Advantages and Disadvantages of Third-Party Logistics (3PL)

Advantages and Disadvantages of Third-Party Logistics – Before digging deep into the various benefits and aspects of using third-party logistics in your retail business, let us first know what is third-party logistics. To manage the materials or inventory of a firm and their distribution, firms sometimes take help from an outside company, which can be named as third-party logistics. They are also known as 3PL. As businesses grow, they witness many challenges from various factors such as location, manufacturing processes, warehousing, etc. For some companies meeting these requirements may not be a viable option financially. Therefore, in such cases, they discover the need of taking help from third-party service providers. These third-party service providers can help them with all the necessary functions required to keep the business growing.

Choosing the best third-party service provider can be a game-changer for the business. Now you must be wondering about the services provided by a 3PL. Let’s find out about these services. Good supply chain management software is highly beneficial for the business, as logistics providers are specialized in various parts of the supply chain. They are classified into many categories. Generally, 3PL providers deal in the following categories-

• Procurement of goods in the supply chain.
• Fulfilling the orders of the customers by receiving, packing and arranging the orders.
• Providing warehouse facilities to the businesses.
• Transportation of goods to the customers.

What are the advantages of using 3PL for your business?

1. Achieve economies of scale
   Businesses should always try to network with 3PL partners who are known globally. It will help the retail businesses exceed international exposures.
2. Time-saving
   Outsourcing business activities to a third-party logistics partner will help the businesses to save time. The time saved can be utilized in other areas of management. It helps businesses to avoid costly shipping mistakes.
3. Capturing a new market
   While expanding your business to new geography, a 3PL can establish smoother ways for the business to capture a new market.
4. Cost reduction
   Businesses taking help from 3PL service providers need not invest in infrastructure facilities like warehouses. These service providers have fully automated and secured warehouses that can save the retailers money in cases of overhead costs and rent.
5. Focusing on core competencies
   Outsourcing can help a retail business focus on its core products and their development. Based on previous feedback and data, one can improve or refine their products and services.
6. Customer satisfaction
   In the era of competition, with the right 3PL partner, businesses can make on-time delivery or even deliver the products or services before the projected time to their customers. It can also help businesses in achieving brand loyalty. Checkout our blog to build Brand Loyalty Effectively.
7. Competitive advantage
   Having a 3PL partner successful in fulfilling the needs of the supply chain can help the business achieve a competitive advantage by providing offers like specialized packaging, free shipping, delivery within 24 hours, etc. So the business can achieve a competitive advantage over its customers.

Are There Any Disadvantages of 3PL?

1. Problems in Communication
   When two completely different companies work towards achieving the same goal, precise communication plays a key role. But sometimes complications emerge in the communication process leading to misinterpretations which in turn fails in delivery.
2. Irregularity
   When a business hires a third-party logistics, it allows some responsibility or control of the processes to the logistics provider. Irregularity on the part of the 3PL can create problems in the shipping process, thus ultimately harming the business reputation.
3. Cost- External Factors
   Like the weather, tariff, etc., might increase the costs incurred in the business. If the business consumes several resources, then the transaction costs can eventually increase.
4. Understanding of the Business
   Sometimes it’s difficult for businesses to select a logistics provider that can understand the retailer’s business, goals and the various ways of achieving these goals.

After analyzing the advantages and disadvantages of 3PL, the decision to take help from these 3PLs can be a little difficult for businesses. It’s mandatory to know the various factors that might be/be not beneficial for a business in matters related to this.
If the business is a startup and is rapidly growing in its industry, then it is highly recommended to take help from a 3PL. For small businesses, it is suggested to stay wise while deciding on logistics providers depending upon the profitability of the business.
Note that the businesses trying to shift or expand to newer locations might take help from a third-party logistics provider because they have high experience in handling new endeavors.

How can ZapERP help you enhance the 3PL Set-Up in your business?

ZapERP is a multi-channel inventory management software that offers capabilities of integrating completely with other 3PL companies and service providers to make your processes streamlined and synchronized.

ZapERP offers multiple functionalities like order management, order fulfillment, shipping and returns management, inventory control, tracking, purchase order, bill of materials & so much more. If you are just getting started, you can also sign up for free and explore all the benefits of an integrated omnichannel inventory management platform. Alternatively, if you wish, you can also request a demo to have an expert give you a tour of the software, so you can see and decide how it fits your use case.