Is a 3PL Right for My Business?
Supply chain issues can become a fast track to an everyday migraine for business owners, especially with companies overseas constantly opening and closing due to the pandemic. Could a third-party logistics company help your business, not just during these chaotic times, but long term as well?
So, you have outgrown your britches and it is time to find solutions for your company’s exponential growth. While growth can be a good thing, finding storage and logistical resources can quickly become a second job in itself. Enter the thought of considering a 3PL.
Today, consumers look for instant gratification more than ever before and not necessarily with just getting their products or services sooner than later but needing updates and communications from the company as well. Companies that are in the throws of a growth-spurt may not have the resources to update their customers regularly or the capacity to get their products to the user as quickly as they would like. Cost of growth also plays a major role in decided what may be the best route and historically 3PLs can help alleviate those growing pains. But before a business starts to look into a 3PL there are some basic details they should know about the vast world of this industry before getting their toes wet.
What you should know about 3PLs
Before reaching out to any you may have searched on the internet, it is vital to know what type of 3PL your business needs. Asset-based 3PL, non-asset-based 3PL, transportation, warehousing, distribution; there are a lot of varieties in the 3PL world, so it is best to analyze what your company needs are then research what type of 3PL works best for your needs. Let’s dive into the basics.
Asset-based 3PL
In an asset-based 3PL, the company oversees and own most if not all parts of the operations from warehousing to transportation. Whether they are partnered or own all the assets, they should be able to show record of their partnership and reputation.
Non-asset-based 3PL
These companies essentially take over the role of logistics and warehousing without owning any assets but rather negotiate the contracts and manage these functions on the company’s behalf that has partnered with them.
These are the general types of 3PLs out there, but some may offer different functions and it’s important to dig deeper into their offerings as many provide one or multiple of the following:
Distribution
Services including outbound order fulfillment, labeling, and manufacturing is a function that a 3PL can offer a company.
Transportation
Those that offer the transportation service handle all of the physical transport of the company’s goods and oversees those operations.
Warehousing
This is a service where the 3PL stores the goods and often ties in with transportation services of moving the goods from warehouse to warehouse as needed for efficient storage.
Shipping/Receiving
Just what it sounds like, the 3PL will manage all shipping and receiving of good with typically state of the art technology that takes these types of headaches away from the company.
Pros and cons of asset-based vs non-asset-based
Going further into what best fits your business, let’s investigate the strengths and weaknesses of each of these:
Asset-based 3PL: The obvious benefit upfront is you are now partnered with a resource that has oversight over every function they offer by owning its assets (warehouses, trucks and trailers, distribution centers etc.) as well as being able to provide more security and structure to your business by harnessing the power of relationships. Never underestimate what a good relationship can do for a company when you get your foot in the door. When an asset-based 3PL has a tenure with their partners, they can help your company out of the tightest spots when you need it. Most the time they will own their own equipment so there is no need to deal with finding reliable solutions. A growing business needs to be able to have room to scale and this type of 3PL can give them that as well. A possible downfall of an asset-based 3PL is if they are not very well established they could possibly be limited in their resources as they have not been able to build up their book of business. These 3PLs still find success, though, with smaller companies who may not have as high demands that are cross country like other, larger companies.
Non-asset-based 3PL: These types do not own any of their assets but are rather in the business of negotiating contracts between the network they have. They offer a bit more flexibility for the company and have the ability to move from one warehouse company to another in order to meet their customer needs. Although this can be a good fit for some companies as there may be a preferred warehouse location or transport company that was used but might become unavailable for your specific needs exactly when you need them and the 3PL will have to use an alternative.
The choice primarily comes down to the company’s needs and preferences and what their priorities may be. Are you running out of storage almost daily for your products? Are you constantly running into shipping and transportation issues with your current method? Are you able to precure and distribute your goods efficiently to meet deadlines? These a just a few questions that should be asked when deciding if it is time to involve a 3PL. Deciding on what type of 3PL though should be based more on the company’s budget, size, network and sometimes even locational needs and many other finer details.
Who is not a good fit for 3PLs?
There are many factors to observe when making the decision to get a 3PL involved. Most importantly is if it makes sense financially. If the budget is already tight and involving a 3PL wouldn’t make a huge difference by relieving that tight budget, it is likely not the time for a 3PL. Companies that already have the resources but may just be poorly managed wouldn’t necessarily benefit from an outside party coming in. Companies that need total and full control over every aspect of their business would not be able to have that one hundred percent control with a 3PL. Many 3PLs that have been in the business for a very long time can often alleviate that pain point with clear and concise communication. If your product or service only thrives on every component of the business understanding the in’s and out’s of it's product or service, you may lose that strength of knowledge in with a 3PL. Typically companies that produce high specialized goods or services fall into this category.
A helpful excerpt from geo.com gives some pointers on deciding what kind of 3PL could be right for your business:
- Define and document your 3PL requirements in supply chain, and the results expected, and state the priorities. Also, set down what logistical responsibilities will remain in-house.
- Have an internal multi-functional team to both select and work with the 3PL partner, as a logistical partner impacts multiple stakeholders. There will also be wider acceptance and higher compliance if everyone concerned is involved from the start.
- Check if the 3PL provider has the capability to upscale operations, if and when needed.
- Can the provider offer customizations? The one-size-fits-all template may not always be the ideal solution for your business.
- Does your potential partner offer solutions in multiple segments of the supply chain, or does it focus on only particular areas and solutions? If your organization’s needs are very specific, you may want to look for niche 3PL providers; otherwise, the more solutions you get out of a single provider, the more seamless your supply chain will be.
- Ask for client references and check on them thoroughly. An existing client’s feedback can be the best indication of the 3PL provider’s performance and reputation.
- Check the company’s financial health. Your business should not face unexpected turmoil and risks because your 3PL partner can’t deliver on the promised solutions.
They also mention that finding a consultant that is well versed in a wide array of 3PL functions can help a company make a decision not just if it is time for one but also which route to choose.
What to look for in a 3PL
After evaluating that your business would do well with a 3PL, it is equally important to know what characteristics make up a good 3PL that works with your company.
Experience is a given, but primarily experience in your industry would be a plus. A 3PL that has prior experience in your field would be more beneficial but depending on your needs, that might not be necessary.
Longevity is another quality to look out for. The longer a 3PL has been in business, the more likely they will have grown into a multifaceted network that could better serve your demands.
Relationship material is a real thing in this industry. The more proven and trusted relationship a 3PL has with its partners, the better they can benefit your business.
Resources is just as vital to anything else when analyzing a 3PL. Make sure they have enough to go above and beyond your company needs in order to help scale your business.
Communication channels need to be wide open and readily available. This is something that may have to be proven over time, but testimonials and references can help gauge how effective their communication is as well.
If you are looking for a solid 3PL company that will deliver on their promises it will be well worth your time to investigate and take in depth looks at which one can be the best fit for your company.
The Meadow Lark Difference
You could say we have longevity on our side and with that comes great experience in being a transportation 3PL. We use a combination of our own company trucks, independent owner operators and core carrier partners to create the flexibility and capacity you expect. It is entirely because of our relationships that we have fostered through the years that we are able to offer multiple lanes to cover even the most unwanted routes. You could say we are old fashioned but by making the effort to visit each and every partner in person we’ve been able to maintain this trust throughout.
We are able to boast 98% on-time deliveries thanks to customized software that creates lane synergies that also gives us performance metrics, so we are able to continuously improve ourselves. With multiple teams dedicated to researching market trends and forecasting we know how to beat the pricing in the market to make sure your business doesn’t overpay.
Trust Meadow Lark to take care of your transportation. Being an asset-based carrier, we understand the need for control, communication and capacity. Call us today to get started!
