There is no getting around it – the words broker and outsourced have gotten a bad rep. But even amid this negativity, 3PLs (third-party logistics) providers continue to grow in popularity and permeate every industry in the United States. The question is how.
But first of all, it is important to understand that 3PLs are the brainchild of this century. The poor image they had at the beginning is starting to seem more like an issue of the small 3PLs companies making their debut in the industry having a few teething problems.
Proof of this lies in the fact that many organizations fully embrace the services these companies offer. In fact, a majority of Fortune 500 companies (80%) and Fortune 100 companies (96%), use the services provided by 3PLs companies. So, outsourced transportation and logistics is becoming a serious issue for all companies.
But why? Why are 3PLs so popular, even among large, well-funded organizations that can handle these issues themselves? Here are three reasons why.
3 Reasons 3PLs Have Gone Mainstream
Economies of Scale
Third-party logistics companies can do the same thing companies can, but for less money because they are larger. It also helps that they are into the business for good, not for a season like most companies would be if they handled this part of the business in-house.
This puts TPLs in a better position to negotiate better payment terms with shipping companies, and these cost benefits are eventually passed on to the companies that use their services. And another thing, 3PLs are better suited to handling the uncertainties (financial or otherwise) that typify this industry, which often require skills beyond what an in-house logistics team can handle.
Third-Party Logistics Companies Better Technology
A typical company has a lot of things to worry about besides logistics. For this reason, it can fall behind when it comes to keeping its logistics services up-to-date. But since logistics is all 3PLs deal with every day, they are better equipped technologically.
Today, they have at their disposal options like Transportation Management Systems (TMS), which help with a whole range of logistical needs. These include better shipment management, handling of complex scheduling, freight consolidation, and so forth.
Such a system would be too big of an investment for a company’s logistics department. In any case, most companies would not be in a position to fully exploit the whole range of benefits such advanced logistic management systems have to offer. Furthermore, such systems need to be managed properly and updated from time to time, which is a little more work a company can avoid by choosing to use a 3PLs provider.
3PLs are More Suited to Versatile Logistical Needs
Some companies have very diverse logistical needs. They may need to move things from distant and varied overseas destinations, or special products that need unique handling. Trying to do all this within the organization can prove hectic, expensive, and error-prone.
This makes the use of 3PLs the best option for them as these companies have a better reach and better skills and equipment to handle all kinds of transportation. Any organization that would choose to do this on its own would end up spending a fortune on logistics.
Justin Bright – CEO Brighter Logistics