Third-party logistics dates back to approximately hundreds of years ago when businesses needed to extend their logistics needs to an external company. The physical and online business growth has sparked many questions regarding these companies. “What does a third-party logistics company do?” has to be the most commonly asked online question.
Third-party logistics companies are a lifesaver to many businesses, especially those handling large deliveries and fleets. From cost savings to customer satisfaction, profitability, access to expertise and experience, and risk mitigation, you cannot exhaust the benefits. You can get one for your business after learning what these professionals do.
This blog will offer a detailed answer to this question below.
Understanding Third-Party Logistics
The first step to understanding what third-party logistics does is getting what it is and how it works. A third party logistics company, abbreviated as 3PL, offers logistics services to another company.
Businesses can choose a single or different 3PL companies for their needs, allowing them enough time to concentrate on other departments. Below is a breakdown of what services these companies offer.
Consolidation
Consolidation by third-party logistic companies refers to when the service provider integrates small products to be shipped as a single package. It often happens when the company or vendor orders various products delivered to the exact location.
Instead of paying the shipping charges for every item or order, the logistics company consolidates the products to save on costs. This is also referred to as freight or cargo consolidation.
Order Fulfillment
Another crucial role of 3PL companies is order fulfillment, which involves receiving, storing, processing, picking, packing, and shipping.
Order fulfillment is critical and should only be done by experts to avoid mistakes that would dissatisfy the customer. Third-party logistics undertake the process quickly and smoothly, ensuring a wide coverage of deliveries.
Distribution
3PL companies are responsible for distributing suitable and raw materials to different destinations on behalf of the company. When a business receives an order, the third-party logistics company picks the items on its behalf and plans for delivery to each customer.
Some businesses give their 3PLs direct access to the system to access customer information and update the distributions consistently. 3PL also helps businesses determine the most remarkable shipping or distribution charges that align with market trends.
Transportation
Many confuse distribution and transportation regarding third-party logistics services. Transportation, as a role of 3PL companies, goes beyond the delivery of products to the general fleet management. These companies arrange for the consolidation and deconsolidation of goods.
They are also responsible for ensuring the fleet vehicles remain in good shape throughout their operation to ensure timely deliveries and goods delivered in good condition. Some businesses hire 3PL to document and report transportation details, especially with no sub-logistics department.
Warehouse
It would be absurd to talk about third-party logistics without mentioning warehousing as one of its key responsibilities. These companies offer storage services to their clients, keeping products in good condition as they wait for orders and deliveries. They also ensure the products remain safe from theft by installing robust lock systems and hiring security guards on your behalf.
Many 3PL companies offer different storages, from special to general, allowing businesses to choose their preferred one. Thanks to the developing technology, businesses have integrated their systems with those of 3PL companies to ascertain orders are received from both ends. This step eliminates the need for endless reminders and delays.
Financial health
How can you choose the right 3PL for your business? Below are some considerations when selecting a 3PL service provider for your business.
First, you should consider the financial health of your preferred 3PL, ensuring it can fulfill the services stated and other unforeseen possibilities. A financial adviser or logistics expert can help you determine this factor.
Competency
A competent third-party logistics company seeks to maintain healthy client relationships, regularly checks on them (updates), and seeks references. You can evaluate their competency by scrutinizing their client reviews and ratings.
Room for growth
A good 3PL should offer growth to itself and the client business. The company should be able to work on future developments and ensure the business’s needs are sorted even ten years from now.
Customization
Since 3PL companies handle many businesses at a go, you should consider the level of customization, as every organization has unique needs. Generalized services attract customer dissatisfaction and losses.
Other factors to evaluate when choosing a 3PL service provider include reputation, which should be at its best level, and the safety and security of your products in their hands. Your preferred third-party logistics partner should have a remarkable experience in the sector reinforced by excellent customer service.
