7 ways 3PLs can reduce your logistics costs

Warehousing, trucking, transloading.  These are just a few examples of the services your supply chain likely requires – services that are likely better left to experts like third-party logistics (3PL) providers.  “Sure,” you may think, “but what about the costs?”  As we’ll see in this article, logistics costs are not only less shocking than you may think, they are often outweighed by the tremendous value to your supply chain.

Seven 3PL services to reduce your logistics costs

While there are costs involved as a 3PL handles key components of your supply chain, there are also significant cost savings.  The following are 7 examples.

bigstock-Cost-Reduction-Decrease-Icon--253330285 1. Let costs parallel revenue with shared warehousing. With the shared warehousing (or “public warehousing”) model, you simply pay for the space and services you use. If volumes – and your operation’s space and service needs – are modest, then your costs will be, as well.  When your sales start booming or peak season arrives and you need more space and services, your costs will scale accordingly –  but they’ll always be in proportion to your needs.

Let’s compare this to the do-it-yourself models.  If you anticipate high sales volumes and build and staff your own large facility, but the sales aren’t there yet, then you’re stuck paying for unused space and resources.  Conversely, if you build and staff too small, you run the risk of having inadequate space and resources as your volumes take off.  Shared warehousing helps you avoid these potential cost drains by keeping your spend in line with your sales.

2. Avoid substantial WMS costs. The modern warehouse requires a warehouse management system (WMS) to manage inventory, shipments, pick and pack operations and host of other functions. While these technological wonders are indispensable, they’re not cheap.  In fact, depending on the size of your operation, the cost of a fully-featured system can easily reach six-figure territory.  So, you could take on this expenditure yourself, or you could partner with a 3PL that already has a WMS and skip the purchase cost entirely.

3. Save time and money with rework. Let’s say you have an imported shipment of a product that needs to be reworked and/or repackaged. You can ship it back to its origin for these services – taking substantial hits to your wallet and product turn time in the process.  Or, you can save time and money by working with a 3PL that specializes in rework services and can perform the job quickly and cost-effectively.

4. Reduce OTR miles with intermodal transport. As the impact of the truck driver shortage continues to be felt across the logistics industry, many companies are looking to reduce logistics costs by decreasing their reliance on trucking. With intermodal transport, companies can transport products via rail for the majority of their journey and have the freight transferred to/from truck – or directly to/from the warehouse – at the beginning or end.  This reduces costs as rail is much more cost-effective than trucking. It also helps ensure transportation capacity since rail has been relatively immune from the challenges brought on by the driver shortage.

5. Improve cash flow via vendor-managed inventory (VMI). With the VMI model, manufacturing suppliers work with 3PLs to store goods that the manufacturer will eventually require.  Once the materials are needed, the 3PL performs just in time (JIT) delivery to the manufacturer.  This is of substantial benefit to the manufacturer who only pays for – and takes physical ownership of – materials when they are needed.  Its production space, therefore, isn’t cluttered by boxes of inventory and it doesn’t have to pay upfront for high volumes of materials that won’t be needed right away.  3PLs will, of course, charge a fee for buying and holding this material, but these costs are often outweighed by the advantages of maximizing production space and throughput at the factory.

6. Skip warehousing costs with cross docking. Many 3PLs offer cross docking services in which goods are delivered to a 3PL loading dock for temporary storage or direct transfer to another truck. The time and costs of long-term warehousing are skipped while distribution can continue with minimal interruption.

7. Avoid the costs of doing it wrong. No matter what your industry is, your marketplace is more competitive than ever. And, whether it’s eCommerce fulfillment or retail compliance, your logistics operation is going to be a big part of your success.  In other words, the stakes are simply too high to approach your logistics operations with anything less than a high level of expertise.  The best 3PLs provide this and keep every component of your supply chain running optimally, efficiently, and error-free.

Turn to Kanban to reduce logistics costs

Located in Eastern North Carolina, Kanban Logistics provides big-time capabilities from a cost-effective region.  Doing business in North Carolina gives us cost and infrastructure advantages that allow our customers to realize significant cost savings, while also providing us with a prime location along I-95 that can reach 70% of the U.S. population within one business day.  To learn more about our capabilities, contact Kanban today.