Third Party Logistics Provider
Also known as a 3PL
What is a 3PL
A 3PL is an abbreviation for a Third Party Logistics Provider. When a company is selling product they can decide to store/warehouse the product themselves, but most companies outsource that work to 3PL’s. A 3PL is just a warehouse operated by a company not related to the ones using its services.
A 3PL can take care of warehousing and the transportation of goods.
Why use a 3PL?
There are several reasons to use a 3PL for your business:
- Less Capital Expenses
Here is a situation many businesses face.
ex: Jim has a ecommerce business that sells widgets to customers who order items online.
Jim is getting hundreds of order per week and doesnt have enough time, employees or space to complete orders.
Jim has 2 options:
- Lease a warehouse and hire employees to keep up with demand
- Outsource the warehousing and shipping of the widget.
The costs associated with leasing or buying a warehouse then hiring employees could run up to tens of thousands per month, and the risk of failure will leave you in financial ruin.
Using a 3PL will allow Jim to outsource the warehousing and shipping of the product for a fee. Jim will be able to budget better and not be obligated to pay overhead costs associated with running your own warehouse.
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