What is 3PL? Overview, benefits, points to note, etc.

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What is 3PL?

“3PL” is an abbreviation for “Third Party Logistics,” and the logistics department in supply chain management, from “procurement” to “production” to “distribution” to “sales,” is managed by a third party . Refers to outsourcing work to a third party.

“First party” refers to the manufacturer, and “second chain” refers to wholesalers and retailers. The companies responsible for logistics operations are “third parties.” In other words, 3PL refers to a business that performs logistics operations on behalf of a shipper company.

Types of 3PL

There are two main types of 3PL services that outsource logistics operations. There are two types: “asset type” and “non-asset type.” I will explain the characteristics of each.

Asset type 3PL

“Asset-based 3PL” refers to services that use the company’s own drivers, trucks, bases, management systems, etc. The word “asset” comes from the English word “asset,” which means “asset” or “property.” In other words, logistics services that utilize a company’s own management resources are called asset-based 3PL.

Because we manage all assets such as transportation vehicles and distribution centers in-house, we are able to comprehensively manage logistics. We have a structured management system and know-how, such as well-trained drivers, an optimization system for transportation routes, and a loading plan that takes safety and efficiency into consideration, allowing us to build relationships of trust with shipper companies. Another major feature is that we manage all logistics assets, making it easy to communicate with shipper companies.

Non-asset type 3PL

“Non-asset type 3PL” refers to a service that does not have trucks, drivers, or distribution centers for sorting or distribution processing. The company’s unique feature is that it does not own logistics assets, but rather works between shipper companies and logistics companies and performs management operations.

For example, transportation and delivery is outsourced to Company A, which has a large-scale distribution network, and storage facilities are provided to Company B, which has strong security management.The logistics operations themselves are outsourced to companies with optimal resources. By outsourcing as necessary, a major advantage is that it allows us to respond flexibly to the business scale, strategy, and requests of shipper companies.

Advantages of introducing 3PL

With 3PL, you outsource some or all of your logistics operations. We will explain what benefits you can enjoy by outsourcing your logistics operations to a 3PL company.

You can concentrate on your core business

The biggest benefit of implementing a 3PL is that you can focus your valuable management resources on your core business. By outsourcing logistics operations, you can devote resources to more important tasks such as planning, development, and improving product quality.

Before a product reaches the end user, there is a series of steps: “procurement” → “production” → “logistics” → “sales”, and this process is called the “supply chain. ‘ ‘ In the supply chain, logistics is not a business that is directly linked to corporate value. The quality of products and services is important for successful branding. By outsourcing the logistics department, which is difficult to directly link to corporate value, to a specialist company, it will be possible to use management resources more efficiently.

Optimization of logistics costs

Developing a logistics sector requires extremely large costs. When we think of logistics costs, many people may generally think of transportation costs such as drivers and trucks. However, in reality, a variety of other costs are incurred, including utility costs for warehouses and facilities where products are stored, labor costs for inventory management and inspection, system costs for administrative processing, and human resources training. It is also necessary to consider the cost of labor risks such as damage during transportation, handling of claims resulting from damage, and traffic accidents.

By introducing a 3PL, you can centrally manage these various costs. Furthermore, fixed costs such as personnel costs, transportation costs, and facility management costs can be replaced with variable costs, leading to improved cash flow. Another major benefit is that it contributes to eliminating uncertain factors such as accidents.

Improving logistics quality

By outsourcing operations to a 3PL company, you can expect to improve the quality of your logistics. A 3PL company that undertakes logistics operations is, so to speak, an expert in logistics operations. We perform detailed delivery planning and progress management under a management system specialized in transportation and delivery. In addition, transportation and delivery are carried out using the most optimal and efficient route, leading to shorter delivery lead times.

What is important in logistics operations is to quickly and safely deliver packages to customers and consumers. By entrusting logistics operations to experts, we greatly contribute to improving service quality and customer satisfaction.

In recent years, the spread of e-commerce sites and companies’ desire to reduce inventory have led to an increase in frequent small-lot deliveries. Another important point is that we can handle small lots of a wide variety of products and frequent deliveries. Additionally, many 3PL services are available 24 hours a day, 365 days a year, allowing you to develop flexible business strategies to meet diversifying customer needs.

Points to note when introducing 3PL

By outsourcing your logistics operations, you can concentrate your management assets on your core business. By doing so, you will be able to enjoy various benefits such as improving operational efficiency, maximizing labor productivity, and reducing costs.

However, things are two sides of the same coin, and there are always disadvantages behind the advantages. When you outsource something, you basically lose command and control over that department, so you can’t manage the process. What is important here is building a cooperative system. Therefore, we will explain the importance of communication as a point to note when introducing 3PL.

Building a cooperative system with 3PL

In order to operate 3PL efficiently, it is essential to build a cooperative system with the service providers. As the outsourced work is carried out under the control of the outsourcer, it becomes difficult to manage the process and ensure quality. There are many cases where complaints from customers frequently occur due to a decline in service quality.

Additionally, there is a possibility that unexpected situations may occur immediately after implementing a 3PL. For example, there are various possible cases, such as not being able to reduce costs as much as expected or confidential information being leaked due to human error. Therefore, there is an urgent need to establish a cooperative system to ensure smooth communication with 3PL operators.

Developing professionals who can communicate with 3PL

In order to build a cooperative system with 3PL companies, we need human resources who can act as a bridge between shipper companies and service providers. In other words, we need to develop professionals who can communicate with 3PL operators. To do this, you will need not only good communication skills, but also sufficient knowledge and knowledge of logistics operations.

According to the “Factors for Success in 3PL Businesses” published by the Ministry of Land, Infrastructure, Transport and Tourism, many respondents cited “lack of human resources to connect shipper companies and service providers” as a problem after contracting out 3PL operations. In order to increase corporate value, it is essential to develop human resources with excellent communication skills.

summary

Developing logistics routes requires enormous resources. By outsourcing logistics operations to a 3PL company, you can focus your resources on more important operations such as product development and quality improvement. Deciding where to invest management resources is a very important issue in business strategy. When introducing a 3PL, be sure to compare the services of multiple companies and determine whether the company is trustworthy.