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7 Reasons Your Business Should Hire a 3PL

Posted by Mihlfeld & Associates on Nov 8, 2018 7:45:00 AM

The world is getting smaller.

The potential reach of even the smallest business today far exceeds what it was a couple decades ago, and as such, logistical challenges that previously only larger businesses experienced, have trickled down to SMBs worldwide.

Thanks to 21st century technology, businesses that previously only served a small geographical range now have access to potential customers across the globe. With increased supply and demand, it is no secret that most companies today experience extreme complications and inefficiencies in their supply chain. As with any integral aspect of a business, managing and maintaining an effective supply chain requires time, knowledge, and money – your company’s most important resources.

Inefficient logistics management gets in the way of the overall productivity and profitability of your company. The question is, how do you improve your company’s logistics? The most simple and cost effective course of action is to hire a 3rd Party Logistics company (3PL) to manage all of your logistics for you.

3PLs assume control of the time consuming and difficult aspects of your supply chain, allowing you and your employees time to focus on the areas integral to your company’s success. In 2017, it was shown that over 90% of fortune 500 companies outsource to 3PLs further validating the benefits of using a 3PL; however, if you need more convincing, here are 7 reasons to work with a 3PL.


1. Work With Industry Professionals

By partnering with a 3PL, you guarantee that you are working with people who know the ins and outs of the industry. In contrast, by managing logistics from within your company, you have no guarantee that the work your team does matches the industry standard. Without the proper guidance and information, most of the work a company does in supply chain and logistics management is educated guesswork.

For perspective, if you are a coffee roaster, your expertise is in coffee and your knowledge and experience with coffee far outweighs anyone who does not work in the coffee industry. Would you want someone with a limited knowledge of coffee running your operations? Of course not!

Likewise, a logistics professional’s expertise and knowledge in the logistics industry far outweighs anyone outside of the logistics industry. By handling your logistics, 3PLs are simply doing what they do best, leaving you the time to do what you do best.


2. Leverage a Developed Network

When working with a 3PL, you’re given the benefits of working with a developed network of carriers, routes, warehouses, and relationships.  A primary duty of a 3PL is to develop and leverage an organized network for the benefit of their customers.

The better the network, the better the service provided to the customers and the more likely the customer will stay with the 3PL. It is in the best interest of the 3PL to provide the most developed and organized network for their customers.

Additionally, a good 3PL leverages carrier relationships built over time to vouch for the customer and get them the best rates. Doing in-house logistics management for your company requires building those relationships from scratch whereas 3PLs provide those relationships from the start.


3. Shipment and Carrier Visibility

3PLs work as the mediators between the shipper and the carrier. As such, the 3PL provides customer service on behalf of the customer to get in touch with the carrier and to stay in contact throughout the duration of the shipment life-cycle.

Does the carrier have a complaint? It will be directed to the 3PLs customer service. Were you billed incorrectly? Customer service will make sure it is handled appropriately.

Throughout the shipment life-cycle, 3PLs provide you with constant visibility of your shipment through both customer service and TMS software. Losing visibility of a shipment is a pain but working with a 3PL guarantees you will have eyes on your shipment from the time it leaves the dock to the time of delivery.


4. No additional employees

Outsourcing a 3PL is like hiring a professional employee without the liability and overhead that an in-house employee brings. With a 3PL, you gain the benefit of having an entire, trained logistics staff without the inconvenience of interviewing, training, and managing them.

Additionally, a team member of a 3PL works for you but is ultimately an employee of the 3PL so taxes on an additional employee, benefits, and payroll are not an issue. Essentially, a 3PL employee is an asset with no liability for your company.

What if something goes wrong in your supply chain? What if an employee of the 3PL messes up a shipment? It is inconvenient for you, yes, but ultimately the blame falls on the 3PL, which is separate from your company. You don’t need to worry about an HR crisis.


Depending on the agreed upon liability between you and the 3PL, they will absorb the shock, making it easier for your company to deal with the larger issue. It is a responsibility of the 3PL to ensure everything works correctly, and the right employees play a large part in that. Luckily, they are not your employees and you don’t have to worry about them.


5. Cost Reduction

The most common reason companies hire a 3PL is cost reduction. 63% of companies say that cost reduction in their transportation is a top priority. 3PLs work with carriers to negotiate lower rates than the company could negotiate on their own.

Many companies aren’t aware of the standard rates for their industry and don’t know how to negotiate with carriers. This results in higher costs and inflated invoices. With the help of a 3PL, your company won’t have to participate in blind negotiations.

A 3PL also makes cost reductions through economies of scale. Leveraging other customers and previously negotiated tariffs, 3PLs reduce costs through contracting larger amounts for individual shipments and consolidating shipments across the board.

Costs and regulations are constantly changing and 3PLs research best practices and industry changes to ensure your company gets the best service for the lowest price. Transportation management is a huge cost for companies and it will continue to be a huge cost but leveraging the resources of a 3PL will reduce the impact year-over-year and guarantee a better bottom line.


6. Time Reduction

One of the greatest advantages of outsourcing to a 3PL is the time it saves your company as a whole. Time-consuming tasks such as data entry, invoice auditing, and carrier negotiations, are completed by experienced workers with specialized resources who do those tasks for a living. 3PLs offer sophisticated invoice processing systems and they operate them for you.

On average they can save 90% of the time it takes to process invoices if you are doing it manually. If your team was spending 100 hours a week on receiving, auditing, entering, GL coding, and paying invoices, imagine cutting their total invested time down to just 10 hours a week, or less. Thus, logistics tasks will be completed in a more efficient and effective manner.


7. Technology and Data Collection

The cost and time reduction provided by 3PLs is partly from the experience of the employees and the prebuilt networks, but among those resources is the additional technology and data at their disposal.

When profits are invested back into a company, the improvements rarely go into the advancement of the logistics department. As a result, many companies lack the resources to effectively manage state of the art supply chain. Conversely, a 3PL is dedicated to improving and updating the tools needed for effective supply chain and logistics management.

Big Data is one of the greatest assets available to companies in the 21st century. 3PLs are constantly capturing, analyzing, interpreting, and reporting on big data to make small changes to improve your company.

Some 3PLs give detailed and objective reports directly to your company on the current condition of your supply chain and best practices of the industry to bolster the continued improvement of your operations.

TMS software is also available through many 3PLs to better improve the effectiveness of your supply chain. Different TMSs provide different benefits to your company but most provide easy scheduling for shipments and detailed visibility of your shipment once it is created.


Finding the Right 3PL for You

When you outsource a large portion of your company’s work to another business you essentially invite that business to be an extension of your own operation. As such, you put an incredible amount of trust in that company.

Research shows the benefits of outsourcing to a 3PL. Organizations who partner with 3rd Party Logistics Companies:

1. Experience a Reduction in Transportation Costs.

2. Report Increased Production from Employees.

3. Overall Improvements in Efficiency and Long-term Projects.

However, not all 3PLs are created equal and, depending on your business’s needs, some 3PLs will work for you and some will be less effective. It is important that you do your research, reach out to different 3PLs, and weigh the positives against the negatives. There is a great 3PL partner out there for your organization. Ready to start improving your supply chain?

Updated 2/11/2019

Topics: Cost Reduction, Logistics Management, Continuous Improvement

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Mihlfeld & Associates is a Logistics & Technology Co. 

We specialize in custom solutions for transportation management, software, cost reduction, invoice processing, and much more. In short, we exist to save your company money on transportation and logistics. We hope this blog helps you in your journey toward better transportation practices.

Welcome to the Mihlfeld Mile.

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