To survive in today’s marketplace, retailers, manufacturers and ecommerce companies all must sharpen their pencils and find new ways to control logistics costs. Third-party logistics companies can be a valuable resource in this regard. In fact, 75 percent of shippers say that using a 3PL helps reduce overall logistics costs.
3PLs offer financial flexibility and give companies the resources to retain supply chain strategies that might be difficult to handle internally. 3PLs can help to drive out costs in five critical areas of operations:
3PLs typically offer a choice of dedicated or shared-space facilities. A shared-space environment balances the needs of multiple customers so that they can meet peak requirements without having to invest in permanent space and equipment. It also offers the scalability to expand or shrink operations to accommodate business needs.
Having access to a 3PL’s established network of facilities is particularly valuable in today’s omnichannel marketplace. Many companies are strategically expanding their number of distribution centers – establishing more regional locations, opening smaller facilities like mixing centers and cross-docks, etc. The goal is to get closer to the end customer, move products through the supply chain faster and minimize transportation costs.
With strategically located DCs, 3PLs can reach more than 98 percent of the U.S. within two business days via ground service. This allows them to achieve competitive customer service using economy shipping options.
3PLs’ established carrier networks offer the flexibility to choose the optimal mode/level of service for each shipment at the best price. 3PLs also can pool parcel packages and leverage postal work-share options such as presorting and drop-shipping to help reduce costs.
It can be challenging to staff multiple facilities while meeting escalating expectations for order accuracy, quality and timeliness. Finding, hiring, and training reliable, qualified employees can be time-consuming and costly. Often, dramatic fluctuations in sales volume make the workload inconsistent. Such peaks and valleys can be hard to plan for.
An established 3PL will have a scalable pool of reliable, experienced workers at the ready. They provide the training, handle scheduling, and assume the overhead investment.
3PLs give their customers access to an array of sophisticated technology solutions without the associated overhead investment. Order management systems (OMS), warehouse management systems (WMS), and transportation management systems (TMS) can help to increase efficiencies and reduce costs.
An effective order management system, for example, allows companies to better allocate their inventory across multiple locations, so they don’t need to replicate every SKU in each location. Rather, they can draw inventory from the optimal location to ensure the fastest and most affordable service.
5. Inventory Management
Postponement strategies can help to optimize inventory. Experienced 3PLs offer value-added services like building gift baskets, inserting coupons, and assembling store displays that can help to delay product configuration until the last possible minute to meet current demand. Building to order instead of to stock allows them to reduce production and inventory carrying costs. Moving product customization closer to the end customer also can help to shorten the cash-to-cash cycle.
The bottom line? 3PLs are well positioned to create efficiencies, streamline the supply chain and control logistics costs. Want to keep your business in the black? Talk to your third-party partner today.