Pros and Cons of Third Party Logistics

Third Party Logistics, also known as TPL or 3PL, is a process that involves outsourcing your storage and distribution services to another company.  You rent out a portion of a warehouse that matches your personal needs, and the 3PL provider takes care of inventory management, product organization, outgoing deliveries, and more. There are a number of benefits to Third Party Logistics, but this process is not right for everyone. We'll explain the pros and cons of TPL so you can determine if it is a good fit for you.

Pro: Someone Else Takes Care of the Tedious Tasks

With third party logistics, you do not have to worry about the labor-intensive steps in distribution and inventory management. A team of dedicated professionals handles all of that for you, so all you have to do is track your inventory remotely. This frees up time for you to focus on more important elements of running your business, and it saves you money in labor.

Con: You Lose Some Control over Your Inventory

Perhaps the biggest con to 3PL is the fact that you don't get to watch over the process in person. Logically, most business owners want to be in control of their goods, and that isn't always possible with outsourced logistics. Nevertheless, you can monitor your inventory levels, deliveries, incoming shipments, and more in real time if you work with a quality 3PL provider with real-time tracking programs. You can still feel in control of your products because you are there watching in the background.

Pro: You Have Specialists Working for You

You can trust that you have a crew of knowledgeable professionals in charge of your merchandise. You don't have to hire and train people that may not do their jobs correctly. The Third Party Logistics company will do all of that for you. Chances are you are not a logistics expert, but your distribution company will be. This ensures that your customers receive all the services they need in an efficient manner – from labeling the packages to completing the deliveries.

Con: You Have to Find Someone You Can Trust

As you may expect, not all 3PL providers are created equal. You need to take the time to find a good company to work with from the beginning. Once you have someone you can trust, you can rest assured that your goods are being properly cared for. You may experience stress during the search, but it will all work out when you find a reliable 3PL company.

Pro: Save Money in the Long Run

As you will see below, Third Party Logistics is an investment that will take up some of your profits in the beginning. With that in mind, most companies save money in the long run with 3PL providers because they are able to manage higher inventory volumes more efficiently than they could on their own. The 3PL process also reduces the cost of labor across the board, from sorters to deliverers and everyone in between.

Con: Spend Money at the Beginning

Getting your Third Party Logistics set up can be a bit of an investment, but as we discussed above, that investment tends to pay off in the long run. If you skimp on the cost of your warehousing and distribution, you're going to get what you pay for. This will ultimately affect the way your customers see your company, and it could hurt your profit margins in the future. Rather than risking a big loss down the line, you should invest in a quality 3PL provider that will increase your ROI and boost your customer satisfaction.

Pro: Flexible Service Options

Many 3PL companies will offer additional services to make it easier for you to run and manage your business. For instance, you may outsource your customer service and shipping needs to the warehouse's fulfillment center, which will virtually stream your Third Party Logistics provider, the less you will have to worry about on your own.

Con: Bad Service Reflects on Your Company

The fact is that there are bad 3PL warehouses out there, and their inefficiency could make your company look bad. Your customers do not care who is in charge of getting the product to them. All they care about is the end result. That is why it is so important to look for a good distribution center early on so you can avoid customer satisfaction issues in the future. Make sure your logistics team is experienced with the type of services you need before you entrust them with your reputation.

Is Third Party Logistics Right for You?

In most cases, the pros of Third Party Logistics greatly outweigh the cons. You just have to make sure you find a company that you can count on at the very beginning. If you're in the right hands, you will enjoy years of stress-free inventory management for your business.

Contact Overflo for your third party logistics needs.


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