Sometimes, business does not have the resources to meet their shipping and transportation needs from warehousing through delivery. Companies, however, may outsource these supply chain logistics to third-party logistic companies. 3PLs also have their own transportation law needs.
3PL advantages
The greatest advantage to using a 3PL is that companies can devote attention to sales, marketing, product development and other parts of their business. There are also other benefits.
Companies may reduce costs because 3PLs can negotiate pricing with freight companies based on volume and order frequency. Using a 3PL allows improvement management of sales and demand fluctuations.
A 3PL can also assume the space and personnel costs of warehousing. There may be reductions to inventory holding costs and improvement tor inventory levels.
Because of their distribution networks, 3PLs have the ability to provide faster shipping service. A 3PL can reduce risks from shipping delays because it is responsible for making alternative arrangements when unforeseen problems arise. Businesses also receive protection if goods are loss or damaged.
Business, especially new companies, can take advantage of 3PL’s existing expertise without having to develop their own experience and taking risks with fulfillment, warehousing, and shipping. Companies engaged in international sales have used 3PLs to handle costly and time-consuming border issues such as documentation and custom duties and address complicated rules from different countries.
Disadvantages
Potential drawbacks include reduced control of shipping. Customers may still hold companies responsible for delays or problems if they use a 3PL.
Even though using 3PLs may be ultimately cost-effective, the initial investment with obtaining its services may be costly. Businesses that do not need a large warehouse or have many orders can face serious costs.
Using a 3PL may position a business far away from their products. This can be inconvenient if there are quality control issues or a need to physically inspect stock.
Considering a 3PL
When selecting a 3PL, business should review whether it can handle current volume and any volume spikes from adding new stock, increased stock volumes or sale spikes. The 3PL should also have compatible technology, especially if a business uses a cloud-based inventory management system.
Companies need to obtain references from the 3PL’s clients and reports on their performance for several years. References and information should address on-time deliveries versus delays, business compensation for problems.
An attorney can help companies enter these agreements and confront laws governing 3PLs and other transportation matters. Lawyers may also deal with issues as they arise.
