Pro and Cons of Third Party Logistics

Pro and Cons of Third Party Logistics

By BHL Solutions

Meeting customer delivery demand should be the priority of any service or product company. Its shipping and fulfilment operations have to be tailored to convenience to suit the customer time and preferences. And this is why third party logistics comes in, to aid businesses in achieving customers’ delivery demands.

What is third party logistics?

Third party logistics (3PL) is a type of an outsourcing business which supports some or all aspects of a business’ shipping operations, the management and movement of their goods from manufacturers and distributors to end consumers. When a company outsources its shipping and fulfillment services, the services expected include:

  • Transportation
  • Warehousing
  • Inventory management
  • Customs brokerage
  • Freight audit
  • Payment
  • Shipping tracking

In short, third party logistics is an outsourcing service where your operational logistics from warehousing to delivery is being managed to save you time and fulfill customer delivery demands daily.

Functions of 3PL 

Warehousing is a type of third party logistics service provider that is integrated into a business warehouse and transportation procedures. It involves specialized storing and distributing of the goods. It is usually customized to handle storage, distribution, and product transportation.

Distribution: Distribution of large quantities of product can be a bit overwhelming, especially for small businesses. So, by outsourcing your distribution service to a third party logistics, you minimize your task and draw focus on other business core competencies. The services would include outbound order fulfillment, picking and packing, custom labeling, and manufacturing.

Shipping:  With a third party logistics, your shipping processes would be managed from start to finish, which  include management of carrier relations, and freight data and matrix reports for real-time visibility and increased transparency throughout the shipping process.

Transportation: When a company leverages on a third party logistics, what they expect is for the 3pl service provider to manage the inventory shipment between the company and its buyers. 

Pros 

Third party logistics has been designed to help businesses optimize their logistics operations. Whether a business owner or as an individual, here is how you can benefit from the services of a third party logistics.

It saves you cost:  Utilizing the warehouse services of a third party logistics saves you the cost of having to maintain your own warehouse and staff. You can now save money instead of spending it on stock levels and inventory storage fees.

Unlimited Access to Experts: A third party logistics company has a core specialization in certain areas of logistics, that’s to say expertise knowledge in those areas you might have no idea about. These areas often come with its own challenges, so by having an expert handle your logistics functions, you can have time to increase your business value. 

Simplified International Logistics: Third party logistics works for you when you sell products across countries whether between two or three countries, or if you are in the category of expanding your business internationally. Third party logistics companies handle the custom, documentation, and other international duties which may delay shipment. 

Cons

Everything has a disadvantage; here are some disadvantages of third party logistics:

No control of over delivery process:

Delivery is the most sensitive part of business, and issues arise during shipment, and are however impossible to get by, if you used a third party logistics company. And this will probably lead to series of back and forth, which would waste your company’s resources.

The initial cost of hiring a third party logistics company is high: At first, the cost of using a third party logistics company is expensive, and may have an effect on turnover. If your business doesn’t require substantial storage area, or have many orders, using a 3pl can weigh down on your business.

You can no longer monitor the quality of your products: This can be inconvenient if you have any quality control issues, or feel like you need to physically inspect your inventory for some reason.


Perspectives from BHL Solutions.

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