Given the hyper-competitive nature of the manufacturing and distribution industry, it’s no surprise that small advantages can have big impacts. In fact, variables that determine how and when a product is shipped are nearly as significant as the product itself.
Take shipping, for example. If your business offers complimentary two-day shipping while a competitor offers a comparable product and price with a much broader shipping window, you could likely win more sales. That said, your company may still be falling behind in the rapidly evolving logistics game. If it is, a third-party logistics (3PL) firm could be a wise move for your business.
A 3PL is a logistics management outsource firm that may receive, hold and transport a consumer product while never actually holding title to that product. In layman’s terms, it’s essentially a shipping middleman. While not a shipping company like UPS, FedEx, or the United States Postal Service, a 3PL will contract out various shipping companies, storage warehouses and distribution networks to fulfill your shipping needs.
So, when do you know if your manufacturing business needs 3PL services? To answer that, ask yourself the following questions:
- Are you fulfilling more than 20 orders per day?
- Are you running short on storage for your inventory?
- Are you expecting a sudden growth in business
- Are you falling behind in your shipping already?
If you answered yes to any of these questions, then 3PL may be a relevant option for your business. Think about it: No supplier wants to garner sales without being able to fulfil them. 3PL firms help manufacturing businesses manage inventory, project for growth peaks and maximize storage use. If your business has a firm grasp on these challenges, then investing in a may not make sense.
If you’ve determined that 3PL is the way forward, your task becomes identifying and retaining a suitable 3PL firm. While you may not need the most comprehensive and expensive provider on the market, there are some questions you should ask prospective 3PL providers before jumping into a contract:
- How long has your company been in business? Do you have a sustainable model that ensures your business won’t be left without 3PL service for extended periods?
- How often will we get shipping updates from your company? How will these updates come through to us? Can you use our preferred method of communication for updates?
- How many warehouses do you operate within your logistics network?
- Do the locations of your warehouses align with our shipping needs?
- Describe your customer service record, and tell us how it compares to the industry.
- How are delays and shipping losses handled?
- How can you accommodate highs and lows in our shipping needs?
- Can you integrate your system into our ERP?
- How are costs broken down? Transportation fees? Packing fees? Setup fees? Minimum shipping thresholds?
Please not that using a 3PL can have both income tax and sales tax implications for your business. 3PL providers may not be for everyone, but the potential they hold for alleviating certain logistics duties could simplify your manufacturing process while freeing up management to focus on expansion and growth, rather than getting widgets from the factory to your customers.
For more information on 3PL or manufacturing questions contact your MarksNelson professional at 816-743-7700.
