Outsourcing to a 3PL


The Case for Outsourcing to a 3PL

    To be competitive on retail price, retailers must have efficient distribution operations. The warehousing and transportation expenses are charged as a direct pass-through. If distribution costs are high, the upcharge for warehousing and transportation will cause the store to be less competitive. 
   Considering a 3PL will charge a fee to cover their desired profit margin, why are more retailers choosing to outsource their reasonably efficient distribution services? 

A few reasons include:

-Specialization: The 3PL is more efficient at distribution than the retailer because this is their area of specialization
-Capital Investments: Retailers prefer to invest capital into more stores or do not want to invest in an area that is not their core competency
-Flexibility and Scalability: The 3PL has a network of facilities which provide additional savings to a retailer’s supply chain through flexibility and scalability
-Labor strategy: Nonunion retailers are forcing retailers to compete on low prices – low, low prices.
-Technology: The 3PL has invested in state-of-the-art transportation and warehouse management software which provides the retailer real-time visibility and process improvement.
It’s clear to see why an overwhelming majority of Fortune 500 companies are partnering with 3PLs. A successful partnership with a 3PL provides value-added services as well as expertise and costs-savings.

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