What is the Role of Third-Party Logistics in Supply Chain Management?

Third-party logistics (3PL) is changing the game when it comes to supply chain management. The role of logistics is essentially to link the supply chain together, as well as manage the storage and packing of orders. Handling every stage alone can be costly and take time away from more fulfilling tasks. Outsourcing your fulfilment, by contrast, means more time for development, strategy, and marketing. With a 3PL, you don’t have to fork out for equipment, facilities, new staff, and training; instead, everything is handled for you by a specialist in the field.

Allegro Logistics is an industry leading e-commerce fulfilment provider based in Bristol. We help a wide range of businesses speed up their supply chains with our integrated logistics solutions. We’re always adapting and evolving with the modern e-commerce landscape, ensuring our customers stay ahead of the competition.

In this blog, we consider the role of 3PL companies in supply chain management and explain some of their key benefits.

What is Third-Party Logistics (3PL)?

Third-party logistics describes when a business outsources its fulfilment to external providers. 3PL companies provide a range of logistics services to their clients, including warehousing, inventory management, packing, customs brokerage, and shipping.

What is Supply Chain Management?

Overseeing the movement of raw materials all the way through the supply chain from beginning of production to delivery to customer is called supply chain management. Essentially, it’s about monitoring and optimising each link in the supply chain. Effective supply chain management can be difficult because it involves balancing two contradictory goals: driving cost savings while improving performance. These things don’t often go hand in hand – but that’s where 3PLs come in!

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What is the Role of 3PL in Supply Chain Management?

3PLs can play a crucial role in supply chain management. As your business grows, the supply chain is likely to get more complex. Managing it all by yourself can be difficult and costly. By outsourcing to a third party, all logistical tasks can be handled by one company. This simplifies and streamlines the chain, reducing the amount of investment you need to make in infrastructure like warehouses. As a result, 3PLs solve the problem of supply chain management; they deliver cost savings and better performance without one compromising the other.

The three crucial functions of 3PLs are:

  • Warehousing and Storage – Storing products on behalf of other businesses is a key service provided by 3PLs. They also pick and pack orders ready for distribution.
  • Flow of Goods – 3PLs handle the flow of goods from receipt right through to last-mile delivery to customer. Generally, they do this through coordinating a network of couriers. They deal with all aspects of domestic and international shipping including customs brokerage.
  • Reverse Logistics Effective returns management is a key factor in buyer decision making and can improve brand loyalty and customer satisfaction. 3PLs will handle returns on your behalf, making the process highly efficient.

See more: Product Returns Management – 6 Best Practices to Follow

How do 3PLs Benefit Supply Chain Management

Working with a 3PL means all logistical tasks are handled by one provider – that’s one point of contact for every aspect of your distribution. We all know that lean supply chains are the best supply chains – a 3PL provider makes it easier than ever to rationalise yours! Below, we explain more ways 3PLs benefit supply chain management.

Increases Efficiency of Chain

3PLs are logistical experts. They know the industry inside and out and have all the infrastructure, equipment, and staff in place to deliver highly efficient turnaround times. As well as this, a good 3PL will always be looking to improve aspects of supply chains through investing in new tools and technology, and developing their team.

By putting your logistics in their hands, you’ll get lightning fast fulfilment speeds that will wow your customers. A supply chain that runs like a well-oiled machine, not a rusty old relic? Sounds good to us!

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Rationalises Supply Chain

Supply chains can get flabby and complicated as businesses grow, but it doesn’t have to be like that! Because a 3PL provider handles multiple stages in the supply chain all in one place, you can eliminate unnecessary links. When it comes to logistics, simple is usually better.

Provides Flexibility and Scalability

During periods of high demand like Christmas, Black Friday, and Cyber Monday, e-commerce businesses are often stretched to capacity dealing with the surge in orders.

Working with a 3PL changes that. Instead of struggling to fulfil orders to the right standard and within the right timeframe, everything will be handled on your behalf. 3PLs can easily redirect their resources and scale in accordance with order volume. That means you’ll be able to make the most of the holiday rush, without the stress that usually comes with it!

Equally, if you have a quiet period, the 3PL can scale down resources and reduce the amount you pay. In the long term, this flexibility means your 3PL can grow with you, expanding its resources in harmony with your own business expansion.

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Requires Less Investment

Why pay for your own warehouse, equipment, infrastructure, staff, and training, when you can utilise the highly efficient systems a 3PL already has in place? Paying for a 3PL service may seem an unnecessary outlay, but the costs associated with handling everything yourself will rapidly add up.

Access to Network and Expertise

Whilst logistics can seem like a foreign language to the uninitiated, it’s in a 3PL’s DNA. They know everything there is to know about streamlining supply chains, and can leverage their expertise to help your business grow.

As well as this, 3PLs have access to large networks of couriers and can command lower prices than you might be able to yourself. This is because they have established relationships in the industry and can access the best deals on your behalf.

If part of your business’ strategy is to enter new markets, 3PLs can help you test the waters and open new distribution channels without a large scale investment and commitment on your part. This is one of the many ways a 3PL can facilitate your expansion as a business.

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Focus on Core Business

Effective supply chain management takes up a lot of time. By outsourcing a significant part to a third-party, you’ll free up valuable time for other business activities. From product development to brand strategy to marketing, you’ll be able to drive your business forward while someone else handles all the nitty-gritty details.

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Reporting and Analytics

3PLs are committed to continual improvement, always looking to find new ways to deliver results for their clients. By outsourcing your fulfilment, you’ll have access to real time reporting, tracking, and analytics that can make all the difference when it comes to streamlining your supply chain. Data leads to better decisions – it’s a fact. With access to the vast quantities of data a 3PL collects for you, it will be easier than ever to identify key areas for development.

See more: How to Create an Effective E-Commerce Delivery Strategy

Better Customer Satisfaction

Last but definitely not least, 3PLs lead to better customer satisfaction. With corporate giants like Amazon offering next day or even same day delivery in some locations, keeping up as a small business is no mean feat. With many people citing delivery times as a key factor in their decision making process, it’s clear supply chains need to be lean in order to keep customers keen.

Read more: 3 Valuable Tips for Keeping Up with Customer Demands in the Supply Chain

Leading Fulfilment and Logistics Provider in the UK

Logistics is always on the move, and we’re always keeping up. Allegro deliver the best for our clients and their customers time after time. That’s because our solutions are backed up by years of expertise and investment in the latest technology. Able to integrate all the major shopping platforms, it’s easier than ever for your business to leverage the advantages of working with a 3PL.

Request a quote today and we’ll help you fast-track your fulfilment.

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