What is 3PL? Third party logistics or just simply 3pl are just physical warehouses in which companies own fractions of. To better explain this, I would describe the 1pl and 2pl system. The 1pl system just basically deal with the company and the consumer only. That is they handle good distribution directly. 2pl systems handle theirs differently and don’t handle the distribution of their goods directly but do it through shipping companies which help deliver their goods.
The 3pl system has three different entities involved in the distribution of products and services and they are the production company, the warehouse and the shipping company. This is the reason for the three in the third party logistics.
They are used by companies that can’t handle shipping and distribution services by themselves and so they outsource this to people who can make the business run smoothly. Different third party logistics offer different things too like delivery of Omni channel logistics solutions for manufacturers and retailers
Purpose of 3pl
- Shipping and receiving; The primary function of the third party logistics is shipping and receiving options. It removes the stress that you would have incurred shipping it by yourself and provides better storage facilities that by yourself wouldn’t have been able to procure.
- Transportation; transportation to and from the warehouse is also in the full 3pl package. Most times transportation companies would leverage other transportation firms in order to complete the process for their associates.
- Warehouse provision; The most popular part of the third party logistics system. This is tasked with the storage of the goods. The warehouses of this system aren’t owned by the company storing the goods but own just small fractions of spacing in the warehouse.
- Distribution; not essentially a part of the main parts and sometimes placed under transportation. They are tasked with sending products to the consumers thereby ending the chain.
Advantages/pros of 3pl
There is alot of reasons why you should consider and here are some of them;
- Time and cost effective; one thing that makes a business standout, is its ability to manage time and costs. This also helps it stay afloat. Third party logistics would do just that, making you save the cost of storing and giving you enough time to meet the demand of your consumers.
- Expansion of your company; this system gives you the freedom and space to expand your business because of how flexible it is. By using this system you would be able to leverage newer supply chains and help improve your customer service.
Disadvantage/cons of 3pl
It’s not all good and it has its setbacks, here are some of them
- Lack of control; this is due to the fact that you don’t own the other parts of the 3pl and they act as independent bodies. So your control would be limited and somethings would be done the way you would rather them to be done.
- Cost; it is cost effective until external factors like tariffs, over-regulations and sometimes weather affects it. This could lead to escalating costs thereby creating loss.
At the end of the day, businesses are filled with risk but that shouldn’t be affect your decision making. 3pl is very profitable if done in the right way and with the right people.