In today’s on-demand economy, there is a growing number of customers ordering online and who want their products as soon as possible. When you compare this to the past, when consumers did all of their business in-person, it’s quite the contrast. From a warehousing and distribution perspective, it might as well be night and day. Gone are the days of full pallets being sent to retailers or regional DCs and here to stay are the days of breaking cases to ship eaches. This monumental change in warehousing is one of the reasons why many companies are outsourcing distribution to Third Party Logistics Providers (3PL). Is outsourcing distribution to a 3PL the right move for you? Below are 4 reasons why it could be.
1. Changing Supply Chain
As mentioned above, the nature of fulfillment has changed and will keep changing. If your company is set in its ways of not shipping to consumer and is looking to expand to e-commerce, a 3PL could be a viable option. Various 3PLs specialize in e-comm and have set-ups ready-made to absorb your business, as well as potential in obtaining favorable parcel rates. It may be a better move to outsource this new mode of fulfillment than to attempt it yourself, especially if there is no in-house experience.
2. Lack of In-House Knowledge
If your company does not have in-house expertise in distribution, a 3PL could be a good move for a couple of reasons: first, the 3PL may be able to reduce costs. Distribution is their business and expertise, so, depending on your levels of efficiency, they can run it more efficiently. Secondly, if you don’t have the in-house knowledge, your day-to-day may be stressful – outsourcing reduces those headaches.
3. Business Changes
A different reason to outsource is a change in business forecast. If your company is rapidly growing, making acquisitions or combining subsidiaries, for example, there are a lot of changes coming to your supply chain. Your warehousing needs can vary in large swings year over year, making an owned or leased building an inefficient option for your distribution operation. The best option would be a 3PL shared warehouse where the 3PL can absorb business changes in their idle space and the infrastructure is already in place to avoid the inefficient and expensive warehouse transitions.
4. Market Expansion/Service Level Improvement
Say you are a company with one DC in the Midwestern United States. Your East Coast customers love your quick lead times, but your Western customers are starting to get a little irked about how they can only get a shipment a week after you process it. How can you make them happier without committing to the long-term? A second DC on the West Coast with a 3PL. This way, you can evaluate the benefits and costs of a second operation without committing to long-term infrastructure investments. A similar reason is to expand into a new market: the best bet for an international company with no US presence is to use a 3PL for much of the same benefit.
These are just some reasons to consider a 3PL – every company has a unique situation and evaluation to make. Need help evaluating if a 3PL is right for you? Establish has completed hundreds of 3PL evaluations and searches and have worked with nearly every 3PL in North America. Give us a call at 212-776-9900 or e-mail us at firstname.lastname@example.org to discuss your supply chain needs.