Why should e-commerce businesses outsource their warehouse to a 3PL provider?
picture credit: Michal Koralewski
If the “why” should be explained by numbers then the global third-party logistics market size value is expected to reach USD 1.56 trillion by 2027 with an annual growth rate of 8,3%. The market size value for 2019 was estimated to be USD 830.99 billion. Grand View Research
The trend speaks for itself, nevertheless, it is now reinforced by the COVID-19 pandemic. As a direct result of the pandemic, several brick-and-mortar businesses have moved online. The markets have responded to the pandemic by increasing the demand for online purchases. This has led to rising sales for business-to-consumer and business-to-business in various product categories. WTO
Together, the trend and the pandemic substantiates the decision-making of business being online. To utilise the full potential of being online all business and especially e-commerce companies need a reinforced and supported supply chain. This is done by outsourcing the warehouse to a third-party-logistics provider that adds value to the supply chain management.
The approaches for outsourcing the warehouse:
- Considering outsourcing
- Finding a new warehouse
- Expanding to a new market
- Changing warehouse
This advantage of outsourcing the warehouse to a 3PL provider is more than just RSPPSR services (receiving, shelving, picking, packing, shipping, and returning) strengthened by rational reasons as per below.
Cost and time efficiency
Saving money on processes and activities plays a huge role in developing a successful business. Instead of investing heavily in an in-house warehouse then the service and more can be acquired by teaming up with 3PL providers. Since having a warehouse is more than the investment needed for space, transportation, technology and staff to perform the logistics tasks. Moreover, there are risks implied in operating the supply chain and these can turn into costly mistakes. Eliminating the risks is a prime task for 3PL providers to allow their clients to focus on their core business instead. The warehouse administration of audits, staff, training, and maintenance is also handed over to 3PL providers. This results in saving time and money so the business can be built for the future.
Quality and security assurance
Quality security is a core service for 3PL providers to secure satisfaction. This is determined by the agreed service level agreements. It is a minimum assurance of what is expected and including prices, terms and conditions. Furthermore then 3PL providers are obligated to manage:
- parcel and courier contracts including DOT safety rating and insurance
- security regulations e.g. ISO, C-TPAT, Customs, and FTC
The 3PL providers continually adjust to the latest laws and regulations and the newest standards to be a valuable partner of their clients’ supply chain. This is a service promise to assure that the products of their clients are handled in the best possible and most secure way. If the, unfortunately, should happen then the insurance procedures will take effect and recover losses to prevent worse scenarios.
The resource network is a key driver for 3PL providers to maximise efficiency that follows the trends and market development. Through numerous clients, partnerships and business links, they gain an advantage over e-commerce companies operating in-house warehouses. Insights are delivered with a higher speed and more data are available to analyse to support decision-making. 3PL providers are interested in continually providing high-class service to satisfy their clients. Such as using the resource network to gain volume discounts and faster expedition that otherwise would be inaccessible or costly for stand-alone businesses. Utilising this resource results in lower shipping costs and competitive advantages for both parties and the parcel and courier companies are secured a certain volume. This will reinforce the e-commerce supply chain management and eventually support the business’ overall mission and objectives.
Technology optimisation and industrial expertise
A change in technology will influence the process of analysing the ideal option for any operation. While outsourcing the supply chain to 3PL providers then they are in charge of constantly improving through technology optimisation. The technologies are evolving exponentially and it is getting more complex e.g. robotic and labour automation. They also become industrial experts that can advise e-commerce businesses about options and alternatives. This will efficiently increase the value and outcome of a streamlined supply chain. Then the proper adjustments will be in place automatically and this is powered by the 3PL providers’ encouragement to be leading within their field of services. This will influence positively on analysing synergy effects of the partnership to eliminate risks of not being up-to-date. Since the logistic toolkit is growing then top advisors and experts are needed as well.
Scalability and flexibility
E-commerce can benefit from using the advantages of using 3PL providers during different periods or when a favourable situation meets opportunities in the market. Utilising the services include scaling up space, labour and transportation. If the trends or demand changes then it is possible to adjust accordingly. The transition between the low and high season and demand is a highly rewarded benefit by partnering up with 3PL providers. This also makes it possible and easier to grow the e-commerce business into new areas and markets without facing the same stress. The environment constantly changes and evolves so having a partner will ease up the decision-making. Especially since the 3PL providers are interested in supporting the growth of their clients. This is an opportunity to scale up by far less work and costs.
More companies make the transaction into e-commerce to utilise the benefits of being online since there is a growing demand in the market. The suggested approach is to take advantage of partnering up with 3PL providers since they are industry experts. This can be the path for a business to grow from locally to globally with the use of logistic networks with lesser risks and higher return.
Then the next step is to find the 3PL provider for your business. We can offer the missing-link as your industry advisors. To support the decision-making and match your needs and wishes to the right 3PL provider. We endorse collaboration and other processes since we cheer for your success. You are welcome to join our growing network and share the advantages and symbiotic relationships.
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