The cost-effectiveness of 3PL services is expected to help drive growth of the 3PL market at a CAGR of 3.29% from 2016 to 2020, according to a new report from MarketResearchReports.biz.i
Effective 3PLs can help to control costs for their customers by improving efficiency, increasing flexibility, reducing overhead, controlling inventory carrying costs, and minimizing capital investments. Cost-saving initiatives can take a variety of forms:
1. Shared Space
Many companies find value in a shared-space warehouse environment where the 3PL handles multiple-client operations in a single facility. This allows companies to accommodate the ebb and flow of their business and adapt more quickly to changes in the marketplace. They not only avoid the fixed cost of leasing more space than they need on an on-going basis – they also save on operating, personnel and other management costs by sharing those costs with others.
2. Value-Added Services
By leveraging a variety of value-added services such as packaging, product customization, or order fulfillment, companies can actually control costs while increasing their speed to market and accommodating business fluctuations.
Positioning these services as close to the customer as possible allows companies to be more responsive to customer demand. Delaying product configuration until the last possible moment can help to control the cost of carrying and managing a heavy volume of safety stock.
3. Advanced Technology
Outsourcing also gives companies access to advanced technology without the associated overhead investment. State-of-the-art inventory management systems, automation solutions and material handling equipment can speed the handling of component and finished goods inventory to reduce labor costs as well as order processing time.
This is an area where many 3PL providers fall short, however, according to the report from MarketResearchReports.biz.ii It is important to find a provider that regularly invests in the latest equipment and technology to support customers’ needs.
4. Transportation Management
An experienced 3PL can help customers to save on transportation costs. Evaluating alternative modes, adjusting packaging design to increase freight density, and consolidating LTL shipments into full loads through cross-docking are just a few examples of creative ways in which 3PLs can help customers to reduce transportation costs.
5. Network Optimization
Establishing a strategic distribution center network that puts inventory closer to the end customer helps many companies to increase efficiency and optimize transportation costs. With optimally located DCs, it is possible to reach more than 98 percent of the U.S. within two business days via ground service – often eliminating the cost of expediting shipments.
At Saddle Creek, we leverage all of these best practices – and more – to ensure that our customers receive the highest level of service and greatest flexibility at the lowest possible overall cost.
Interested in learning more about the benefits of outsourcing? Read our Integrated Logistics Report