Do I need third party logistics (3PL)?
3PL is a great option for many retail businesses and SMBs, delivering a range of benefits: cost and time savings, reduced capital expenditure, flexibility, and access to the latest in supply chain technologies.
By outsourcing part or all of your supply chain and logistics operations, your business becomes leaner and you can focus on core business processes. But it’s not for everyone.
Your business will benefit from 3PL if you:
- Can't afford warehousing costs. If your budget is tied up in product development, freight, sales, IT costs and all the other pressures that businesses endure, then you may not have anything left over for warehousing. Let alone the associated technology costs like warehouse management systems (WMS), enterprise resource planning (ERP) systems, radio frequency identification (RFID) and more. Often, these costs simply aren't viable –and outsourcing is a more affordable option.
- Want to tap the omnichannel trend. Consumers today expect an always-on, seamless experience across all channels. To enable this, retailers need highly robust fulfilment strategies – yet over 50% of companies say their supply chain is not 'omnichannel-ready'1. A 3PL makes it a priority to stay abreast of evolving trends, and has the technology and systems in place to satisfy the high expectations of the omnichannel shopper.
- Are a start-up. You are better off channelling expenditure and resources towards business development, sales and marketing. While you're focused on growing your customer base, let a 3PL take care of fulfilment – knowing they will deliver exceptional service and ensure a great customer experience.
- Have seasonal demand. If your retail business has seasonal spikes in sales – for example, a busy lead-up to Christmas or Easter – a 3PL makes solid business sense. Instead of having to pay for warehouse space or resourcing to cope with these spikes yourself, a 3PL can step in during these peak periods to handle your fulfilment needs.
- Plan online expansion. The warehousing and distribution capabilities of 3PLs make it much easier to respond to the unpredictable needs of online shoppers. While you're finding your feet online, let a 3PL take this bumpy logistical ride for you.
- Plan overseas expansion. Before you invest in overseas warehouse and distribution facilities, test the waters with a 3PL. This way, you can get a clear idea of how your business will fare in new markets before taking the full plunge.
- Want competitive freight. 3PL providers have great buying power. They can negotiate the best deals on freight – what may cost your business $2 per kilometre when you go direct to a freight company, will only cost $1.50 through a 3PL. These savings quickly add up.
Of course, every business has unique needs. The checklist above is a guide only – you should always consult a 3PL provider to discuss your unique logistics requirements.