8 Different Pros and Cons of Third Party Logistics
Third-party logistics, or 3PL services, are all about helping businesses with their transportation, warehousing, inventory management, and shipping operations.
You can manage all these aspects if your business is just starting. But when your business is expanding, or if you are thinking about expanding it, hiring a 3PL provider to help you meet customer demand could make a lot of sense.
But before you decide to partner with a 3PL provider, you have to take a moment to weigh the advantages and disadvantages of third-party logistics. Here are the eight pros and cons of third party logistics:
Pro: You can save time and money
Maintaining a warehouse and transporting goods from one place to another can cost much money. Shipping orders to your customers can also take up a lot of time. And while your employees are focusing on these tasks, they don’t have time for other important aspects of your business.
When you hire a third party logistics company, they can handle your most tedious tasks, saving you some precious time and money.
Pro: You will benefit from the work of logistics experts
You’re probably not a logistics expert, and neither are your employees. But that doesn’t matter since you can hire logistics experts. Inventory management will be done efficiently, and shipped orders will arrive on time without any headaches.
Of course, you must shop for a reliable and reputable 3PL provider offering your needed services.
Pro: Their services are scalable
The services offered by third-party logistics companies are usually flexible and scalable. You can choose which services you need and only pay for those.
Then, as your business grows, your needs will surely evolve. You will then be able to outsource more of your logistics operations, and your 3PL provider will be there to provide you with the manufacturing and shipping services, the warehouse space, and the skilled workers you will need to be able to meet customer demand.
Pro: It allows you to expand and reach new markets
As your business expands, you want to be able to reach new markets. You want to find new customers in different countries and perhaps even overseas. And another pro of third-party logistics is that they make your expansion dreams much easier.
You can rely on your 3PL provider to help you gain access to new markets, with well-positioned distribution centers, new and improved supply chains, and expert services that will ensure your new customers’ satisfaction.
Con: It might end up costing you more than you expected
Hiring a third-party logistics company is an important investment for your business. Usually, this investment will help you save money in the long run, but unfortunately, it’s not always the case.
When you partner with a 3PL provider, you must rely on them and their business strategies. You won’t have a word to say if they decide to increase their prices.
Of course, you could still look for another company with lower prices, but it could be time-consuming.
Con: They might not understand your industry
Working with a third-party logistics company that understands your industry, goals, and needs is important. But what if you have very specific needs that no 3PL provider seems to truly understand?
You could still hire a 3PL provider and explain your unique situation to them, but this partnership might not be as satisfying for you as if you could work with experts in your industry.
Con: You might lose control over some of your operations
When you hire a third-party logistics company to manage your inventory, you are putting control of your inventory in their hands. If this idea bothers you, outsourcing your inventory management might not be for you.
And keep in mind that if ever your 3PL provider experiences a data breach, your business will be vulnerable.
Con: The wrong 3PL provider could harm your reputation
Finally, if you don’t choose a reliable and trustworthy third-party logistics provider, it might harm your reputation.
If they make mistakes or work inefficiently, your customers will be unhappy with the services your 3PL provider provided them with on your behalf. In other words, your customers will blame you for a negative customer experience, even if you were not the one in charge of fulfilling their orders.
So if you want to hire a 3PL company, choose wisely.