One of the growing pains you’ll face if you’re running a successful business is having too much to handle on your own. It can be challenging for any small-to-medium-sized operation to maintain and grow its client base while using only in-house services. Rather than printing off your own labels, finding the right postage for hundreds or even thousands of packages each month, and managing your entire inventory, you may consider outsourcing these needs to a third-party logistics company. Doing so could allow you to scale your shipping and fulfilment process while focusing on the core strengths of your business.
Anyone familiar with the world of eCommerce shipping knows how important third party logistics or 3PL is to the success of an online business. The advantages of 3PL are very commonly listed everywhere. From picking, packaging and delivery, third party logistics providers take care of the entire order fulfilment process for eCommerce businesses.
However, there are a few disadvantages of third-party logistics that online stores should also keep in mind when looking to hire a 3PL to manage shipping operations. The massive growth of eCommerce in India and worldwide has led to the mushrooming of numerous 3PLs. Which third-party logistics provider or 3PL is best for your e-commerce business will only come after a thorough understanding of how 3PL works in eCommerce shipping and logistics.
In this article, we will take an extensive look at Third-Party Logistics (3PL) advantages and disadvantages. But first, let’s find out what a 3PL is and what its role is in the shipping logistics industry.
What is Third Party Logistics or 3PL Melbourne?
In eCommerce logistics, 3PL or third party logistics is the service provided by third party couriers and logistics software companies to eCommerce stores to help with their shipping and order delivery. Third-party logistics takes care of order procurement, storage, warehousing, stock management, labelling, picking, packing and finally delivering the order to the end customer. By choosing to work with a 3PL, online companies relegate the responsibility of shipping and order fulfilment on 3PL providers. Research shows, working alongside 3PLs helps eCommerce businesses to scale up much faster.
Most eCommerce companies start outsourcing shipping and logistics to third party logistics services because of the advantages they provide. As an online store grows and starts receiving a larger number of orders every month, it looks for a suitable 3PL to provide a smooth and streamlined shipping and delivery experience to its customers.
A third-party logistics provider can store items in its warehouses, manage stocks and replenish them when necessary and finally deliver the item when a customer places an order. Apart from these shipping services, a 3PL also provides customised packaging, picking, kitting, bundling, customs clearance, etc., for eCommerce retailers.
Advantages
Specialisation
3PL companies are highly specialised because they are created with one and only one purpose – to provide logistics support to various businesses. Specialisation naturally increases the efficiency of such organisations, which in turn benefits the courier companies that hire them.
Access to advanced new technology
Due to high specialisation, 3PL companies usually have access to better technology than in-house logistics departments. The new technology helps both reduce the time spent on a task and cut costs.
Access to required facilities
It is challenging for a company to have access to warehouses and transportation required for the shipment of items of huge volume or size. On the other hand, 3PL companies almost always have access to such facilities.
Ability to handle large number of clients at a time
Hiring 3PLs helps courier companies to handle a large number of clients at the same time. It is possible because such logistics companies usually have a large capacity along with a very high amount of efficiency.
Carrier Performances Monitored Separately
There’s a major consequence to orders being tracked and managed with each carrier independently. The performance of each courier partner also has to be analysed separately based entirely on inputs provided by each carrier. And whatever metrics and analytics you have resources for.
Separate Carrier Platforms
The biggest barrier to monitoring carrier performance is that each courier partner maintains separate websites or backends for tracking the status of orders. This means that the data required to monitor each carrier’s performance has to be individually pulled by you from each carrier’s respective website. This can be another disadvantage of using third party logistics companies.
Different SLA Terms
Given the wide range of pin codes that you need to service and the variety of specialised services you’ll make use of, each carrier demands a separate focus from you. This goes doubly when it comes to creating SLA terms. Absolute clarity of your operations and necessities is required at this point. Having different SLA terms can be a disadvantage of working with third-party logistics partners.
Different Terminology Used By Carriers
When it comes to relationships, be them with your customers, your courier partners or your significant other, communication is key. All it takes is one misspoken word to completely ruin your dinner plans. Similarly, the entire delivery process for each order can be shaken with just a few misprints or alternate phrasing.
Disadvantages
Irregularities on the part of Third-party company may lead to problems.
Once a courier company hires a 3PL company for its logistics distribution, it allows some of the control of the entire shipping process to slip away. When there is complete lack of control over a particular process, there is always a chance that a problem may crop up. And if it does, it may cause harm to the reputation of the company.
Communication problems
Two completely different companies are working towards achieving the same goal, and in a scenario such as this, communication is of very high importance. But, since the message must travel from one company to another, complications may arise, which in turn could lead to misinterpretation of facts or complete miscommunication. When this happens, most often than not, the delivery becomes a failure.
Therefore, it is vital for a company to be responsible while hiring a third party logistics company. All the advantages and the disadvantages have to be put through extensive scrutiny.
LIMITS ON INDIVIDUALISED SERVICE
An experienced, professional 3PL will do everything in its power to customise its services to your business needs. But whenever you’re dealing with a separate company with its own practices and offerings, there will be restrictions on how far they can go in tailoring the services to suit a single client.
Other disadvantages are-
- Lose skills and infrastructure you may want to develop
- Have a hard time finding find a trustworthy 3PL
- Sacrifice some control of your image and customer service
- Send out your inventory to a relatively unknown third party
Reference-