When Is a Third-Party Logistics Provider
the Right Choice?
Identify areas where outside help with logistics could improve results and reduce costs.
Manufacturers have found ways to wring savings from production, product design and procurement phases. Now, the rise of third-party logistics (3PL) companies provides new options to reduce costs in supply chain operations.
3PLs vary widely in the logistics services they offer, from shipping and warehousing to IT services and inventory management. They enable manufacturers to concentrate on their core competencies while achieving high performance in supply chain operations.
Consider hiring a third-party supplier when you find a 3PL company that can:
- Handle both the physical and IT aspects of logistics more efficiently than your company can.
- Save you time and money.
What they can offer
A high-performing 3PL has specialized knowledge and expertise that many manufacturers lack inside their companies. 3PLs can show you where they can squeeze costs out of your supply chain operations. Here’s a more detailed look at several areas where they could help.
Shipping. A 3PL company with shipping expertise can plan routes to minimize fuel costs for every mile. Its understanding of shipping regulations can protect a manufacturer from costly mistakes and violations, as well.
Warehousing. Some 3PLs provide flexible or dedicated warehouse space, along with the expertise to manage it effectively. Besides offering the space itself, a 3PL can free the manufacturer from costs related to capital equipment and assets, such as cranes and forklifts. They also can find, hire and manage supply chain operations workers, a boon in a time of workforce shortages.
IT work. Manufacturing IT systems, such as Enterprise Resource Planning software, were not built for logistics. 3PLs have developed and invested in technology that’s often beyond the reach of small- to medium-sized manufacturers. For example, 3PL providers have IT systems that can optimize multimodal (ship, rail or truck) transportation networks and automated routing. Some have IT systems that can help track and trace goods for regulatory compliance and provide you with data to boot. They can monitor the trucks moving your goods, pinpointing their locations and adhering to schedules. Such capabilities improve supply chain visibility and flexibility, which manufacturers say they need.
Three steps to hiring a 3PL
First, form a team to investigate where the supply chain has weaknesses and to look for opportunities to improve quality or customer service.
Second, make a list of highly rated 3PLs and find out if they offer the services you need.
Third, have conversations with the top candidates and talk to some of their clients.
A good match: finding 3PLs
For profiles and customer reviews about a range of companies, start with 3PLAdvisor.com from Armstrong & Associates, Inc. (A&A), a leading supply chain market research and consulting group.
The best 3PLs know your goal: to get the right things to the right place at the right time and in perfect condition. The right logistics partner will improve the flow of goods from the plant floor to the customer’s door.
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