03 Jan 4 Ways 3PLs Benefit Small and Medium-Sized Businesses
It’s true: managing your own logistics operation can be more cost-efficient if done right. Knowing this, many small to medium-sized enterprises (SMEs) will attempt it to increase their cost-efficiency. Unfortunately, these SMEs will often run into problems that end up costing them more.
The problem is that SMEs generally don’t move the level of inventory required to make operating their own supply chain cost-efficient. On top of this, the mental resources required from business leadership to manage that supply chain can be significant. All the time business leaders spend on finding the best warehouse location, carrier management, dealing with late shipments, and retail compliance issues is time not spent on growing the business.
However, this is also why SMEs are uniquely positioned to take advantage of a third-party logistics provider (3PL). By working with the right 3PL, SMEs can benefit from shared warehouse and transportation resources and take advantage of a preexisting national distribution network to ship products cheaper and faster. Moreover, the SME will have access to logistics experts that can manage their supply chain for them, so business leaders can focus their efforts on growing the business.
The Primary Ways SMEs Can Benefit From Partnering With a 3PL
Before we move into the benefits of 3PLs, it’s important to understand what an SME is. For the purpose of this blog, an SME is generally defined as an organization with less than 250 employees and less than $1 billion in revenue. These businesses can move anywhere from 10-10,000 pallets of inventory at any point in time.
As you can probably guess, this covers a wide range of businesses. However, the clear distinction is that these organizations generally don’t have the resources and inventory to manage their supply chain and fill warehouses efficiently.
Because of this, SMEs can see many benefits when partnering with a 3PL:
- Limiting large expenses
- Increased flexibility
- Better supply chain data
- Access to logistics expertise
Limited Large Expenses
Perhaps one of the most obvious benefits of working with a 3PL is the ability to limit costs that come with managing your own logistics operation. Renting or purchasing warehouse space, paying logistics employees, and investing in a Warehouse Management Systemare all large expenditures that can restrict cash flow. Combine this with the fact that SMEs often don’t move the level of inventory needed to make these expenses worth it, and it’s easy to see why these costs can significantly hamper growth.
However, by partnering with a 3PL like Customized Distribution Services (CDS), SMEs can gain access to a network of fully staffed warehouses at a fraction of the time and cost it would take to do it on their own.
Outside of the upfront cost, one of the problems with managing your own supply chain is that it decreases flexibility.
For example, say an SME purchases its own warehouse in New Jersey because 80% of its product is sold in the northeast U.S. However, the other 20% is sold in California, and that share is starting to grow significantly. It would be ideal for the company to have warehouse space in California as well, but with so much cash already locked up in the New Jersey warehouse, they are unable to afford it, limiting their expansion.
If the same SME worked with a 3PL like CDS, they would not only have access to our New Jersey warehouse but could also expand to our California distribution center. And since 3PLs have other customers using the space as well, this SME could take advantage of transportation and storage cost savings that they would not have access to on their own.
Better Supply Chain Data
A strong 3PL will have a warehouse management system (WMS) that provides valuable data about your SME’s specific logistics operation. A WMS allows you to track inventory throughout the supply chain, letting you know where it is, whether it’s on time or late, and various other factors. Using this data, you can spot problem areas that need to be addressed and potential opportunities that can increase efficiency and cut costs.
At CDS, many of our clients receive regular reporting that shows the current state of their supply chain. The WMS technology we use is extremely flexible, so we can create custom reports that provide the exact information you want to see.
Gain Access to Logistics Expertise
A huge benefit of partnering with a 3PL is that you will be able to gain access to experts that focus solely on logistics. They can help you manage your inventory and provide you with insights into ways your organization can increase efficiency, cut costs, and grow.
Focus On Your Business & Grow Faster
In the end, all the steps mentioned above come back to this: partnering with a 3PL allows SME business leaders to focus on their business and grow without their supply chain holding them back.
At CDS, we are here to help SMEs do just that. With access to our network of warehouses and distribution centers, you will be able to increase your supply chain’s efficiency and expand across the U.S. On top of this, our logistics experts will use our best-in-class WMS to provide you with data-backed insights that can help you better understand your logistics operation so you can plan ahead and cut costs. Lastly, we’ve worked with all sizes of businesses, from small e-commerce companies to large enterprises like Pepsico and Henkel, so you can be sure you’re getting the very best logistics solutions.