On paper, third-party logistics seems like an easy choice to make. But there’s a reason why many companies choose to maintain some or all autonomy in handling their logistics.
To help you make an informed decision about whether 3PL is right for you, let’s look at the pros and cons it comes with.
Pros
- Reduce Overhead Costs. Perhaps the main appeal of 3PL services is the ability to tap into their streamlined processes and infrastructure. Leading 3PL providers have efficient systems for warehousing, packaging, and shipping, which means that they can reduce and minimize overhead costs, freeing up resources for marketing, product development, and other aspects of growing the business.
- Scale Faster. Developing logistics capabilities is one of the most common bottlenecks that prevent businesses from scaling. 3PL providers can simplify entering new markets and expanding volume, all while improving shipping times and customer satisfaction. For example, if you want to enter a new market, a 3PL company can offer its built-in infrastructure that you can leverage, allowing you to offer a good experience for customers from day one, without having to implement your own logistics operations in the region.
- Leverage Expertise. A big part of effective logistics is being up-to-date with the latest technology, processes, and best practices in warehousing, inventory management, order fulfillment, and transportation. When you work with a reputable 3PL provider, you can leverage their expertise and resources in all aspects of logistics, which can help you gain an advantage over your competitors.
- Focus on Your Business. Cost is a crucial factor when deciding whether to outsource logistics. But freeing up time that maintaining your own logistics operations can take up can often be even more impactful. When you have a trusted partner who can take over warehousing, inventory management, and order fulfillment, that time can go into areas that grow your business. Whether it’s introducing new products, implementing new marketing strategies, or strengthening your brand presence, being able to focus your time and resources toward making more sales can have a dramatic impact on your growth potential.
Cons
- Initial Cost. Third-party logistics is an investment. And that investment comes with an upfront set-up cost. Many 3PL companies have onboarding costs for setting up warehousing, order fulfillment, and transportation processes, which can sometimes be significant and take some time to be recuperated. For companies that aren’t sure if 3PL will work out or if a specific provider is a good fit, the upfront cost can be a risk that’s too big. However, if you find a provider that is reliable and offers good value, the initial investment is usually worth it in the long run.
- Variable Service Quality. Just like with any service, the quality from one 3PL provider to another can vary greatly. Therefore, when evaluating 3PL as an option, it’s important to consider that the company you choose to work with will be a good representation of your brand.. As with any service, look at the credentials, experience, and customer stories when deciding whether to trust a 3PL provider to deliver.
- Less Control. Outsourcing your 3PL processes offers a lot of flexibility and can free up time. But the tradeoff is that you are also handing over control of how your products are stored, handled, and shipped. With a provider you trust and can rely on, that’s not an issue. But if you need to maintain tight control over your inventory or have compliance requirements in your industry, trusting someone else with the operation of a big part of your business can be a big commitment that comes with significant risks.
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