Third party logistics: is it beneficial to you?
Setting up your dream e-commerce business holds many pitfalls and challenges, and one of the most overlooked is, not surprisingly, the delivery logistics of your company. Or, perhaps you’ve already started your company, however you’re only just catching up and adding a ‘click to checkout’ function on your website. Either way, when an order has been placed, and you pack and ship it, it is at this point where business owners realise they have not properly thought through this process.
In fact, a January 2015 YouGov survey found that 31% of e-shoppers said they had issues with delivery, and 45% said they had either not got what they wanted, or it arrived too late to go under the tree at Christmas. The reality is, logistics – the shipping of goods from place to place, in a predictable and secure way – is a genuine problem for all companies, not just from the brave new internet start-up, but also the most established of brands. So, with this information in mind, what are the benefits of outsourcing this common problem to someone else?
Why use a 3PL?
The majority of delivery problems occur in the the last part of the supply chain (the bit where you take the stuff in brown paper to the Post Office). The reason being is that logistics actually covers a lot more than just that. In today’s business world, it covers the whole delivery side of your extended supply chain: warehousing to transportation to packaging. Obviously, managing this in its entirety is quite a challenge, and mistakes are likely to be made along the way, resulting in customer dissatisfaction. Therefore, we come to the vital roles third party logistics companies (3PL) now play.
A 3PL is, upon finding the right one for your business, a typical example of working with an expert in a field you yourself are perhaps not so confident in. They will take on the whole raft of problems and needs your supply chain will inevitably have, and ensure that your product is successfully delivered to the customer – be that an enterprise, a public sector body, or a consumer.
Economies of scale
The first thing that springs to mind when it comes to a third party logistics company is the cost, and whether it is worth the outlay. Well, firstly, one of the reasons why it perhaps is worth the cost has to be seen from the customer’s point of view. Even the very smallest e-tailer acquires a sheen of high professionalism if it works with a slick 3PL player that is operating at peak efficiency – this can come down to the smallest detail. Of course, actually choosing the right the 3PL for you can be tricky. It’s important to research, first of all, and discover those who have a similar ethos to you regarding business. For example, should you be passionate about your products being delivered in sustainable packaging, you should choose a 3PL who believe the same – otherwise how you want your business to be known and seen may become compromised. A 3PL should be, in theory, an extension of your business, so take time in finding the right one.
From the point of view of small business owners, paying for an expert to do this will be an added cost, and this has to be taken into consideration. However, there are two sides to this coin, another benefit of a 3PL is you no longer needing to worry (in a sense) about the logistics of your delivery procedures. As a result, it means that you can spend even more time focusing on brand growth and customer acquisition. So, you have to weigh the two together. Effectively, are these benefits worth the added costs?
Additionally, are they beneficial to the bigger fishes of the business world? Would 3PL outsourcing not be worth the attention of, for example, the John Lewises or the Amazons of the world? It turns out they are: operating at scale with a 3PL leader recoups multiple benefits in terms of lean admin, economies of scale, cost through sound and progressive SLAs (service level agreements), and security in knowing an important job’s being properly done.
At the end of the day, outsourcing to a third party logistics company is a business option that should certainly be considered by anyone trying to make an impact in today’s e-commerce world, due to its simplification of an important business process (delivery), the way it can add to your brand, and the efficiency it can bring to your company.
Rick Stanford
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