July 1, 1980 changed the United States in unanticipated ways. On that day, former President Carter signed the Motor Carrier Act into law. The legislation deregulated large parts of the trucking industry, paving the path for fewer restrictions on shipping carriers and allowing for greater competition.
During the 1990s, global trade heightened between the U.S. and Asian countries, including China and India. That led to the need for increased warehouse space and inventory management solutions on behalf of overseas manufacturers. Things really gained steam as the internet took off and e-commerce businesses like Amazon became a household name.
Fast forward to today. Thousands of companies lean on third-party logistics (3PL) providers to store products, fulfill customer orders, and facilitate client shipping support. With the right 3PL support, it's possible to deliver clients the products they want, wherever they live — from midtown Manhattan to the streets of Cape Town.
The staggering efficiency and strategic advantages available through 3PL order fulfillment organizations make it easier for any product-oriented business to scale operations worldwide.
Understanding the Concept of 3PL
What, exactly, does 3PL logistics encompass? Essentially, everything to do with fulfilling customer orders. A 3PL logistics provider may handle incoming and outgoing shipments with motor carriers and shipping companies. It can store a brand's inventory in its vast warehouse space, monitor product availability, and facilitate customer orders and returns. Rather than handling all those processes in-house, your 3PL partner will do it for you.
Outsourcing to a 3PL provider makes sense for many small and mid-sized retailers and other businesses that don't have the resources to invest in warehousing and logistics. It saves time and money, and allows brands to focus on things that matter — making great products and building an extensive clientele.
You can rely on your 3PL provider to do what they do best: manage inventory, process incoming orders, and deliver products quickly to your clients.
The Role of 3PL in Global Logistics
It's a real challenge for foreign businesses to set up shop in a new country — especially for an organization that plans to handle its logistics activities in-house. Shipping and transportation regulations vary significantly from one country to another. Trying to navigate all those challenges can be an exercise in frustration that small and mid-sized businesses aren't ready to navigate.
That's where 3PL companies with a global reach can help. A global 3PL provider has already gone through the bureaucratic red tape of navigating international regulations. Management has an existing, working infrastructure to support international shipments, guaranteeing that customers receive their orders.
Instead of spending hours trying to work out customs forms and figure the most time-efficient way to transport products, you can rely on a 3PL provider who understands what to do.
A 3PL provider's capabilities go much further than warehousing and inventory management. Advanced companies use efficient technology that support real-time tracking, so brands always know exactly how much inventory is on hand. Companies can easily track orders and plan for inventory restocks, so there's less risk of a stockout.
Cross-border shipping comes with other considerations, too — like tariffs, trade agreements, and unique regional market concerns. Your 3PL fulfillment company knows how each one works, and how they apply to the products you're moving from one country to another.
3PL support can yield a tremendous boost in overall logistics efficiency. It can also help reduce the risk of costly errors, like improperly calculating customs fees or failing to apply exemptions available through trade agreements.
Key Features of 3PL Services
Relying on an international logistics company to fulfill customer orders provides several key advantages, including flexibility and scalability. When you use a 3PL provider for e-commerce fulfillment, you're not limited to the constraints of your in-house resources. You can increase or decrease your reliance on the service according to business needs (within the confines of your agreement).
As your business continues to grow, you can lean on the 3PL company for additional warehousing space, or to service new locations.
Another benefit of using 3PL fulfillment companies is the cost efficiency. Trying to manage logistics on your own is extremely expensive. You may need to invest in a property to store products, hire new employees to oversee inventory and distribution, and buy warehousing equipment. Those costs can add up quickly.
According to the U.S. Bureau of Labor Statistics, the median salary for a warehouse manager is $99,200. Distribution staff earn a median hourly wage of $16.74 each. Tack on the average rent of a warehouse of $8.08 per square foot, and expenses could reach into the hundreds of thousands of dollars. You can cut your expenses in half — if not more — by utilizing a 3PL provider.
Professional fulfillment organizations use advanced technology to manage every aspect of their client's logistics needs. Such software may include a warehouse management system (WMS) and transportation management system (TMS). Both of these systems improve efficiency throughout every aspect of the logistics process, from inventory management to global shipping.
The Transformation of Supply Chain Management
Advancements in 3PL technology make it easier for logistics providers and brands to manage their supply chain from end to end. Through a WMS, brands and distribution managers can track inventory in real time, from its arrival at the warehouse to its delivery at the customer's door. That helps brands plan for inventory peaks and troughs, reducing the potential for overstocks and understocks.
Utilizing a 3PL results in better lead times and a more efficient use of resources. Since 3PLs specialize in everything logistics, managers understand how to make the most of limited staff resources. Your 3PL can maximize delivery efficiency and costs by selecting optimal providers for any given route.
Many 3PL fulfillment organizations are moving toward greater sustainability in their practices. Some of the largest providers are building efficient warehouses that meet Energy and Environmental Design specifications established in the U.S., and similar principles in the E.U.
The Future of 3PL in Global Logistics and Supply Chain
New advancements in technology may change the face of 3PL as we know it in future years. Tools like automation and artificial intelligence (AI) will create new efficiencies that save time in the packing and distribution process. Such tools can relieve some of the administrative burden on employees and eliminate manual errors.
Another potential game-changer is robotics. Several companies, including Amazon and Tesla, have introduced robots that possess limited capabilities to handle routine tasks like picking and packing. As robotic abilities improve, they may cut down on labor expenses that 3PL companies incur.
While projected growth for 3PL companies is forecasted to exceed 5.48% annually, it may attract increased competition. To stay ahead, fulfillment organizations can double down on investments in advanced technology to maintain an edge in efficiency.
The Role of Technology in 3PL
Like pretty much every industry, 3PL companies stand to benefit from increasing digitalization and the use of AI. Using the vast amounts of data available through a 3PLs WMS and TMS, AI can easily:
- Optimize inventory management
- Plan efficient picking and packing paths
- Select the most efficient route distribution options.
Other advancements, like predictive analytics, offer enhanced forecasting capabilities that are helpful to retailers that commonly see order fluctuations throughout the year.
A 3PL organization's technology stack typically includes real-time tracking capabilities that retailers can use to examine inventory levels and outgoing shipments. Cloud-based solutions allow retailers to access their information from anywhere they have an internet connection, allowing for better communication.
The Environmental Impact of 3PL
The use of 3PL providers is becoming much more environmentally friendly than trying to operate logistics in-house. Fulfillment organizations may optimize routes to limit emissions and fuel consumption, and use eco-friendly packaging materials for distribution.
Some 3PL companies are moving toward alternative fuel vehicles that rely on batteries rather than traditional gas. Ultimately, all these moves toward sustainability have a positive effect on the environment.
Utilizing 3PL Partnerships for Global Logistics and Supply Chain Management
Retailers and other businesses seeking to capture new markets for their products stand to benefit significantly from third-party logistics partnerships. Through a 3PL, it's possible to expand your product availability into new countries and leverage the knowledge, resources, and advanced technology that are tough to imitate from scratch.
Partnering with a global 3PL eases some of the regulatory pain that comes with expanding into a new market. You can lean on your provider's expertise of local regulations, tariffs, and free trade agreements to avoid costly mishaps that result in fines or incorrectly priced shipping costs.
Another key benefit of global 3PLs is their cost efficiency. Instead of investing in new warehouse space in every market you operate in, you can use 3PLs to store inventory and scale up or down according to customer demand. It's a simple way to control expenses and maintain a healthy profit margin.
At QuickBox, we offer a variety of fulfillment services for growing retailers and e-commerce stores. With several large warehouses spaced strategically across the U.S., we can help you optimize your entire logistics function, from inventory management to distribution. Contact us today to learn how we can support your organization.
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