by Before we get into logistics costs, I’d like to know what processes are involved in your supply chain operations. Is it warehousing? Transportation? Or, transloading?
If that is the case, these are some examples of operations that are commonly performed by supply chains in every company.
But did you know that such procedures should be left to the professionals? As an example, consider the Third Party Logistics (3PL) company.
What you must be thinking about is how much it will cost to pay them. Is that correct?
What is the price? Is it actually profitable?
These are the thoughts that will cross your mind.
That’s right, you’ll have to pay a fee to use the 3PL service.
However, you should be aware that, while logistics costs are frequently underestimated, the figures can be higher than what you believe the overall cost of your supply chain to be.
Using 3PL services is one method of reducing logistics costs.
You can outsource your entire logistics operation to a third-party logistics provider or just a portion of it.
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7 3PL services that can help you save money on logistics
As I previously stated, there will be a fee that you must pay to 3PL. But don’t worry, because these expenses will be offset by significant logistics cost savings.
And here are seven cost savings you can achieve by utilizing 3PL services.
Your warehousing costs will be proportionate to your requirements
You will only pay for the area and services you use with the shared warehousing concept, also known as “public warehousing.”
You are not required to pay for the entire warehouse area and services provided by 3PL companies.
This means that as the volume and area of use, as well as the services you use, decrease, so will the costs you must incur.
What’s more, if your sales begin to increase or the peak season approaches and you require additional areas and services, you can obtain them.
3PL will provide you with what you require without overcharging you.
Of course, the costs you must incur will rise as the area and services you use expand. However, it is inextricably linked to increasing your sales volume. This means that your expenses and income will continue to be proportional.
Now compare the results if you do everything yourself.
As you prepare to deal with increased sales volume, you begin constructing additional warehouses and hiring a number of workers to manage them.
However, as long as no additional sales occur, you will be required to pay for the warehouse and the installed resources.
On the other hand, if you build a warehouse that is too small with too few employees, you risk running out of space and resources as sales volume increases.
Shared warehousing can assist you in avoiding unnecessary costs and keeping your costs in line with your sales volume.
You might also like:
- How to Calculate Warehouse Area, Capacity, and Utilization
- 7 Effective Ways to Achieve 100% On Time Delivery
Reduced investment costs for WMS
Warehouses that want to be properly managed must have a Warehouse Management System (WMS).
It is required for inventory management and to support warehouse operations such as shipping, picking, and packing goods, as well as other warehouse functions.
The issue is that the technology is not cheap. On the other hand, you require it.
Particularly if you purchase a full-featured WMS. The cost will almost certainly rise.
These are the costs that can be avoided by utilizing 3PL services.
You can collaborate with 3PLs that already have their own WMS to share the WMS’s investment and maintenance costs with other 3PL customers.
The price will almost certainly be lower, and you will no longer have to waste money on things you do not require.
Save time and money on rework
Assume you have an imported product that needs to be reworked or repackaged. What would your reaction be?
You have the option of returning the product to the seller, which incurs additional costs and delays until the product is returned to you. Alternatively, you can work with a 3PL that specializes in rework services.
The second option will solve your problem faster and at a lower cost.
Intermodal transfers can help you cut your OTR miles
Reducing your reliance on truck transportation is one way to cut logistics costs.
You can ship goods by rail for the majority of their journey, for example, and then transfer them to/from trucks or directly to/from warehouses using intermodal transport.
As a result, your logistics costs will be reduced because train transportation is much more cost-effective than trucking.
Furthermore, you can be more relaxed because trains have a comparative advantage in terms of transportation capacity. As a result, you can be confident that sufficient capacity will be available to meet your requirements.
Vendor-Managed Inventory (VMI) can help you increase your cash flow
Manufacturing suppliers use the VMI concept to collaborate with 3PL to store goods they will need later.
When the material is required, 3PL will deliver it to the manufacturer on time.
This concept is unquestionably advantageous to the manufacturer because you only pay for and take physical possession of the material when it is required.
Another benefit is that you won’t have to worry about your production space being clogged with unnecessary inventory.
Of course, the 3PL will charge a fee to buy and store the material. Those costs, however, will be offset by the benefits of maximizing storage and production space in your factory.
You might also like:
- 21 Important Warehouse KPIs for Measuring Performance and Efficiency
- 6 Ways to Manage Your Logistics Operations Efficiently
Skip warehousing costs with cross-docking
Cross-docking services are provided by many 3PLs.
Goods will be sent to the 3PL loading dock only for temporary storage or even transported directly to another truck with this service.
This means that there is no time or cost for longer storage in the warehouse, allowing for faster distribution.
Avoid costs for making mistakes
The competition map is currently very competitive. It was never even close to being as competitive as it is now.
And one of the factors that can help you win the competition is your logistics operations.
This means that you must ensure that your logistics operations are managed by people who are true experts. If not, it means you’re taking a huge risk.
The best 3PLs will give you that assurance while keeping every aspect of your supply chain running smoothly, efficiently, and without incident.
Conclusion
There are numerous benefits to using a reputable 3PL service. Saving money on logistics is one of them. Of course, this will increase your company’s profit.
You can handle your logistics process without the assistance of a third-party logistics provider if you believe you are capable of doing so.
However, if you choose to outsource part or even all of your logistics operations to a reputable 3PL, you will forego at least seven benefits.
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