What is 3PL? How does It Benefit Your Business?

What is 3PL? How does It Benefit Your Business?

2022-11-25 09:37:37

1. What is 3PL?


3PL (short for Third Party Logistics) is an outsourcing service provider dealing with e-commerce logistics for you. You make and receive orders through the online marketplace and e-commerce platform whose logistics is performed by 3PL, which includes: receiving purchases from yourself or your suppliers; store inventory in one or more warehouses; select items for the order; packaging orders for delivery; arrange shipping the order to the customer; handle returns of inventory items.


2. How does 3PL benefit your business?


The third profit excavated by the third-party logistics is basically reflected in the users, which increases the profits of users. Users can make a third profit from the following aspects:


(1) Decrease cost

One of the driving forces for enterprises to consider outsourcing their logistics operations to third-party logistics is to reduce costs. Because enterprise can outsource their logistics business to the third party in the form of a service fee for services with no need for internally maintaining logistics infrastructure such as transportation facilities and warehouse and personnel, making the fixed costs into variable costs whose impact is more obvious for those with seasonal variation in business.


With strong purchasing power and cargo loading capacity, the third-party logistics company can implement joint distribution through its extensive meshed network or can get even cheaper transport quotation from shipping company or other logistics service providers. It's possible for the company to buy shipping services in bulk from a carrier and realize centralized loading for different customers, greatly reducing unit transportation cost.


(2) Help enterprises to improve customer service level and quality

Making use of the information network and meshed network of the third-party logistics enterprise speeds up the ability to respond to customers' orders and order processing, shortens the time from order to delivery and carries out door-to-door transportation, realizing delivery of goods and improving customer satisfaction.


Through its advanced information and communication technology, third-party logistics can strengthen the monitoring of goods in transit, timely find and deal with accidents in the distribution process, ensure the timely and safe delivery of orders to the destination, and fulfill the promise to customers as far as possible. After-sales service of products, door-to-door delivery, return handling, waste recycling, etc. can also be completed by the third-party logistics enterprises to ensure providing customers with stable and reliable high-level services.


(3)Integrated benefits

3PL is both the strategic investor of customers and the undertaker of risks. The third-party logistics company does not pursue short-term economic benefits, but rather serves customers as an investor, which is a typical characteristic of it as a strategic ally. For example, in order to meet the needs of customers, third-party logistics companies often invest in or form joint ventures to build modern specialized warehouse, personalized information system and special transportation equipment for customers. Such investment can be as small as tens of thousands of yuan, or as large as millions, tens of millions or even hundreds of millions of yuan, which directly saves a lot of construction costs for customers, but the risks of such investment must also be borne by the customers themselves. Therefore, the third-party logistics service itself is a long-term investment and the income of such investment depends largely on the growth of customer business volume, which forms the basis for the integration of interests of both sides.


(4) Improve business value chain

The improvement of value chain is a hot spot in modern enterprise management. Conceptually, the value chain mainly describes the interaction and dependency between suppliers, producers, intermediaries and customers as well as their internal strategic business units so as to identify the value they create for customers and strengthen the company's competitive advantage. In practice, there are two main forms of so-called value in the value chain: providing undifferentiated goods or services at a lower price than competitors; providing a unique quality product or service at a reasonable additional cost.


Value chain plays an important role in the realization of logistics integration by enterprises to obtain and maintain their competitive advantages. It can be used to identify and understand the specific resources where enterprises generate competitive advantages and how these resources create value-added services for customers.


The essence of 3PL is to coordinate customer service requirements and logistics activities starting from suppliers, giving consideration and optimization to high customer service level, low inventory investment and low operating cost. Therefore, reducing operating costs and the occupation of working capital, improving the rate of return on assets (ROA) and enhancing the competitiveness of enterprises are the value expression of efficient 3PL.

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