Third-party logistics providers offer a wide range of services and solutions to help companies manage their supply chains. They can provide everything from warehousing and order fulfillment to freight forwarding and transportation management.
According to Global Market Insights, the 3PL market size exceeded USD 1 trillion in 2022 and is expected to expand at a compound annual growth rate (CAGR) of more than 5% from 2023 to 2032.
However, not all third-party logistics providers are created equal. Some are better than others at certain aspects of their business. In this post, we’ll discuss some features that will help determine whether an efficient third-party logistics provider is right for your company:
Strong Transportation Network
When you’re looking for a third-party logistics provider, they should have a strong transportation network. This means that they can move goods from one place to another quickly and efficiently, as well as connect your business with the rest of the world through their global network.
When it comes down to it, there are two main aspects of transporting goods- speed and cost. You may not realize it, but these things matter when moving items across borders or distances. And there’s no better way to know if someone has these qualities than asking them yourself.
According to Forbes, the logistics industry, in recent years, has invested heavily in the last-mile capacity, which is moving products to consumers’ residential addresses. It is also the most expensive part of the transportation cost. A recent study estimates that the “last mile” niche of the logistics market will grow from USD 25 billion to USD 72 billion by the end of 2025.
Comprehensive Warehousing and Distribution Capabilities
Warehousing and distribution capabilities are essential to the success of your third-party logistics provider. You need a warehouse management system that can:
- Manage and track inventory, keeping up with quantities in stock, on order, or both.
- Pick and pack items for shipment on your behalf once orders come in.
- Perform order fulfillment services for you which is sending out packages as needed to customers who have placed orders through you.
- Retrieve products from warehouses when required, such as in the case of returns.
Advanced technology is an important feature of any third-party logistics provider. Advanced technology enables efficiency and cost savings, increases customer satisfaction, and allows you to compete with the best in the world.
A strong third-party logistics provider should have access to and utilize modern logistics technology, such as warehouse management systems (WMS) or transportation management systems (TMS), to improve efficiency and accuracy.
According to Retail TouchPoints, the ever-changing retail market has made automation a necessity in warehousing. According to recent research, the global warehouse automation market is projected to grow at a CAGR of 14%, reaching USD 30 billion by 2026.
Strong Customer Service
Customer service is a crucial part of the 3PL fulfillment process. From picking up your shipment to delivering it, fulfillment services involve many different people and businesses.
A strong customer service department will help you maintain smooth communication between all parties, as well as provide proactive updates on your shipments so that you can conduct business on time.
A third-party logistics provider should also have responsive and proactive customer service, with open communication channels that allow for easy access to information about your shipment’s status at any time.
If a third-party logistics provider can’t scale with your business, then your business won’t be able to grow. The ability to scale is critical in today’s world of e-commerce and changing market conditions.
An efficient third-party logistics provider should have the following characteristics:
- The ability to adapt to changing market conditions.
- The ability to handle peak demand during the holiday season or other high-volume times such as Black Friday and Cyber Monday.
- The ability to handle seasonal demand during busy months like February for Valentine’s Day gifts, Mother’s Day items, graduation gifts, and summer items like sunscreen, sunglasses, and swimwear.
Cost-effectiveness is a complex concept that can be hard to explain, but it’s important to recognize. The best way to think about cost-effectiveness is in terms of value for money and how you can get the most bang for your buck.
Cost-effective providers will provide the right amount of services at a fair price, which means they won’t charge more than they need to and will still make enough profit to keep them going as a business. If your provider isn’t being cost-effective, then there are two options- negotiate with them or change providers entirely.
Compliance is the practice of adhering to rules and regulations. It’s important for your business, customers, and suppliers alike. But when it comes to third-party logistics providers, compliance can be difficult to achieve because they have an incentive structure that drives them away from following certain rules or regulations.
That’s why we recommend choosing an experienced 3PL provider who knows how best to handle all kinds of compliance situations.
From ensuring that employees adhere correctly while working with sensitive materials like medical equipment, handling customs paperwork, ensuring proper labeling on shipments, making sure products are processed according to their specifications, and keeping track of inventory levels across locations so there aren’t any shortages throughout the supply chain process, etcetera.
In conclusion, a third-party logistics provider is an important part of any supply chain. This article has outlined the features that make an efficient third-party logistics provider and how these features can benefit your business.