Businesses are increasingly seeking to treat Logistics Companies in India strategically to gain a competitive advantage. Greater flexibility, operational efficiency, reduced cost, improved customer service levels, and a better focus on their core businesses are part of the advantages that may accrue from logistics but businesses often lack the competence to run efficient logistics services.
When Should You Consider a 3PL?
The decision about whether a business should hire a 3PL company is one that can involve numerous variables.
- Does it make financial sense?
- Do you have the resources internally?
- Will it streamline efficiency?
If a company is growing aggressively, rising costs such as labor, manufacturing, facilities, and staff expenses – can get out of hand in a hurry.
3PLs also can take advantage of the latest and most modern technology. By hiring a 3PL, a company can gain those technological benefits without making the financial investment themselves.
Those 3PLs with in-house IT teams that develop and provide their own B2B integration, WMS, TMS, and inventory management software can be a big selling point for a third-party logistics provider.
Many companies choose to work with a 3PL after experiencing perpetual inventory inaccuracies, inefficiencies, and other critical mistakes. Inconsistent inventory capacity and unpredictable costs can cripple a business and its reputation, but a 3PL with reliable inventory solutions can prove beneficial by streamlining the flow of goods for optimized resource consumption and delivery.
4 Forms of 3PL Logistics For Outsourcing
- Functional Capability: Do the Logistics Service Providers (LSPs) have enough bandwidth to comprehend and execute user expectations into a workable process? Can they map out the delivery process with respect to an intangible outcome? Do they understand the specifics of an industry that they are pitching in? Do they have enough management bandwidth and manpower to execute such activities? How much are they geared up to cope up with change and complexity? Are they mere ‘handlers’ or value creators?
- Solutions Capability: Do the LSPs understand the geographical, regulatory, competitive, cultural, and social environments? Do they understand the emerging trends in the industries? Are they capable of analysing the challenges that firms face with respect to the above parameters and any other emergent parameters? Are they capable of thinking of solutions combining all the above? Can they think of logistics solutions that align with the broader business strategy of the firms?
- Infrastructure & Resourcefulness: How resourceful are the LSPs. Do they have or can they arrange required resources important to deliver the service? Do they have enough financial, knowledge, and IT resources?
- Current Performance / Experience: Do the LSPs have enough showcases in the region? Or do they have the commitment of resources for knowledge transfer across regions?
The following parameters are to be considered while choosing an effective 3PL partner:
- Provider Type, Specialty and Size
The majority of 3PL providers specialize in one of three domains.
- Commodity: Sourcing, shipping, storing, transporting, customs managing and order fulfilling for specific product types, such as coffee beans, consumer electronics, etc.
- Industry: Providing specific or multi-function supply chain management and oversight for a particular category of business, like apparel e-commerce, pharmaceuticals, etc.
- Logistics services: Specializing in a distinct piece of the supply chain, such as international ocean freighting, domestic trucking, domestic warehousing, etc.
3PLs outline responsibilities via service-level agreements, or SLAs. Service agreements can also designate critical information and workflow communications, such as proper points of contact for invoicing, proof of delivery, quality control inspections and more.
- Warehousing and Storage Network
It’s essential to understand warehousing 3PL’s asset ecosystem. Does the provider have a proprietary storage facility, or rent from others? Similarly, your products may require multiple storage stops throughout domestic or international distribution. Does your 3PL provider own and manage every warehouse along the transportation route? Consider factors such as :
- Facility sizes, capacities and scalability, plus any upcoming expansions
- Proximity to relevant ports, railways, airports and highways
- Bay door traffic flows, specifically the number of containers and trailers they currently ship and receive a day
- Service alterations during heavy shipping periods or seasons
- Technological Affordances and Capabilities
A 3PL’s IT infrastructure is a significant piece of their competitive differentiation pie. Does a 3PL partner own and operate the contemporary technology necessary to uphold their end of the SLA? Consider factors such as
- Yard and warehouse management systems
- Transportation management and fleet tracking systems
- Voice-controlled, RFID or EDI wares tracking
- Inventory analytics and controls
- Order fulfillment systems
- Freight theft of damage management
- Overall access, integration and customization capabilities between your software and theirs, plus associated fees
- Performance Tracking
Performance-tracking capabilities are another of the essential factors to consider when choosing a 3PL partner. They give you the assurance your 3PL strategy is successful — and your chosen 3PL provider is supporting their end of the bargain.
Focus on measuring the effectiveness, accuracy and cost savings of the outsourced logistics outlined in your SLA. Positive improvements across these activities signal, with objective figures, you made the right choice. For example, consider monitoring and analyzing any of the following:
- Proof-of-delivery tracking
- On-time, in-full delivery rates
- Voice-of-customer feedback studies
- Inventory records accuracy rates
- Order picking/fulfillment accuracy
- Shipment or product return rates
- Service Amenities
Service add-ons are in both parties’ best interests. For the 3PL, value-added amenities — such as IT asset integration — provide competitive differentiation.
Common service add-ons and amenities you can engage in include:
- Returned material authorization agreements
- Quality assurance upon receipt documentation and file sharing
- Rush order or emergency order handling
- Overnight or rush shipping
- Product/order kitting
- Postponement packaging
- Reverse logistics programs
- And more
You don’t need reminders on how essential pricing is to your third-party logistics contract. While part of the goal is cost savings — outsourcing aspects of the supply chain so you can streamline and strengthen internal resources — be cautious of too-good-to-be-true contract terms. With functions like order fulfillment, packaging, kitting and more, paying for quality is especially critical, ensuring the reputation of your business and the longevity of your brand.
Bear in mind other pricing parameters and “hidden” costs to take note of before signing a 3PL contract:
- Transparent service quotes
- Sensible payment terms
- Charge-back responsibilities
- Correctly formatted, easy-to-understand invoices and other billing documents
- Overall, pricing structures and terms are clear, consistent and sensible for your industry
- Contact for billing and payment questions
International and even domestic supply chains require in-depth expertise into customs, trade requirements, permits, itemizations and more. In freight forwarding operations alone, a 3PL must be able to efficiently — and legally — administer the following:
- Certificate of origin statements
- Proper shipping licenses and insurance
- Declarations forms
- Import and export lists
- Bills of lading
- Customs clearance papers
- Full commercial invoice documentation
- Industry-compliant packaging, routing and shipping adherence according to your industry’s regulations
- Non-Disclosure Agreements
Non-disclosure agreements (NDAs) in the 3PL partnership assure the protection of both parties’ intellectual property. More specifically, these documents outline everyone’s respective responsibilities and capabilities, plus assures these responsibilities get carried out in private, to the benefit of all in the agreement.
Organizations typically draft NDAs for all prospective 3PL candidates, at the onset of any contract negotiations and often well before the formal SLA. Your organization’s attorney or legal counsel will be instrumental in creating NDAs with the appropriate language and boundaries for this stage of the vetting process, including beginning to understand a 3PL’s legal liabilities and insurance coverage needs in any future partnerships.
- Overall Brand Reputation
Last but not least, only consider 3PLs with a proven, positive name in the industry. The supply-chain management industry has undergone a radical revolution over the past decade. Many new companies emerged as a response to today’s still-growing e-commerce boom and globally connected marketplace. But are these companies ready and worthy of your business? Conversely, is experience always synonymous with expertise?
Look for the following parameters before signing up with a 3PL Provider:
- Financial history and stability
- Experience working with companies of your size or in your industry
- Experience shipping and handling to the same geographic regions or customer bases you sell to
- Owned versus rented asset ecosystem — especially warehouses and transportation fleets
- Customer reviews and references
- Proven ability to scale — both up or down depending on seasonal cycles, demand fluctuation, etc.
- Complete adherence to compliance norms and regulations
- Executive management experience and reputation
Outsourcing supply chain management or choosing the right partner amongst the supply chain companies in India is a tedious task, but it is worth it in the long run. It is necessary to collaborate with the top supply chain companies in India that offer a global fulfillment network, best-in-class technology, and supply chain expertise.
Through varied in-house expertise and strategic acquisitions of businesses with differentiated domain expertise, TVS SCS has evolved into a provider of value-added solutions with a robust technology ecosystem.
TVS Supply Chain Solutions is one the top supply chain companies in India providing integrated supply chain solutions. We focused on moving up the customer’s value chain with various technology-based solutions. TVS SCS has helped its customers seamlessly run operations by solving supply chain complexities using a technology platform. Solutions also involve customers outsourcing their complete supply chain on an end-to-end basis. TVS SCS developed partnerships with customers across diverse and high-growth industries, which offer various outsourcing opportunities.