The 3PL distribution industry is worth $127 billion, and it continues to grow. Here’s why: every successful business has a core competency, and the best leaders within these businesses also recognise which areas are not their core competencies. In the product business, this is often warehousing and transportation. The distribution industry provides an important service that will allow your company to focus on what you do best.
What is 3PL distribution?
It’s important to note that 3PL and 3PL distribution is not the same thing. Instead, there are several levels at which companies can partner with third-party logistics providers.
- Third-Party Logistics Provider (TPL)
This level consists of an organisation or company that transports goods for another business without any ownership rights to those goods. In turn, it receives compensation based on mileage travelled or freight volume handled.
The most common examples include courier services, such as FedEx and UPS, and many other parcel delivery options like DHL Worldwide Express Mail Service.
These TPLs often offer discounted rates because they don’t have any ownership costs when transporting goods.
- Distribution Centre Vendor
Distribution centres are warehouses where a 3rd party provider oversees the storing, sorting, packaging, and shipping of products manufactured by a company to 3rd party retailers.
The company will often have its distribution centre and can also use the services of other 3PLs for delivery.
3PLs also offer marketing and merchandising services. This may include product placement in stores, branding, display space, catalogues, or online listings.
The company can use the 3PL to develop a marketing plan for their products that will help them increase sales and market share while reducing costs.
- Web store Integration
When dealing with logistics software from different providers, integration is often the most difficult task between two separate companies due to the different interfaces of each system.
For an eCommerce business’s warehouse management software (WMS) to communicate properly with other integrations like customer relationship management (CRM), shipping operations, accounting systems, or point of sale platforms (POS), there needs to be a common API.
Advantages of using 3PL distribution
The 3PL distribution model is a great way for companies to distribute their products while maintaining control of warehousing and transportation.
- Reduced Capital Investment
Warehouses are expensive, so utilising third-party logistics services providers can help reduce costs in this area.
- Increased Productivity
Outsourcing warehousing and shipping allows more time to be spent on core competencies like marketing and sales, which increases productivity levels overall.
- Improved Customer Service
The 3PL models provide customers with faster delivery times due to improved 3PL supply chain management, including inventory monitoring, forecasting, and replenishment systems.
- Improved Quality Control
3PL companies are knowledgeable about the intricacies of Distribution and warehousing, which means that quality control is improved.
- Improved Product Selection
Third party logistics companies with greater variety in product selection as they have access to warehouses around the world.
- Reduced Risk of Litigation & Losses Due to Operational Mistakes
When a business entrusts an outside company to handle its logistics, it reduces the risk of operational mistakes and related litigation expenses.
Is 3PL Distribution Right For You?
There’s no one size fits all approach to these services, and there are some factors that you should consider before making your decision. This includes:
- What is the size range of the products you’ll be shipping to customers, and how many orders do you receive each week or month?
- What type of deliveries will the provider be handling for you: local or nationwide?
- What kind of goods are you selling?
- How often will your inventory change?
- What are your shipping requirements?
- How many products and orders do you ship daily?
- Is warehousing a core competency in your business model?
- Does your company have a warehouse space where it can store its incoming shipments before distributing them out for delivery with other 3PL distribution facilities?
Factors to consider while picking 3PL distribution partners
1. Communication Protocols for Order Management & Inventory Replenishment.
They should have efficient communication protocols so that orders are processed correctly every time.
This includes inventory replenishment by monitoring stock levels from different distributors to ensure continuous supply to customers while also reducing operating costs.
2. Full Inventory Coverage for Your Products.
3pl providers should provide inventory coverage for all products your company offers without incurring additional fees or exceeding storage limits.
3. Transportation Planning & Scheduling.
They need to have an experienced transportation planner that can help coordinate delivery schedules to maximise efficiency while minimising cost related to vehicles, fuel usage, labour, etc.
4. 24/365 Customer Service & Support.
This is a key feature of 3pl services. Since they will be handling customer orders, clients may call them with questions or concerns about their order status instead of calling your company directly.
The ability to speak to someone on the phone right away is essential if you want to maintain high levels of customer satisfaction—especially when this person speaks English fluently or has excellent communication skills.
Companies must focus on their core competencies while outsourcing transport and warehousing services to ensure maximum efficiency. With Invenco’s 3pl distribution solution, you get access to all the benefits of outsourcing—including streamlining and automation of your logistics—without sacrificing control.
If you want to deal with a warehouse service provider that understands your needs and knows what it takes to run your business, contact Invenco for your free quote!