With e-commerce taking over the world and competitiveness in marketing products is rising daily, the topic of product transport and logistics is becoming more and more vital. Companies around the world, especially in the GCC, try to be as efficient as possible in order to be able to pour maximum into advertising while maintaining a high level of logistics servicing.

Hence where third party logistics, known as 3PL, emerged. 3PL helps companies on many different levels, from operational to cost management, it has become a vital, preferred medium for SMEs and even multinationals.

Third-Party Logistics (3PL) refers to the use of external organizations to perform logistics functions that were traditionally handled within a company. 3PL  providers offer a variety of services to streamline and manage supply chain operations. They handle transportation, ensuring that goods move smoothly from one location to another through methods like freight shipping, trucking, and air cargo. 3PLs also provide warehousing solutions, where they take care of storing and managing inventory in dedicated warehouse spaces. Distribution is another crucial service, where they make sure products are delivered efficiently and on time to end customers.

Inventory management is a key part of their offerings, involving the meticulous tracking of stock levels, orders, sales, and deliveries to keep everything running smoothly and reduce excess inventory costs. Finally, Last mile delivery services cover the entire process from receiving orders, processing them, and ensuring timely delivery to customers. 

“Products can be easily copied. But a supply chain can provide a true competitive advantage.”

 – Yossi Sheff, Professor at the MIT Center for Transcorp and Logistics

According to the 2021 State of Logistics Outsourcing Report, 91% of 3PL users agree that their 3PL relationships have been successful, and 68% say that the use of 3PLs has contributed to reducing overall logistics costs. By using logistics partners, the company frees itself from the costs of managing and maintaining facilities including but not limited to labor, infrastructure, transportation and even technological implementations. Instead of investing in warehouses, company vans, trucks and employees, the company can take this budget and put it in brand advertising and product development.

Liability and responsibility is another burden off the shoulder of the company when using 3PL. Liability is assumed by the carrier, who is responsible for the drivers, including workers’ compensation & physical damages related to incidents. These issues, if dealt with internally, take up a lot of time, money, and resources from training drivers, to organizing fleets and repairing any issues that might arise whether technical or customer service oriented. By using a Logistics partner, the company can spend more time focusing on its core activities rather than dealing with these situations.

Another thing that is vital for companies, especially for GCC startups and SMEs, is Scalability. Using a 3PL can pave the way to quickly access new markets. If done internally, building a distribution channel in an alien market takes a while, along with a large trial and error margin. Logistics partners eliminate this margin and take on the road of acceleration for scalability by bringing proper management to inventory, integration systems and already established fleets and procedures.

According to the 2021 State of Logistics Outsourcing Report, 88% of current 3PL users report that their use of 3PLs has contributed to improving service to customers. In a fast-paced world where people are impatient and choose faster, quicker, more precise services, being able to cater to the target market is crucial to the success of businesses. 3PL can gather resources from across their internal team and operations to meet the growing and aggressive demands of customers.

“The real competition is between supply chains, not companies.” 

– Martin Christopher, chair of the Advisory Board of the Centre for Logistics and Supply Chain Management

Logistics partners and the employment of 3PL is crucial to the success of businesses in a world where faster is better and where e-commerce is taking over. Choosing the right Logistics partner is something that can be determined based on all the factors that make 3PL the key to the competitive advancement of companies.

References:

Maud. (2023, July 17). What is Logistics Outsourcing? Plus Advantages & Disadvantages. Approved Freight Forwarders. https://www.approvedforwarders.com/logistics-outsourcing-advantages/

Americas, S. (2024, January 3). 19 Advantages of Logistics Outsourcing. Staci Americas. https://www.staciamericas.com/blog/19-advantages-of-logistics-outsourcing/

Hobgood, H. (2024, June 7). 5 Ways Outsourcing Warehouse Services to a 3PL Can Save You Money. Kaban Logistics. https://kanbanlogistics.com/blog/how-outsourcing-warehouse-services-can-save-you-money