Should I use a Third-Party Warehouse Management Company [3PL Insights]
Lily Tomlin says, “The road to success is always under construction.” Growing a business doesn’t happen by accident; it takes consistent hard work to build, manage & run a brand.
There always comes a time in every business when they need to make critical growth decisions that will shape the company’s future for years to come. One of those significant decisions in a company’s life is whether or not to go with a 3pl.
What is a third-party warehouse management company?
When you choose to work with a third-party warehouse management company, or 3pl for short, you are giving up control of the storage and shipment of your product to another company.
In more technical terms, you outsource your business’s logistical side to a third party.
There is no shame in choosing this option; thousands of companies choose it yearly. It can save you the headache of learning and managing the process yourself. It’s a quick solution to your growth needs, and if a 3pl is chosen carefully, it can help your company to grow well into the future.
Conveniently located at the heart of the supply chain, they offer essential services to product-based businesses. Specifically, they handle your products’ receiving, storage, and shipping.
They typically have closely guarded proprietary logistical techniques they don’t want to get out to the public. These logistical techniques are their competitive advantage. In this article, we will highlight this competitive advantage to level the playing field.
The 3 Main Benefits and Downsides to 3pl’s
At Hoj Innovations, we strive to be as honest and transparent as possible. As a result, companies choose to continue to do business with us because of the good experiences and competitive prices they receive regularly.
We serve both enterprises with their own warehouse operation and 3pls. So we know how to run a warehouse inside and out. Over the years, we have determined a few benefits and downsides to choosing to grow with a 3pl.
Benefits
- Leverage industry logistical expertise
There is no doubt that 3pls know how to do their job & they typically do it well. They already have the racking, storage methods, logistical software, and picking systems that promote rapid shipping times.
Many of the 3pls we will mention in this article have been in the game for decades. Not to mention they have experience and connections with companies and individuals for international imports or exports and they are experts at staying in compliance with international economies.
- Instant Cost Savings
Due to the extensive network and company size, their word typically goes further than a single company’s word would. In addition, because of these relationships and years of experience, they can negotiate better deals with different areas of the logistical sector, such as transportation and, in some cases, suppliers.
It also saves you the downtime and initial cost of starting your operation from scratch.
- Freedom to focus on your company’s core competencies
With one of the biggest hurdles that a company would typically have to face out of the way, any enterprise working with a 3pl can focus entirely on their core competencies. Thus helping enterprises like your personal company to grow faster without missing a stride.
Downsides
- You relinquish control over a critical part of your operation.
3pls sounds like a dream come true, and for many companies, they are. But the fact remains that you are giving up control of your brand to another company.
The warehousing aspect of a business is the heart of the supply chain and, consequently, the driving force behind the growth and success of any business. Therefore, you must ask yourself if you want to give up control of such an integral part of your business.
You don’t have that direct control over any of the staff or your inventory. You can’t track or ensure that the employees are working as efficiently as possible; you can’t ensure your products are being stored and handled correctly.
In addition, you will have a more challenging time detecting and dealing with any quality control issues that may arise.
- You have to deal with customer issues with shipping.
Of course, you are the face of your brand, and as such, you have to deal with any customer complaints. However, if any of these complaints have to do with anything on the logistical side of things, there is little you can do about it. It’s out of your control.
- Location issues
A 3pl may not be in the best location possible to help make your company the most profitable. For example, if your operations are not close to your target market, this can increase shipping and delivery times, costing you more in the long run.
Without open access to your inventory, you can’t identify any inconsistencies in the picking, packing, and shipping process, thus hindering your workflow.
How to find a good 3pl
You are looking to find a good 3pl. But like in every industry, there are the really great and the not-so-great ones out there. So how do you spot the great? Here are a few ideas to keep in mind as you look for your personal logistics partner.
Start by doing a quick google search. Type in your industry name and append 3pl to the end. You will get a list of possible partners with which to work. Then, quickly check out company reviews from employees and customers and easily learn more about each company.
As you check reviews, compile a list of companies you wish to explore more in-depth. Once you have a few companies that you feel would be great to work with, start searching for their services and if they specifically offer services that will meet your company’s needs. Are you trying to expand internationally? Some 3pls specialize in it. What are the specific needs of your company?
Next, check for the proper certifications. The main one to look out for is the “Federal Motor Carrier Safety Administration” (FMCSA). Law requires a 3pl to be certified appropriately before handling another company’s product.
Before making any decision, you should do two more things. First, confirm what their process is for the protection of your company’s assets. What would they do if one of their workers damages your goods? What if the freight company they hired loses the shipment? What does the filing of freight and insurance claims look like for this 3pl?
Throughout this process, remember you will have to call and talk to these 3pls and begin the interviewing process. Don’t forget to test them on how well they are willing to communicate with you outside of this process. Nothing is more frustrating than a company that won’t respond to your calls when you need them ASAP.
Conclusion
There are always upsides and downsides when it comes to any decision we make in business. Choosing to work with a 3pl is no different.
These types of businesses are an excellent way for entrepreneurs to further grow their products without investing too much capital upfront or devoting more resources to learning how to warehouse correctly.
Be sure to vet appropriately and do your due diligence on any third-party logistics company before you do business with them. You don’t want to commit to lengthy contracts with a subpar company that won’t handle your goods suitably.
If you want a company on your side with decades of experience that can help you in your process of understanding warehousing, give Hoj Innovations a call. Our experts are available to help you with any of your questions and are more than willing to help you understand every aspect of your warehouse, from the size of the warehouse you need to the software needed to automate it.
Warehousing doesn’t have to be complicated. HOJ Innovations strives to make it easy. Reach out to us today.
