subject: What Do 3pls Do? [print this page] 3PL stands for 3rd Party Logistics3PL stands for 3rd Party Logistics. A 3rd Party Logistics Company manages your transportation needs for you. Wal-Mart is a company that has their own trucks to get product to and from locations. They do not need a 3PL because they are their own logistics manager. Most companies do not also own and operate a trucking company for their fulfillment needs. Some companies have a Shipping Manager, or a fulfillment expert to handle their shipping needs on a case by case basis. When your company gets large enough it will no longer be cost effective to keep hiring employees to manage your shipping needs. It will become no longer feasible to call on every shipment. Situations like this call for outside consultants or 3pls.
The main benefit is bulk rate discounts. When using a 3rd party you are able to piggyback on bulk rate discounts. Trucking companies love to have guaranteed shipments. If they can count on having shipments without waiting for the phone to ring they are more than willing to give discounts. Also trucking companies give large discounts for large volume of shipments. A 3PL will provide massive volumes of guaranteed shipments to trucking companies by pooling together the resources of all their clients. This means that instead of having the buying power of your single company, you now have the buying power of the entire client base of the 3PL you are using. This could be thousands of companies. This translates into huge savings for you.
This is why you should avoid only using one carrier. There are 2 problems with going directly to carriers, the first is low volume shipments means high retail pricing. The second is time lost. It takes hours to research, get quotes to find the best price for a lane. In general, local shipments it is best to use local small companies, for national shipments you need the big boys. For your immediate surrounding states, regional shippers might be best, but the prices vary between small regional carriers and big freight companies like FedEx. Basically not one single freight company will meet all of your destination needs equally.
A 3PL will save you money and time. Be smart and use one that works for your needs small or big business. In general, a 3PL is great, it helps you manage your time, makes shipping hassle free, gives you an easy access way to manage costs, and allows for flexibility in shipping controls. A 3PL is a great partner to have especially if you do not have the funds to hire your own drivers, buy trucks and send them all over the country for you.
There are many different levels of 3PL's. There are some that completely integrate and manage everything for you, and there are some that are more for the medium to small business that allow for flexibility and a lot more manual control. If you are in a stage where the price of every shipment needs to be managed, instead of having your shipping guy spend all day on the phone with brokers, it is effective to use an online freight quote system.
These 3PL's work a lot like Priceline and Orbit do for airline tickets. Travelocity does it as well for vacation packages. Essentially they give you one stop shopping for the best rates on the market using their buying power. This is different than partnering with a single trucking company like UPS. Trucking companies will want to get you locked into only using their services. If you only use one trucking company, it is difficult to know if you are always getting the best rates. With an online freight quote pricing you can easily allow all trucking companies to compete for your business without the hassle of calling every individual company.
Expedia.com is to the world of travel as online freight quotes are to the world of freight. Travelocity does it as well for vacation packages. Essentially they give you one stop shopping for the best rates on the market using their buying power. This is different than partnering with a single trucking company like UPS. Trucking companies will want to get you locked into only using their services. If you only use one trucking company, it is difficult to know if you are always getting the best rates. With an online freight quote pricing you can easily allow all trucking companies to compete for your business without the hassle of calling every single freight carrier in the country.
Disadvantages to a 3PL, you may get one too big for your britches. Often you could be locked into carriers you don't like. Make sure that your service level remains top notch. Shop around to get the best 3PL for your needs. Most 3PL's have reliable customer service; make sure you get one that allows for returns and damage claims. Remember a 3PL is like a partner, so look for all the things you would like in a shipping partner. For example the benefits of a 3pl are that they provide instant quotes and 24 customer service hotline. When shopping for a 3PL it is helpful to write a list of wants and pain points you want solved before approaching a 3PL. This way you will be prepared to analyze them according to what you really need or what you really want.
To problem in dealing directly with the carrier are, first is low volume shipments means high retail pricing. The second is time lost. It takes hours to research, get quotes to find the best price for a lane. In general, local shipments it is best to use local small companies, for national shipments you need the big boys. For your immediate surrounding states, regional shippers might be best, but the prices vary between small regional carriers and big freight companies like Fedex. Basically not one single freight company will meet all of your destination needs equally. This is why you should avoid only using one carrier.
What is the main advantage to using a 3PL? Savings, Savings, and more savings. The main benefit is bulk rate discounts. When using a 3rd party you are able to piggyback on bulk rate discounts. Trucking companies love to have guaranteed shipments. If they can count on having shipments without waiting for the phone to ring they are more than willing to give discounts. Also trucking companies give large discounts for large volume of shipments. A 3PL will provide massive volumes of guaranteed shipments to trucking companies by pooling together the resources of all their clients. This means that instead of having the buying power of your single company, you now have the buying power of the entire client base of the 3PL you are using. This could be thousands of companies.
In general, a 3PL is great; it helps you manage your time, makes shipping hassle free, gives you an easy access way to manage costs, and allows for flexibility in shipping controls. A 3PL is a great partner to have especially if you do not have the funds to hire your own drivers, buy trucks and send them all over the country for you. A 3PL will save you money and time. Be smart and use one that works for your needs small or big business.
