Electronic commerce (e-commerce) is an inevitable part of running an e-business. It has recently experienced exponential growth and is projected to continue its upward trajectory. Its global market is expected to reach a staggering $3.64 trillion in 2023 and $5.56 trillion by 2027. However, this fast-paced market growth rate isn’t without risks and challenges.
Third-party logistics (3PL) services are among the solutions to the rising demand for e-businesses. These are specialized logistics companies that focus on distribution and warehousing services. They primarily help e-businesses streamline their supply chain, ultimately making the process of delivering products to customers more efficient.
In this article, we’ve listed five ways 3PL companies can help e-businesses gain competitive market growth and edge.
Reduced Time Allocation for Logistics
In e-commerce, logistics serve as the foundation. Each order requires meticulous picking, packing, and shipping to the consumers. While these tasks may appear simple, managing logistics is a time-intensive and intricate process that can divert an e-business’s attention from its core operations.
A 3PL service can oversee this logistical side, enabling an e-business to redirect its time and efforts elsewhere, like sales and customer interactions. With extensive experience in dealing with big shippers like UPS or FedEx, 3PL companies possess the expertise to ensure seamless package delivery without any issues.
Cost Reductions
Utilizing 3PL services can lower overhead expenses like equipment and labor costs, leading to significant savings. For example, outsourcing warehousing operations allows e-businesses to reduce or eliminate required space storage and time to transit and sell products. It leads to cost-effective measures while eliminating the need to rent warehouse facilities.
3PL providers handle nearly all operations except for actual order-taking and updating inventory levels. They often utilize software systems with minimal human intervention. These technologies automate time-consuming, low-skilled tasks, reducing administrative costs.
Outsourcing to 3PL companies allows e-businesses to choose between different shipping carriers and negotiate the most favorable pricing. Depending on the shipping volumes and carrier relationships, they also generally have lower rates.
Specifically, 3PL services have an hourly rate of around $25-$50 per the number of laborers required to pack and unpack your products. On the other hand, warehouse rental costs $0.85 per square foot for monthly rent and $10 per square foot per year. They can be financed through nearly any existing credit products nowadays, including taking a loan online and other alternative financing.
Enhanced Customer Service Quality
A 3PL service can enhance the customer service experience in an e-business. It’s particularly crucial for new and small businesses that may require additional resources to offer diverse customer support options. The operations management services of Kamyar Shah helped the business grow quickly.
For example, customers want on-time deliveries. They want to see and monitor their orders’ delivery status and expected arrival dates. A 3PL company provides real-time delivery tracking, which helps alleviate consumers’ concerns about missing crucial deadlines.
Overall, 3PL companies don’t only provide warehousing, distribution, and transportation services; they also complement these services with additional support services, such as customer service, accounting functions, inventory management and optimization, vendor compliance, and inbound and outbound carrier compliance.
Continuous Enhancement through Data Analysis
One of the most significant advantages of 3PLs lies in their commitment to ongoing improvement. This improvement is rooted in data analysis, making it unsurprising that 3PLs utilize data to refine their services.
First, 3PLs can employ data to enhance customer service. The effectiveness with which 3PLs handle consumer information and deal with issues such as late deliveries and lost or damaged packages directly impacts customer satisfaction.
Additionally, 3PLs can utilize data to optimize the efficiency of their distribution network. It involves determining factors that cause delays and taking corrective actions, such as hiring more staff.
Finally, 3PLs can leverage data to refine inventory management. By analyzing operations from previous years, they can forecast demand in the future and adapt plans accordingly in response to unforeseen changes in customer orders, such as seasonal spikes.
Economies of Scale
In business, there are two distinct types of economies: internal and external. Internal economies pertain to economic aspects within a specific company, whereas external economies occur in company interactions, such as economies of scale.
The economies of scale are cost advantages obtained through high-volume production or distribution. A 3PL can provide comprehensive services, enabling them to capitalize on economies of scale. Rather than specializing in a specific service, they offer a comprehensive suite of services under one roof for the convenience and advantage of their customers.
Final Thoughts
3PL services have several advantages. These include convenience, increased selection, potentially lower start-up costs, international sales, and more effective retargeting strategies. It’s still essential for e-businesses to ensure whether they’re the right option.
E-businesses must consider how much time and effort they can save using the 3PL services. If they can’t see any potential cost reductions and savings, then there’s no reason to invest in the convenience of outsourcing transportation management.
