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5 Pros And 2 Cons Of Working With a Third-Party Logistics (3PL)

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Running a business isn't always easy, especially if you're going to do everything by yourself. Connecting with customers, managing projects, monitoring your computing systems, supervising workers, and managing your supply chain department all at the same time isn't easy. And if you aren't careful, some areas of your company will receive less focus and attention, and therefore your company will barely grow.   

However, there's no single problem in business without a solution. When you don't have enough time for all the tasks in your business, you can always consider outsourcing some functions. This post has all you might want to know about logistics outsourcing, including its pros and cons. Reading it will help you determine whether it's good for your business.  

An Overview Of Logistics Outsourcing  

Logistics outsourcing is when a business hires a third-party logistics (3PL) company to handle its various supply chain functions. A logistics firm can provide services such as order processing, packaging, storing goods, and making customer deliveries. Therefore, the main responsibility of a logistic service provider is to manage inventory on behalf of the client company.  

The supply chain is one of the cornerstones of the growth and success of your business. Nevertheless, because of the complex nature of the supply chain, you might need help managing your logistics. Outsourcing can enhance operational efficiencies, which may help your business to flourish. You can count on reputable logistics companies like Titan worldwide or any other similar service provider to manage your business supply chain function.   

Pros Of Logistics Outsourcing  

There are several benefits of a 3PL company. They include the following:  

1. Helps Minimize Your Overall Supply Chain Costs  

Managing a supply chain department can be very expensive, especially if you do it internally. For insurance, you must build or rent a warehouse. There are many costs associated with running a warehouse. These include electricity bills, security fees, and maintenance expenses, including cleaning.   

You'll have to hire permanent employees who require monthly salaries and allowances. Additionally, you'll have to invest in delivery trucks or vehicles to help transport your products between the warehouse and shop and make deliveries to clients. Managing business logistics can cost you a lot of money in the long run. This is why you need to outsource your supply chain function.  

Working with a 3PL firm allows you to turn fixed costs into variable costs. For instance, you'll pay a service fee instead of monthly salaries. In other words, the outsourced logistics company will demand payments only for the services they've rendered. As such, you can reduce your monthly wage bills.  

In addition to that, the 3PL company will use its warehouse to manage your inventories. So, you won't spend your money on storage facilities. All these help reduce your overall logistics partner costs to increase your profits.   

2. Allows You To Focus On Your Core Business  

Managing logistics can be overwhelming. Processing orders, managing inventories, and making client deliveries can be time-consuming. You might not have enough time to focus on your core business if you manage the supply chain internally. Thus, you should consider working with a 3PL.  

The logistics company hired will manage your supply chain function without much of your involvement. It'll process orders, manage stocks and even make deliveries on your behalf. As such, you can centralize your focus on other important areas of your business.   

3. Ensures Quick Adoption Of Modern Technologies  

Are you wondering how to promote the growth of your business? If yes, investing in modern technologies could be your ideal solution. With modern technologies, you can simplify operations, complete tasks faster and save money.   

Any department of your business can benefit from new technologies. And one of them is the supply chain. Yet knowing which technologies to use in your logistics and how to implement them might be challenging. As an expert in business management, you may not have enough expertise in technology. This is why you need an outside professional to assist you in this.  

Apart from being professionals in the supply chain, 3PLs are technological experts.  The right provider will advise you on the best technologies for the supply chain department. They'll help implement the selected technologies into your business systems to ensure you stay on top of modern trends and inventions as well.  

One of the new technologies a 3PL firm should help you implement in sully chain systems is the Internet of Things (IoT). You can use this technology to collect data about customers' demands and interests. As such, you can increase or decrease your output according to customer demand. Additionally, it ensures that you produce products according to customers' tastes and preferences.   

4. Provides Scalable Supply Chain Solutions  

As you run your business, the quantity demanded by customers will likely vary from time to time. When the demand for your products increases, you should scale up your supply chain. And when it decreases, you should scale down your logistics operations.   

While that is the case, scaling up or down the supply chain department is easier said than done. For instance, scaling up requires purchasing new equipment, hiring extra employees, and training them. Besides, the cost of reducing your employees when you want to scale down your operations can be costly. But the good news is that you can partner with a 3PL to manage your supply chain function with ease.   

Most 3PL services are designed to respond to specific client demands. The right company will help you scale up or down without spending money on personnel and equipment. Therefore, consider hiring a logistics company to respond quickly to your supply chain demands.   

5. Enhances Customer Experience  

Customer experience will always play a critical role in the growth and success of a business. Typically, customers want to receive orders within the shortest time after they make orders. A delay in product delivery hurts the clients' experience and satisfaction.  

By outsourcing logistics, you'll ensure orders are delivered to customers on time. This helps promote customer experience to ensure all your customers are happy. Any happy customers will likely return to your shop, ultimately improving your retention rate.   

Those are some of the main advantages of logistics outsourcing. Hence, outsourcing can be a great move if you want your business to grow quickly.   

Cons Of Logistics Outsourcing  

Although there are many benefits to hiring a 3PL to manage your supply chain, it also has some disadvantages. Here are some drawbacks of logistics outsourcing that you need to know before you decide to find a provider: 

1. Loss Of Control  

The biggest challenge of logistics outsourcing is the loss of control. As noted earlier, the hired firm will fully manage all the supply chain tasks, including making customer deliveries. Henceforth, it'll determine how well customers can relate to your brand. In other words, the 3PL company will be the main determinant factor in building customer relations. Any defect in their customers will be reflected in your business and not the logistics company. 

Before you sign a deal with any logistics firm, confirm they're committed to offering premium customer service. You can achieve that by navigating their online platforms to see what past customers say about them. Besides, signing contracts and service-level agreements can be an effective way of addressing customer service challenges and prevent issues in the future.   

2. Risk Of Data Exposure  

It's important to protect your business data against unauthorized access. Exposing your data to outsiders may pose your business with many challenges, including the risk of cyberattacks. As such, you can lose the critical information necessary to keep your company running.  

The logistic company hired will get access to your business systems. They'll use the data you've collected from customers to make supply chain decisions. The company might not protect your data as you could. And this may expose your data to unauthorized people.   

Before you hire any logistics company, confirm they'll protect your data against unauthorized access. They should use the modern fashion of software to manage supply chain tasks. Such tools have less risk of online attacks and can help enhance your cybersecurity strategy.   

But more importantly, the 3PL company you hire should be ready to maintain your confidentiality. In other words, they must not share your company's information with outside parties. All these helps protect your critical information from exposure to unauthorized people.   

Takeaway 

The supply chain is one of the most important functions of your business. It involves procuring products, transporting them to your business, and delivering them to customers. Nevertheless, managing supply chains can be overwhelming to most business owners. For that reason, many of them consider outsourcing their logistics function.  

As detailed in this post, working with a 3PL company has pros and cons. Yet the advantages are more than the disadvantages. It, therefore, makes sense to outsource your logistics tasks. Hire the most suitable provider for your business supply needs. You can achieve that by searching online or asking for referrals from other business owners in your sector.

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