufacturing of products. To learn how we can apply our expertise to your next project, contact us.