The Value of Partnering with a 3PL Provider

December 5, 2023

In today's fast-paced and interconnected world, partnerships have become not only a strategic advantage but a necessity. This is particularly true in the logistics industry, where the uncertainty, volatility, and complexity of global trade require companies to leverage every resource at their disposal to maintain a competitive edge.

Partnering with a 3PL is not a new concept, and many of the world's most successful companies have long recognized their value as the freight market continues to evolve.

Uncertainty. Volatility. Complexity.

These three horsemen of the logistics apocalypse are creating havoc in supply chains worldwide. And you must manage them because doing so is crucial to transitioning to NextGen supply chains.

As a shipper feels like they're riding a bucking bronco, desperately trying to hang on as their supply chains get whipped around by forces beyond their control. Pandemic disruptions. Labor shortages. Geopolitical conflicts. It's enough to give any logistics/supply chain manager a migraine.

These are daunting and challenging times. But you don’t have to face these challenges alone. The right partner can help you tame that bronco and steer your supply chain toward success.

That's where a trusted 3PL comes in. During times of uncertainty, nothing provides more value than a partnership between a shipper and a 3PL. That collaboration acts as a shock absorber, helping you navigate obstacles and find solutions.

A good 3PL brings more to the table than just extra capacity or lower rates. They bring expertise. Resources. Agility. Things you need to manage supply chain volatility.

Complexity is another beast altogether. The world economy is astonishingly complex, relying on more than 300 million companies interconnected with about 13 billion supply chain links. With global networks, omnichannel models, and proliferating SKUs, supply chain complexity can quickly spiral out of control. However, an experienced 3PL has the systems and know-how to tame that complexity. To bring order from the chaos.

One of the most powerful tools in this regard is partnering with a 3PL provider. These partnerships offer a host of benefits, from reducing operational costs to enhancing supply chain performance and promoting sustainability.

This article delves into the value of such partnerships, exploring why and how companies should consider integrating 3PLs into their business models.

Who Uses 3PL Partnerships?

Examples of successful partnerships in the logistics industry

Amazon, for example, has built its global retail empire on the back of effective logistics management. The company relies on a network of 3PL partners for outsourcing its logistics services. These partners manage everything from warehousing to last-mile delivery, enabling Amazon to deliver its products quickly and efficiently to customers all over the world.

Similarly, Walmart, another retail giant, has a long-standing partnership with Schneider Logistics. This collaboration allows Walmart to manage its massive freight operations efficiently, ensuring that its stores are always stocked with the products customers need.

These examples illustrate how partnering with a 3PL can drive success in the retail industry. The benefits of these collaborations are multifaceted, contributing to improved operational efficiency, cost savings, and enhanced customer satisfaction.

Reasons to Form a Partnership

Visionary management thinker Peter Drucker saw the future coming. Over 30 years ago, he recognized that partnerships would be key for businesses to thrive in an increasingly complex world. Drucker foresaw today's economic globalization and political fragmentation. He believed collaborations were indispensable for organizations navigating uncertainty and volatility. (See Drucker’s book, The New Realities, 1990.)

Drucker pointed to the increase in economic globalization and the splintering of political organizations as the main reasons why businesses should form partnerships.

Think about that for a minute. That describes today’s situation.

As it turns out, forward-thinking companies took Drucker's advice to heart. Recent research from the Council of Supply Chain Management Professionals shows that shippers partnering with a 3PL provider and 4PL provider grew from 57% in 2019 to 64% in 2021.

The COVID-19 pandemic brought supply chain disruptions and surging demand. Shippers who teamed up with 3PL/4PL partners found expert guidance to weather the storm. The data reveals growing value in these alliances. Shippers' satisfaction with their 3PL/4PL relationships increased from 71% pre-pandemic to 76% today.

By banding together, partners can achieve more than going it alone. Drucker was right−collaboration is critical to overcoming whatever changes the future may bring.

There are many reasons why companies should form partnerships with third-party logistics (3PL) providers. Ultimately, the decision of whether to partner with a 3PL is a complex one that should be made on a case-by-case basis.

That said, the potential benefits of partnering are significant. Companies that are looking to improve their supply chain performance should carefully consider the financial performance-related benefits.

Financial Benefits:

  1. Cost Savings: Strategic partnerships often lead to significant cost savings. 3PLs can negotiate better rates with carriers, reducing shipping costs by leveraging their network and volume. In addition, by pooling resources and expertise, partners can reduce operational costs, procurement costs, and overhead expenses.
  2. Revenue Growth: Partnerships can open up new markets and customer segments, leading to increased sales and revenue growth.
  3. Risk Sharing: In a partnership, shippers and 3PLs/4PLs share financial risks. That helps to reduce the potential financial burden on a single entity. Also, 3PLs can help shippers mitigate risks through contingency planning, disaster recovery, and insurance services.
  4. Access to Funding: Partnerships can provide access to additional funding sources. For instance, a partner might have better relationships with investors or more capacity to invest in joint projects.
  5. Improved Financial Stability: By sharing resources and costs, strategic partnerships can lead to improved financial stability for all parties involved.

Performance-Oriented Benefits:

  1. Continuous Improvement: Partnerships often lead to increased innovation as different parties bring unique ideas and perspectives to the table. By partnering with a 3PL, shippers can benefit from ongoing enhancements and innovations in logistics management.
  2. Increased Efficiency: 3PLs specialize in logistics and supply chain management, bringing expertise that shippers may not have in-house. Efficient logistics can contribute to quicker delivery times, helping shippers get their products to market faster and gain a competitive edge. By leveraging the strengths of each partner, strategic partnerships can lead to increased operational efficiency.
  3. Improved Customer Service: Partnerships can enable companies to offer improved customer service. For instance, a partnership with a logistics company could lead to faster delivery times and improved customer service.
  4. Global Reach: Strategic partnerships can provide companies with easier access to new markets, either geographically or demographically. 3PLs can provide access to new markets without shippers having to build a complex logistics infrastructure.
  5. Knowledge Sharing: Partnerships facilitate knowledge sharing, which can lead to improved business practices and processes.
  6. Competitive Advantage: Partnering with a 3PL allows shippers to focus on their core competencies, such as product development, marketing, and sales. By combining resources and expertise, partnerships can provide companies with a competitive edge in the market.
  7. Increased Agility: With more resources and expertise at their disposal, companies in a partnership can respond more quickly to changes in the market.
  8. Sustainability: Partnerships can also contribute to sustainability efforts, as companies can work together to implement environmentally friendly practices.
  9. Skills and Technology Access: 3PLs have extensive knowledge about supply chain industry best practices, which they can leverage to benefit their partners. Partnerships can grant access to new skill sets and advanced technologies that might have been otherwise inaccessible or costly to acquire independently.
  10. Brand Enhancement: A strategic partnership with a well-respected company can significantly enhance a company's reputation and brand image.

In summary, strategic partnerships can offer significant financial and performance-oriented benefits, making them an attractive strategy for growth and improvement in today's competitive business environment.

The Future of Partnerships

The logistics industry is not static. It continues to evolve and is doing so at an increasing pace. That means the value of partnerships with 3PLs is set to increase even further.

Emerging technologies such as artificial intelligence (AI), the Internet of Things (IoT), and blockchain are revolutionizing supply chains. Specifically, they offer new ways to enhance supply chain visibility, reduce risks, and increase agility.

For example, huge amounts of data to optimize shipping routes, better predict customer demand, and automate warehouse operations. IoT sensors on trucks, containers, and inventory can provide real-time tracking and condition monitoring.

Blockchain has the potential to improve supply chain transparency, security, and efficiency through its decentralized ledger.

3PL providers are often at the forefront of these technological advances, investing heavily in new tools and systems to deliver better services to their clients. By partnering with a 3PL, companies can tap into these advancements without having to invest as much in developing them in-house.

In addition, 3PLs have the technical expertise to integrate new technologies into their clients' operations seamlessly. Their experience of implementing these solutions across multiple customers gives them an edge.

The logistics networks of the future will be highly technology-driven. IoT, AI, Blockchain, etc., are revolutionizing the execution of logistics operations. 3PLs, with their expertise and resources, are at the forefront of this technological revolution.

By partnering with 3PLs, companies can leverage these advanced technologies to enhance supply chain visibility, reduce risks, and increase agility. And they can do so without getting bogged down in the complexities of implementation and integration. The future of supply chain success lies in tech-powered 3PL partnerships.

Conclusion

The future of supply chain success lies in collaboration. Thanks to today’s environment of increased uncertainty, volatility, and complexity.

Partnerships offer a means to deal with this turbulence. Moreover, partnerships with 3PLs offer numerous benefits. They can help improve supply chain management, increase competitive advantage, expand market share, boost revenues and profits, and ensure 24x7 operations.

Companies that try to go it alone at times like these are taking a huge risk. However, shippers who leverage 3PL partnerships can turn uncertainty, volatility, and complexity to their advantage.

The cavalry is here in the form of 3PL partnerships. It's time to saddle up and take on the challenges ahead. Together.

Partnerships and NextGen Supply Chains

Now is the time to seek long-term partners in your logistics operations. Collaborating with partners is nothing new to American Global Logistics (AGL). We have deep experience in managing partnerships. It's not our first rodeo.

AGL is no stranger to uncertainty, volatility, and complexity. For many years, we have helped shippers sail through challenging times. Our experience, expertise, and cutting-edge technology empower clients to thrive in even the most volatile conditions.

Partner with AGL to leverage our expertise and resources in your logistics operations. We’re an experienced and future-minded 3PL. We’re already embracing NextGen supply chains.

Contact AGL today if you’re ready to customize an agile, resilient supply chain solution tailored to your unique needs. Let's chart a course in transitioning to a NextGen supply chain together.

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