Understanding the Value of Using 3PL for GNFR
Third-party logistics services (3PLs) are often used by big companies for nearly all of their logistics needs. However, 3PLs today have taken on a lot more responsibility for their customers than when they first came into existence. Due to their inherent flexibility to expand and contract, 3PLs have become a popular choice to manage GNFR storage and freight costs.
What Is a 3PL?
A 3PL is an outsourced provider of logistics services that supports a company’s shipping operations. They have become a very popular way for many companies to handle their GNFR goods and are primarily used in three areas:
- Shipping – If your company does not have an extensive fleet (i.e., you’re not a freight company), you need to get your goods from point A to point B. Both GFR and GNFR goods must be moved, and the 3PL company is one that can do that. This is the primary use of a 3PL. Also most companies that do have an extensive fleet prefer to use their fleets to transport their GFR goods.
- Bulk inventory – Transportation and warehousing are the obvious benefits of using 3PL for bulk inventory, especially when the inventory will also be shipped in bulk orders. Many 3PL providers offer transportation in the form of ocean freight, air cargo, and ground transportation. A lot of them also offer equipment for lease to their customers that will be transporting items themselves.
- Cross-dock shipments – Cross-dock shipments take place when a truck loads into the 3PL and cross-docks to other trucks in order to ship truckloads to the final destination. When this is necessary, it can be complicated and costly to organize, which is where 3PL comes in. A 3PL company can make this process significantly easier for its customers by handling these logistics for them.
What Are the Benefits of Using a 3PL for GNFR?
There are several benefits to using a 3PL aside from the obvious convenience of simply having an outside party handle all of your inventory and shipping needs. For example:
Renting inventory storage on an as needed basis to reduce costs
Utilizing a 3PL to store and ship inventory to their end destination makes economic sense. Unlike GFR, GNFR volume can range wildly making it unfeasible to store the goods in a Distribution Center. Outsourcing the space burden to a 3PL greatly reduces costs.
Consolidating orders to make everything FTL (full truckload)
Due to the high costs of shipping, FTL shipping is usually the goal of any large company. The alternative is shipping LTL (less than truckload), which is extremely expensive, especially for small packages. Using FTL as much as possible is the most cost-effective choice, even after factoring in the cost of the 3PL services.
Getting shorter lead times
Because there is no need to stop or cross-dock, a 3PL service can offer the shortest lead time in your shipping arrangements.
Ensuring more efficient shipping methods
Using a competent 3PL company can effectively manage shipping to maximize efficiency, decreasing number of loads, decreasing stops, and, most importantly, decreasing costs. With efficient shipping, your goods are not loaded and unloaded at different locations as often, so you save valuable time and money. This is also great for delicate goods, as they are not being loaded and unloaded multiple times.
Receiving daily project shipping
For projects, the 3PL with bulk inventory warehousing can pack and ship the truck with the goods needed each day by project. This allows for just-in-time-delivery of the goods and the benefits derived from a controlled delivery. In contrast to direct shipments, the loads only contain one supplier’s goods while 3PL can mix the goods as needed at the location.
Reducing negative impact of individual orders
Smaller individual orders increase freight costs and use unnecessary resources, whereby combining the smaller orders into truckloads reduces labor and freight costs. And since freight costs are a significant cost for the buyer, this can be a benefit that can drop directly to the bottom line.
Maximizing cost savings
Buying in bulk can have huge cost benefits. Most suppliers offer discounts of 10%, 20%, 30%, and sometimes even more for bulk orders. Usually the savings are progressively larger proportionate to the size of the orders. Retailers will also generally negotiate a price based upon expected annual order volume.
What to Look for in a 3PL
To find the company best suited for your needs, there are several areas you should investigate:
- Capacity – It’s important to find out the shipping/warehousing capacity the 3PL will be able to offer you and if it will fit your needs. Talk to them up-front about your inventory size and any special requirements you may have.
- Inventory management tools – Inventory management tools vary from company to company. Does the company in question offer tools that can be shared with you and be used to communicate effectively? Time saved with the proper tools is equivalent to money earned.
- A good track record – Do your research when selecting a 3PL company. In the world of internet, you can often find reviews and other information online. But even if you can’t, you can ask for the contact information of other businesses they have served. And be sure to follow up by actually contacting them to ask questions specific to your particular needs.
- Fair price – Obviously price is an issue when contracting any type of service, and with 3PL companies, you should have plenty to choose from that fit your needs.
How to Work with a 3PL
Your relationship with whatever 3PL company you choose to hire must become a partnership rather than an adversarial buyer-seller relationship. They will be handling critical inventory and shipping; therefore, it is more than a matter of buying a product and only contacting them for customer service issues. Make sure to keep the communication lines open and learn who the “go-to” people are within that organization.
A 3PL partnership is one of the most important investments your company will make. As such, it is not one to be taken lightly. Thorough research and investigation should go into the decision, and you should never be afraid to take your time and keep asking questions. When you do find the right 3PL to partner with, it should give you the opportunity to shave valuable time and expense off your labor and shipping, further increasing your bottom line.
Lumatrak provides a full range of real-time On-Time Delivery Control tools to help better manage supplier and delivery performance from order to the final mile of your indirect goods delivery. Provided in the cloud through its Software-as-a-Service (SaaS) offering and already connected to vast numbers of manufacturers and contractors, Lumatrak’s solution can be quickly implemented to complement and enhance any ERP, Strategic Sourcing and Procure-to-Pay systems.
To learn more about how a better GNFR-delivery management solution could save your company both time and money, contact the team at Lumatrak today.