If you’re contemplating whether to use a third party logistics company for your business, then it’s probably a positive sign. Maybe you suddenly hit the big time, need more room to store your stock, or not have enough staff to manage orders. Either way, you’ve experienced a change in business and want a solution. Today we’re looking at whether investing in a 3PL is the answer for your business in 2025.
What is third party logistics?
You might have heard about third party logistics, but perhaps aren’t sure what a 3PL company does. Before getting into the pros and cons of whether your should be using 3PL in 2025, let’s cover off what a third party logistics company does.
In simple terms, third party logistics is when a business outsources part or all of their logistics to an outside company. A third party logistics company is a 3PL warehouse that stores stock on behalf of another company and manages the logistics. Services include receiving stock, unpacking, wrapping and strapping and storing, to processing online orders, picking and packing and delivering.
3PL businesses will vary in the services they offer, how much they charge and how much they tailor their services.
Some of the common tasks performed by a 3PL warehouse include:
- Stock receivals
- Storage and warehousing of stock
- Inventory management and orders
- Picking and packing of orders
- Shipping orders to customers
- Customer returns
Do I need third party logistics for my business?
Whether or not you go with a 3PL provider will depend on what problem you are trying to solve, and what solution best suits your preferences for running your business. There is no one size fits all approach, and in fact you may find a hybrid solution that suits you best. To make a decision, it helps to ask yourself a few questions.
1. How do I want to manage my business?
Whether you choose to use a 3PL, will depend on how you prefer to run your business. The most significant benefit using a 3PL provides, is freeing you from a host of everyday management tasks that can end up dominating your time. By outsourcing the storage and management of orders, you have more time to focus on other aspects of you business, like marketing, manufacturing and growth strategy. The question is, do you feel more comfortable in outsourcing, to get the significant benefits, or would you prefer to keep everything in-house.
2. Do I want to take on a new warehouse lease?
Leasing a bigger warehouse is an obvious solution to running out of warehouse space, but this usually means a more expensive lease, and the additional cost of investing in new pallet racking and equipment – not to mention the need for more staff to manage the increase.
Sometimes taking on a new lease may not be the most cost effective option – particularly if customer demand and therefore stock levels are prone to fluctuation or are seasonal, or business growth projections are not yet clear.
When faced with the extra equipment and staffing costs associated with leasing a warehouse, many business owners will start to look at the relative value of outsourcing all these tasks to a 3PL company. The question to answer is whether a 3PL provides better value. Particularly if stock amounts fluctuate, a solution that allows you to pay for only the amount of stock you store is more cost effective.
3. What is the outlook for commercial realestate?
A second consideration in making the decision of whether to take on a new lease is the cost of commercial leasing. Since Covid, the cost of warehouse leases has increased by 70% and current estimates for the end of 2024 and into 2025 indicate they will remain high. Combined with inflationary pressure and supply chain costs, this may be too much for some businesses.
This is where 3PL businesses offer a value for money alternative to getting a new warehouse lease. You only pay for the amount of space you need, and you don’t need to pay for staff or invest in equipment.
Some 3PL companies allow you to simply use their warehouse storage service, providing a flexible, hybrid service between regular warehouse storage and 3PL services. This can work particularly well if they also provide adhoc 3PL services, like container receival, unpacking and putting away.
4. Can I afford to hire more staff?
With an increase in business comes an increased need for staff. Increased staff brings its own challenges, including extra salaries, and time and effort spent in hiring, training and managing.
An important consideration is whether you want to to invest this time, money and effort, or is outsourcing staffing issues to a 3PL preferable? For some the prospect of using a 3PL will feel like freedom from a significant financial and time burden. For others, investing in long term staff and maintaining quality control over product handling may be more appealing.
5. Can I manage in-house?
Ultimately the decision to use a 3PL or invest in bigger premises will come down to the relative cost differences, and a preference to keep everything in house or take advantage of the benefits that come from outsourcing storage and logistics.
The decision will not only be a financial one. Some people are more comfortable maintaining control over as many aspects of their business as possible – even if it costs a little more. Others will welcome the opportunity that investing in a 3PL brings, affording them the time to work on their business and future growth strategy, rather than being bogged down in the everyday management of stock and staff.
A hybrid third party logistics solution.
When considering a 3PL, many people believe it’s an all or nothing choice, but if you’re not ready to use a 3PL company, a hybrid model may meet your needs. This allows you to outsource only the parts of your business that you most need assistance with – giving you flexibility and keeping you in control.
A hybrid 3PL company will provide a range of secure storage options and scalable third party logistics. This allows a business with an increase in stock, for example, to solve their immediate storage challenges, and enjoy extra benefits like container recieval and a put away service, without a big commitment. The financial investment stays small, avoiding a big lease. A business offering a hybrid solution will often allow clients to come on site and manage their own stock, providing even more flexibility and keeping you in control.
Should I use a 3PL?
The decision to invest in a 3PL will depend on the expected growth trajectory of your business, and weighing up the relative costs and benefits of leasing, versus 3PL, versus a hybrid model.
There are significant advantages to using a 3PL warehouse for your business, but in some situations, outsourcing extra warehouse storage (with the option of add on 3PL services) may be the best solution.
If you think you could benefit from 3PL support for your business, Go3PL provides a comprehensive range of third party services to help.
From container receival and unload, storage for overflow stock, picking and packing, and deliveries, we tailor a solution that is affordable and takes the pressure off your daily business operations, so you can concentrate on growth.
