What is Third-Party Logistics (3PL) and How Can It Help Your Manufacturing Business?

The variables that determine how and when a product is shipped are almost as important as the product itself. In the hyper-competitive manufacturing industry, small things may set you apart from your competitors. For example, if you offer complimentary two-day shipping while a competitor offers a comparable product and a comparable price with a much larger shipping window, that business could likely be yours. However, manufacturers are busier than ever, and your company may find itself falling behind in the rapidly evolving logistics game. In this case, a third-party logistics (3PL) firm could be the right move for your business.

A 3PL is a logistics management outsource firm that may receive, hold and transport a consumer product while never actually holding title to that product. In layman’s terms, it’s essentially a shipping middleman. While not a shipping company like UPS, FedEx, or the United States Postal Service, a 3PL will contract out various shipping companies, storage warehouses and distribution networks to fulfill your shipping needs.

So, when do you know if your manufacturing business needs 3PL services? To answer that, ask yourself the following questions:

• Are you fulfilling more than 20 orders per day?
• Are you running short on storage for your inventory?
• Are you expecting a sudden growth in business
• Are you falling behind in your shipping already?

If you answered yes to any of these questions, then 3PL may be a relevant option for your business. Think about it: No supplier wants to garner sales without being able to fulfil them. 3PL firms help manufacturing businesses manage inventory, project for growth peaks and maximize storage use. If your business has a firm grasp on these challenges, then investing in a may not make sense.

If you’ve determined that 3PL is the way forward, your task becomes identifying and retaining a suitable 3PL firm. Industry leaders such as Stitch Labs and Orderbot service the logistics needs of thousands of midsize manufacturers. While you may not need the most comprehensive and expensive provider on the market, there are some questions you should ask prospective 3PL providers before jumping into a contract:

• How long has your company been in business? Do you have a sustainable model that ensures your business won’t be left without 3PL service for extended periods?
• How often will we get shipping updates from your company? How will these updates come through to us? Can you use our preferred method of communication for updates?
• How many warehouses do you operate within your logistics network?
• Do the locations of your warehouses align with our shipping needs?
• Describe your customer service record, and tell us how it compares to the industry.
• How are delays and shipping losses handled?
• How can you accommodate highs and lows in our shipping needs?
• Can you integrate your system into our ERP?
• How are costs broken down? Transportation fees? Packing fees? Setup fees? Minimum shipping thresholds?

3PL providers may not be for everyone, but the potential they hold for alleviating certain logistics duties could simplify your manufacturing process while freeing up management to focus on expansion and growth, rather than getting widgets from the factory to your customers.

Do you have questions about 3PL or strategies to improve processes in your manufacturing business? Please contact Sam Eartly, Supervisor, Tax & Business Services.