Is Using a 3PL Worth It?

There are many reasons why companies use 3PLs (Third-Party Logistics) in their logistics and supply-chain management. But every business functions differently. Is using a 3PL right for you? Let's take a closer look at what a 3PL does and what to focus on when making your decision.

What A 3PL Does

A 3PL provides companies with outsourced logistics and supply chain management, which includes distribution, warehousing, and fulfillment services. They act as a middle man between you and your customers.

A 3PL's main focus is to optimize supply-chain operations. You can pay them to do your supply-chain operations or you can do it yourself. Because of a 3PL's specialization, they are pushed to innovate and find major improvements within the supply chain.

What to Analyze

It is wise to do research on different 3PLs. Just as your business is different than others in the same industry, 3PLs differ from each other too. Find the one that works best for your company.

In 2018, Inbound Logistics wrote an article listing ten tips for choosing a 3PL provider. Here are three:

• Seek Stability - As you do your research, ensure that the 3PL is stable. How are they financially? Do they invest in good systems, facilities and solutions? Are they capable of taking you on as a client? Do they have a high turnover of clients? These types of questions will help you know if your supply chain will be properly taken care of.
• Aim for Scalability - Will the 3PL be able to balance your needs with the needs of their other customers as you grow? You'll want to make sure they can scale with you, or you could be left without adequate space in their warehouse or with switching providers.
• Ensure Your 3PL Has Robust Technology - You want your provider to have up-to-date technology solutions. You may not think it's necessary, but warehouse automation is becoming more and more important in supply-chain and inventory management.

There are tools, like WarehouseOS, that can help them and increase the likelihood of getting orders right. And, such tools can show data on how effectively the 3PL functions to help you decide if using that particular provider is worth it or not.

Additionally, weigh out your costs and benefits by doing an analysis for the short-term and long-term of your business. It may be more cost effective to use a 3PL now, but you may want to keep control of your warehouse and supply chain down the road. If you'd rather not worry about it all, go with the 3PL.

Decide Whether or Not It's Worth It

Using a 3PL provides a lot of benefits that can help you focus on growing your business and can be a very smart decision. If using a 3PL is worth it for you, but you choose the wrong one, your company could suffer drastically. If the 3PL messes up the order or sends it late, you could lose a customer and get hit with negative reviews online. Those can add up and be difficult to recover from.

As mentioned before, research potential 3PL companies before partnering with them. You won't regret doing so.

If using a 3PL is not the worth it for you, you can definitely do it yourself. It may be more expensive and take a bit more time to get going, but it is nice to know that you'll have the receiving, storing and shipping of your products in house. And, there are ways to maximize your warehouse space and to run it at top-of-the-line efficiency. As mentioned above, WarehouseOS is a tool that can minimize your stress as you create your own warehouse.

To talk about your specific situation or for more information, call us at 801-938-7282 or click to learn more about the WarehouseOS software.

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