5 Key Benefits of Third-Party Logistics (3PL) in Supply Chain Management
Traditional business models that do many or all operations in-house are not always the most productive. This is especially true for small e-commerce businesses. Many e-commerce companies have been able to grow while operating on tight budgets. Third-party logistics in Supply Chain Management allows you to partner with professionals in one of the most important aspects of your e-commerce business. Therefore, you can focus on marketing, growth, and customer satisfaction. The Indian third-party logistics (3PL) market is slated to witness high growth in the coming years. According to a report by the UK-based market research firm Technavio, the Third Party Logistics market in India is poised to grow by US$10.74 billion in the period 2021-2025, progressing at a compound annual growth rate (CAGR) of almost eight per cent, and witnessing an incremental growth of US$81.73 million by 2024.
What is Third Party Logistics (3PL)?
Third-party logistics or 3PL is a service that enables enterprises to outsource or make use of third-party businesses to carry out tasks to completion in their supply chain.
- 3PL providers are companies that offer comprehensive and even one-stop solutions for enterprise supply chains in packaging, warehousing, transportation, and order fulfilment.
- 3PLs can identify and fill the gaps in your supply chain.
- Their expertise, best practices and technologies can integrate into your business processes to solve the most complex challenges in logistics management and make your supply chain a more agile, responsive function — a necessity in today’s uncertain market environment.
Third-party logistics, or 3PL, is used interchangeably with fulfilment warehouses or fulfilment centres. Companies that provide 3PL services offer many of the same services as order fulfilment companies. These services include:
- Warehousing
- Inventory management
- Shipping and receiving
- FTL and LTL freight shipping
- Picking and packing
- Kitting and customization
- Reverse logistics (returns)
The third-party logistics company acts as an e-commerce fulfilment company. It provides all the services you need to outsource your logistics operations.
Different 3PLs specialize in different types of fulfilment and warehousing. Some are equipped to run cold. These warehouses can store and transport food products that need to be refrigerated or frozen. Other 3PLs are ready to store and transport hazardous materials. ProConnect Supply Chain Solutions is a leading third-party logistics provider in India for heavy, bulky, and high-value products.
Why use Third Party Logistic Services?
It could be to expand the customer base, venture into new markets, or create positive consumer experiences, but more and more businesses — big and small — are looking for external support and expertise to run their supply chain more efficiently and gain a competitive advantage. And that’s where a third-party logistics (3PL, also known as TPL) provider comes in.
5 key benefits of 3PL in supply chain management:
- Drive Cost Savings
Because third-party logistics companies specialize in logistics, they have a broader network than the company’s supply chain capabilities. They will probably have an exclusive relationship within the logistics industry, have greater leverage in negotiations and will be able to offer even greater volume discounts to their clients. All of this minimizes overhead costs. By partnering with a 3PL supply chain management company, you can also provide transportation, warehousing space, staffing, tracking technology and more, saving you a huge investment in your infrastructure.
- Focus on Core Competencies
Logistics outsourcing allows companies to focus on their core competencies rather than being involved in managing non-core but important features. Your company can take advantage of logistics know-how without using internal resources.
- Gain Flexibility and Scalability
The advantage of third-party logistics in supply chain management is that it provides the enterprise with the flexibility and scalability to use delivery and sales resources based on current business requirements. When sales decline, there are no extra investments or idle resources, and when demand surges, companies can scale up.
- Enable Business Growth and Market Expansion
The role of third-party logistics in supply chain management is to enable businesses to grow by giving them access to markets that do not have an established presence. Being able to manage inventory in new markets without spending money on inventory, equipment, and effort saves money and hassle in learning the complexity of logistics in new markets. As mentioned earlier, the Third Party Logistics in India is on a path to grow manifold, this will help ease the day-to-day working of the supply chain industry.
- Improve Customer Satisfaction
All of the aforesaid 3PL benefits will lead to improved services and response time, timely deliveries and greater brand reliability. This translates to satisfied customers — the fundamental goal of all businesses.
– Anil D Yadav