The truck driver shortage in the U.S. often poses challenges for carriers who may not have an adequate number of drivers to meet their demand.  Freight carriers sometimes use truck drivers who own and operate their own rigs for regular or special routes to move goods.  Some owner-operator drivers use their own subcontractor drivers, particularly during peak seasons.

Employees vs. Independent Contractors

Whether you are a B2B or B2C company, shipping plays an integral part of your operations.  Ecommerce shows no signs of slowing down, and yet spot shipping rates are at the highest they have been in years. Online consumers, however, are only concerned about what the final cost will be when they go to checkout.  While sales are growing, it is important to take care of the back end as well. Many companies have invested heavily in their supply chains in order to satisfy their customers. A third-party logistics provider (3PL) can increase the efficiency of your business while decreasing costs.

What is a 3PL?

A 3PL, or third-party logistics company, allows for the outsourcing of operational logistics and supply chain, including warehousing, picking and packing, and transportation. A 3PL provides a cost-effective way to manage these operations for companies that do not have the staff to perform then or have outgrown their in-house capabilities.

Logistics service companies are an important part of supply chain management. According to a 2017 report from Armstrong & Associates, 90 percent of Fortune 500 companies use a 3PL for logistics and supply chain services. The study also found that the larger the company, the more 3PL services are used.  More often, the shippers are turning to 3PL’s for solutions and multichannel services because they offer great advantages.

Services a 3PL Can Offer

Third-party logistics providers can offer a variety of services that make ecommerce fulfillment and shipping easier. 

• Receiving:  Some businesses find that using a 3PL to store and distribute products eliminates the cost of storage and staff. Since 3PL’s can negotiate costs of inbound shipments with freight carriers based on volume, costs decrease. Inventory is organized, stored, and then located via warehouse technology so an order can be fulfilled and shipped efficiently. In addition, the warehouse software can be integrated with your website to provide customers with real-time tracking.
• Picking:  Another time-consuming task is picking once a customer places an order. A management system can help to locate the items to fulfill the order. For smaller companies that do not have the technology to do so, picking can be an arduous task, however, a 3PL can reduce the time to fulfill the order.
• Packing:  The packaging on a shipment is important as it is the customer’s impression of your brand.  A 3PL will take into account dimensional weight and the cost of shipping as well as the appearance of the packaging.
• Shipping:  Third-party logistics providers simplify the complex nature of the fulfillment process by coming up with cost-effective strategies for the shipping process. 3PL’s are able to negotiate shipping rates that your individual business might not be able to do on its own. Shipment tracking can also be integrated for real-time updates to the customer. 
• Returns:  Returns have become a big part of the online shopping experience, but can be problematic for companies, however, a 3PL can help with receiving and handling returned goods.  3PL’s can give customers shipping labels to conveniently return their purchases.

Benefits of Working with a 3PL

Whether you choose to have a 3PL handle all your fulfillment operations, or only portions of the process, there are many benefits of working with one.

Save Money. A third-party logistics company can help to cut costs on both the fulfillment and transportation sides. The costs incurred from managing warehouse space, labor, equipment, technology, and transportation add up. A 3PL provider can significantly reduce costs so you can concentrate on growing your business.

If your business has seasonal peaks, a 3PL can handle fluctuations in demand or growth. Multiple fulfillment centers allow for customers to expand their reach without increasing costs and still meeting customer demands.

Industry Expertise. Logistical planning requires the knowledge and expertise of how to keep orders moving and eliminate costly delays.

Choosing to Outsource

If your business is expanding, you are running out of warehousing and storage space, or you want to reduce fulfillment costs, you may want to consider using a 3PL. The pricing you receive from a 3PL provider will depend on your requirements although choosing a 3PL based solely on their costs is not the best choice. The 3PL should be able to meet your future plans for growth and integrate with your current technology systems. The following questions should be considered:

• – Will the 3PL optimize our fulfillment process? The 3PL should have the skills and knowledge for your specific industry.
• – What technology do they use? You want to choose a 3PL that is up to date on technological advances.  Review what automation they use to ensure they can handle fluctuating workloads. 
• – Do they offer flexibility? Particularly in times of volume growth or a busy sales season, the 3PL should be able to grow with your business. 

Using a 3PL for logistics operations like warehousing, distribution, and transportation benefits companies of all sizes. At Red Arrow Logistics, you will find our knowledge and comprehensive supply chain support will ensure the best possible experience for your customers.