How Do 3PL Companies Work? – Know About 3PL Business!

A business is said to be successful when its revenues are more than the cost. Reducing the cost factor can make a significant difference in increasing your profit margins. But that’s not an easy job to do.

The market has seen a lot of entrants who had that spark which is needed to run a business, but just because of lacking the expertise of reducing cost, they didn’t make it to an end.

Successful businesses keenly identify their cost and try hard to automate most of the operations in order to focus on their core activities. No doubt, this automation doesn’t become a part of the business overnight, it takes time.

Process of Effectuation & Opportunity of Reducing Cost

Professor Sara Sarasvathy explains in her book: “Effectuation: Elements of Entrepreneurial Expertise”, about the process of effectuation. According to her, all successful entrepreneurs follow a thinking framework which she called the process of ‘effectuation’.

Success doesn’t happen overnight, you’ve to take some serious steps to control the future, rather than predicting it. So, the easiest way to control the future is to take effective decisions to reduce the cost in order to gain the competitive advantage in the market.

Almost all the types of costs are somehow directly linked with your product which can never be reduced because that will negatively affect the final product itself or make the process slower by creating bottlenecks in the operations.

But the logistics department is the one where there are numerous opportunities for cost savings. Logistical costs can be altered by making smart decisions in both inbound and outbound logistics.

Reducing logistics cost is important because it’s not one of the core functions of a business (except if the business is a logistics services provider). It’s always recommended to outsource your logistics operations to a third party, which is commonly known as a 3PL or third party logistics company.

What is a 3PL Company?

A 3PL company offers the management of logistics operations that allows businesses to outsource their entire logistics department to a third party. These 3PL companies not only provide cost effective logistics solutions, but they also allow businesses to use their limited resources in improving their core activities.

3PL Service Overview

There are basically 4 types of services that a 3PL company offers; procurement, transportation, distribution, and growth. The details of all these dimensions are discussed below, however, the growth part is quite interesting to discuss.

Whether it’s distribution, transportation, or procurement, all these logistics activities are focused on growing the business by reducing its logistics cost. Handling in-house logistics operations requires a lot of resources that’s not a wise option at all.

Moreover, it’s quite obvious that managing logistics is a 3PL service provider’s core business activity, so that would definitely have some expertise in handling your logistics system. You can get some amazing and attractive deals by a 3PL service provider because they know how to effectively provide complete order fulfillment services.

How Do 3PL Companies Work? A Complete Cycle!

Working with a 3PL can be a huge step towards cost savings. It not only helps you improve your logistics systems, but it also maintains a complete record of your inventory levels. They work in a very smart way to create a fit between your supplies and demands by keeping your inventory levels fresh and updated.

It All Starts with a Simple Call

Keep in mind, a 3PL company won’t contact you for a jaw-dropping logistics deal. But it is youwho need to contact them in order to attain all the perks of a 3PL service.

The representative at the 3PL company might ask you some basic questions regarding your business profile. These questions will later become the base for a better offer that’s more effective and budget-friendly.

They’ll ask you about your company size to determine the size of the warehouse you need to keep your operations running smooth. This basic interrogation is different with different companies, so give them a call or contact a professional 3PL company to make your business venture more exciting.

Order Fulfillment Services

Once you ping a 3PL company, they will document every single detail about your company. They will create some contracts and agreements, most probably the SLAs (Service Level Agreements), to make sure that everything stays safe in the future.

This documentation also helps a 3PL company to conduct a smooth order fulfillment process in which there’s little to none intervention of any party. Since the order fulfillment activities demand skills and expertise, a 3PL company knows about placing an order, managing inventory, picking and packing the requested items, and how to deliver the right product to the right customer.

Warehousing Services

A startup or SME (Small and Medium Enterprise) can NEVER run their own warehouses in different strategic locations. They need to hire services from a 3PL company that offers warehouse space at significantly low cost.

3PL warehouse provides customized space to businesses who are looking for a space to hold their inventory. 3PL companies try their best to provide you a fit between the supply and demand of your product. It not only helps you save cost by storing only a limited amount of inventory, but it also provides you an opportunity to produce only what’s needed.

Transportation Services

Whether it’s rail, road, air, or water, 3PL transportation services are available in every single transportation mode. You can choose a specific type of transportation for both of your in-bound and out-bound logistics.

Proper Distribution

An efficient distribution channel means an efficient sales channel. It can save you a lot more than what you think.

From a manufacturing plant to the wholesaler, and from wholesaler to the retailers, and then towards your customers, a 3PL company provides a proper distribution channel for your business to get the most out of it.

Provision of Procurement Services

When it comes to ecommerce business, procurement becomes the major concern. 3PL companies also provide procurement services that help you make a better deal with your suppliers across the globe.

3PL companies also assist you in handling your entire supply chain management, which is also referred to as 4PL services. It’s more like a 360 coverage of your entire supply chain that also includes the customer service support and other financial benefits.