Never before has being nimble to market demands been more important. In our world today, one social influencer can set the world on fire, craving a specific product or fashion style. Frequent trend changes puts pressure on manufacturers and retailers large and small to keep up with and even anticipate consumer wants. It’s very important to understand how vital a good logistics partner can be for keeping your business on the cusp of current trends. We’re going to dive deeper into one of our top services, Third Party Logistics, called simply 3PL, and how this type of logistics service can help your business respond quicker to hot sales.
What is Third Party Logistics?
Third Party Logistics is simply logistics operations for a business that are handled by another business. Logistics is the management of the flow of goods from one point to another. It involves managing inventory levels, storing or warehousing of those goods, and planning and executing the distribution or movement of those goods to their final destination. Logistics companies are used by manufacturers to receive and store parts of a product for later use in producing a final product, as well as for warehousing and inventory control for ecommerce businesses that lack storage facilities of their own. At its core, logistics though is about planning the process from receiving the item to getting it to the customer.
Third Party Logistics is having a logistics company handle all facets of that process for you. Top fields that use 3PL are medical, manufacturing, seasonal/retail, construction, and even the restaurant industry. In fact, Amazon is a 3PL. Amazon is actually the largest third party logistics company in the world! And it is estimated that over “86% of domestic Fortune 500 companies use 3PLs for logistics and supply chain functions,” according to a 2020 study by 3PL Central.
How can 3PL help manufacturers?
With international trade at an all-time high and manufacturers dependent on goods from other countries, 3PL can be a time & cost savings to these companies. Manufacturers can offload parts ordered or produced overseas into a Foreign Trade Zone (like ours here in Greer, SC) and have them cataloged in an inventory management system and housed in secure storage till the parts are needed. When demand increases, manufacturers can utilize the parts for their final product, which is then taken by the logistics company to their final destinations. A 3PL will handle all of the touchpoints from retrieval of parts from ports to storage, distribution, and everything in between.
So now let’s look at manufacturing through the lens of an emerging trend. With COVID, suddenly the majority of white collar workers were forced into work-from-home situations. That means a lot of people immediately needed to rethink their home office space. Suzie, a huge internet sensation & trend setting organization expert is suddenly raving about silk backed office chairs. With one TikTok post, suddenly over a million people are Googling silk backed office chairs, but with limited players selling such a thing, no one can get their hands on one. This is of course a fake scenario, but in this instance, a manufacturer of office chairs can potentially pivot their designs, incorporating silk backing easier with the use of a 3PL. If a manufacturer was storing various fabrics in their logistics’ partners’ warehouse, calling up their logistics partner to request shipping the silk fabric over to them wouldn’t be a problem. Within a short time frame, this manufacturer would be able to change designs & market their own versions of this trend while it’s still hot! The new produced chairs could be cataloged as well in the same storage facilities and distributed to various stores in record time. The 3PL enabled the manufacturer to shift gears quickly and not lose time or sales.
How can 3PL help retailers?
The retail industry can essentially be broken down into 2 pieces – brick & mortar and ecommerce. Both come with their own logistics challenges as well as their own benefits for choosing a 3PL. Let’s look at traditional retail first.
A traditional retailer may have a brick & mortar store and perhaps some ecommerce presence. A blended model, the retailer balances keeping inventory levels maintained in store as well as managing inventory levels in warehousing for online orders. Typically here, a third party logistics partner is used to manage the supply chain and all facets of logistics given the retailer’s complex needs. So let’s go back to our example of Suzie & her suddenly in-demand office chairs for our blended retailer. Let’s call the retailer Greenville SmartMart.
Greenville SmartMart suddenly needs a lot of silk office chairs. What they don’t need are their current in-stock options of black suede. Using a 3PL, they can quickly free up floor space in their brick & mortar store, shipping their undesired chairs back to their logistics partner for warehousing, and be able to stock the new chairs quickly. On the back end, at the warehouse, 3PL experts are there to catalog the unwanted chairs, reorganize the retailer’s storage space to make room for the new inventory, and then be able to accept the silk chairs from the manufacturer, distributing some to the store and cataloging the rest to fulfill orders purchased online. In quick time, the logistics company is able to not only ship out online orders but receive any returns, inspecting them for issues, and destroying bad or restocking resellable pieces. The logistics partner handles the processes needed to get the chairs from manufacturer to the store in record time and while providing great customer service.
Many retailers are already using 3PL successfully to pivot with trends. One of the greatest examples of this is the clothing store, Zara. This European clothing brand essentially coined the phrase fast fashion. Their shoppers will purchase frequently and change looks to match catwalk trends. Zara meets demand which is typically much shorter than a season. In this instance, experienced 3PL partners are needed to stay nimble and shift inventory in stores quickly with little downtime or disruption.
Now let’s pivot to a pure eCommerce business.
eCommerce is largely fueling the tremendous growth in the 3PL industry in recent years. With drop shipping so easily attainable for everyone, suddenly anyone can become an online retailer. It is estimated that 27% of all online retailers use drop shipping to fulfill orders.
Third Party Logistics for online stores can be the make or break for success. 3PL is essentially drop shipping in its easiest explanation. A store is able to skip the costs of owning a warehouse, employing people to manage it, renting or paying for transportation & equipment, and get better supply chain service through 3PL. Using a 3PL will typically lead to better customer experience because of decreased shipping times and easier returns. Everything is done for the online retailer – warehousing, determining the best way to distribute products, inventory management, and returns management. Especially for an online store in heavy growth mode, this service can be invaluable by simply allowing the store to do what it does best, not having to worry about logistics.
With hot trends impacting online stores perhaps even more than brick & mortar, let’s delve into an example of how 3PLs can help them as well. Let’s talk about office chairs, again. ChairUniverse (an online shop example) doesn’t have silk office chairs. But they can sell them, and quickly too, through using a 3PL. All they have to do is call the manufacturer. After securing the product, their third party logistics company can handle the rest. With a click of a button, or a few calls, ChairUniverse can move on to making other decisions that can help grow their business.
Expertise is at the core of 3PL nimbleness.
Cost savings are usually at the core of many companies’ decisions to use a 3PL versus trying to manage their own storage and distribution process. But experience is another facet of 3PLs that is hard to replace internally for companies looking to do it all. Logistics companies retain experienced staff capable of managing complex workloads and ensuring delivery satisfaction.
Partnering with a third party logistics provider such as GT Logistics Group simplifies your supply chain. 3PLs can provide secure warehousing of products or raw materials instead of a company purchasing their own storage facilities. This is an even larger cost savings for companies looking to store inventory closer to more than one location. Businesses also reap benefits of having experienced logistics partners with established contracts and relationships with shipping companies such as Fedex and UPS. The hassles of managing complex inventories and inspecting and managing returns can be offloaded onto experienced 3PLs. And having a partner that is driven to excel is invaluable. We here at GT Logistics Group work closely with our clients to understand their needs and the needs of their supply chain. Our staff becomes deeply ingrained in clients’ processes, acting as extensions of their teams. At their core, both retail and manufacturing industries (among others) must provide a great customer experience to thrive, whether with a product produced or shopping experience. Third Party Logistics partners aim to help businesses during pivotal customer touchpoints, providing superior customer support when it’s needed most, leading to greater customer satisfaction and repeat business.