What is the value of a 3PL? We get this question often, and we see it in many different forms in blogs and other online discussions regarding logistics, supply chain management, transportation, 3PLs etc. Defining the value of any type of service provider can be difficult. My wife recently convinced me that it was “worth it” to have someone clean all of the floors in the house rather than do it ourselves. $417 later- my floors are clean, I am theoretically breathing cleaner air, and I got to spend a Sunday watching football. The ROI analysis seems to be positive I suppose.
ROI analysis on a supply chain however is much more difficult. Many things have to be taken into consideration including market supply and customer demand, production schedules, governmental regulations, seasonality and environmental concerns to name a few. This is all in addition to running your business and finding customers to support it.
Here are a few areas where 3PLs can really drive value as a core business partner. (You can also read additional information we have on partnering with a 3PL by clicking here Building a Smarter Supply Chain.)
Strategic planning and industry expertise
Just like the floor guys are experts in cleaning my carpets, 3PLs are experts in providing supply chain solutions. A 3PL is going to know the best way to move goods through the supply chain and how and where to distribute from. A great 3PL however, will proactively come up with new and creative ways to save you money and improve productivity. A great 3PL can provide value to a company by providing expertise in customs compliance, export restriction controls and risk management. A great 3PL will also be able to help you with your sourcing strategy by providing input on duties, quotas and landed cost analysis. (Remember, a 3PL should be aligned as a core business partner– not just a transportation service provider option).
Leverage world class technology without huge capital investment
Transportation and Warehouse Management Systems are expensive to purchase, integrate and maintain. TMS and WMS offerings are also core solutions that a 3PL must maintain, and more importantly continually develop and improve. Utilizing a 3PL with core InfoTech capabilities can directly save a company thousands if not hundreds of thousands of dollars in IT and R&D expenses annually.
3PLs integrate data from all areas of the supply chain. Transportation data is integrated from carriers around the world to provide visibility to in-transit cargo as well as documentation. Inventory data is visible in real-time to use for planning purposes. Having this data available through tracking tools, or even integrated into your own ERP system provides huge value to companies of all sizes.
Consolidation of resources, processes and systems
Usually, a 3PL will be able to leverage their buying power across their entire client base and provide very competitive transportation rates. 3PLs also have proven processes in place to effectively manage movement throughout all phases of a client’s supply chain. These processes are engineered and built upon strong systems as mentioned above.
When a 3PL is positioned as a core business partner, they also become the central point of contact for all things supply chain-related. A 3PL will have the right people in place to ensure goods flow through each stage of the supply chain. When there are delays or issues, an expert will be available to help provide a solution. This information is critical to a company as they strive to provide better service to their client base.
We would love to hear your feedback on this subject, we invite you to post a comment below. You can also visit our website at www.legacyscs.com to learn more about 3PL and supply chain solutions.
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