How A TMS Can Help Third-Party Logistics Companies
February 12, 2024
What Is a Third-Party Logistics Company?
3PL stands for third-party logistics. 3PL is a company hired by businesses for the responsibility of logistics. It consists of many aspects that deal with the possession and execution of activities. In short, the role of the 3PL service providers is to deal with the supply chain. Third-party logistics either provide you with a single service, like transportation or storage, or they provide you with a variety of services altogether. E-commerce companies highly demand good 3PL services as they are very economical and efficient because dealing with loads of in-house operations can be futile for e-commerce companies.
Role Of A Third-Party Logistics Company:
When a company hires a 3PL, then they are bestowed with the responsibility of handling the picking, packing, and shipping of the inventory. They are the most important link between the manufacturer and the customers. It is simple: if the dispatch of products was executed smoothly, then it would definitely be satisfying for the customers and would inevitably result in an increase in business. The 3PL services include warehousing, inventory management, freight forwarding, kitting and reverse logistics, and many more.
Benefits Of 3PL In Supply Chain Management:
1. Faster order fulfillment: A company just has to choose a 3PL company with a warehouse for a smooth dispatch.
2. Greater flexibility in product sourcing: Orders that include products from different suppliers can be shipped in the same box, which can save shipping costs.
3. Lower cost of goods sold: The more you buy, the higher the customer's profit margin as the price decreases per item. People purchase at wholesale prices.
4. More control over your logistics operations: It is easy to choose a 3PL company that complies with your demands.
Disadvantages Of 3PL In Supply Chain Management:
1. Difficulty Tracking Multi-Carrier Orders:
Brands have to be alert to all orders and all incoming orders at once, which can be difficult to manage.
2. Independent Communications:
Companies have to contact each consumer if they deal with a problem, which can be time-consuming and may result in a misunderstanding.
3. Separate Allocation of Orders:
Tracking orders can be tough; brands have to rely on consumers and companies to notify them of problems.
4. Different SLA Terms:
Each brand has different requirements, so it should be communicated before an agreement is signed.
What Is Third-Party Supplier Drop Shipping?
It is an e-commerce business model where SKUs are listed for online sale. However, purchase inventory is only made after a customer makes a purchase. Since it requires little to no capital investment, it can be a good way to start a new venture. A contract is made between the drop shipping company and the seller; then, the seller puts the products up for online sale. Once bought, they pass the orders to the drop shipping companies and pay with the money earned, so drop shipping companies direct their products to the customers.
Benefits Of Drop Shipping:
1. Low overhead:
No need to rent a warehouse to store your inventory. It remains with the drop shipping supplier until a sale is made.
2. Low capital expenditure:
Anyone can start a business with a small investment with the help of drop shipping.
3. Low risk:
The owner only has to pay for the product bought by the customer and doesn’t need to hold up stocks.
3PL vs. 4PL:
When a third-party logistics company hires another company to manage its particular affairs, it becomes a fourth-party logistics company. Thus, when a 3PL subcontracts its freight weighing and shrink wrapping to other companies, then a 3PL functions as a 4PL. Moreover, 3PL looks over the particular services assigned to them by the businesses, while 4PL looks over the entire supply chain.
What is TMS?
TMS stands for transportation management system. This is a type of technology that allows 3PL to smoothly run its operations in supply chain management. This program is complex to understand yet powerful enough to make a change. It offers a variety of services to choose from and make the operations swift:
Shipments and documentation tracking
Planning and procurement
Carrier selection and communication, etc.
It can be combined with enterprise resource planning (ERP) or warehouse management systems (WMS). However, TMS cannot replace these systems.
Benefits Of Using TMS:
Reasons why many distributors, retailers, and manufacturers prefer to use TMS because;
It tracks shipments, which will allow businesses to keep an eye out.
More proficiently plans shipment’s route.
Provides cost-efficient rates by finding haulers that load goods at a reasonable price,
You can find data regarding supply chain optimization by gaining access. This will increase business.
Disadvantages Of Using TMS:
These are the major challenges faced:
Sometimes, inefficient route management can delay delivery shipments.
A traditional transport system will lead to the inability to track consignments, as many calls have to be made to get an update.
Not using full vehicle capacity at once leads to increased transportation costs.
There is a probability that delivery is not made on time, which will impact the customer’s experience, and this might affect the business.
TMS Software Pricing:
TMS pricing falls under the category of transactional or subscription. It is one of the most highly demanded software. It allows its users to only pay when it is being used. Its subscription fee is the same for heavy and light users, which leads to heavy traffic. This results in high payments even during idle periods. The cost of transportation management systems can vary, as shown:
Transactional Cloud-Based TMS Price:
The final price is calculated at the end of the period by counting the number and size of each transaction made. The cost is typically between $1 to $4 per freight load provided by the TMS cloud software.
Licensed Subscription TMS Price:
The cost for this subscription can lie between $10,000 and $250,000 for the license and access. This price would also include annual maintenance associated with the setup.
Small companies that have recently started transactional cloud-based TMS pricing would be better for them as their number of orders would be limited. However, those companies that have to deal with large freight volumes are better suited for licensed subscription TMS setup.
Best TMS Software to Consider:
FlexTMS is a comprehensive transportation management software designed to streamline everyday tasks for trucking companies. From dispatch and accounting to compliance and maintenance, FlexTMS offers a unified platform to manage all aspects of transportation operations efficiently.
2. Digital Permit Book & Compliance Platform:
Digital Permit Book is an all-in-one compliance platform that simplifies permit management for transportation companies. With Digital Permit Book, compliance becomes effortless as the platform automates permit documentation and regulatory processes. The easy-to-use interface, coupled with features like Drop & Hook, Offline Mode, and Email Mode, makes Digital Permit Book the ultimate tool for ensuring compliance.
3. Samsara: AI Safety Programs:
Samsara offers AI-powered safety programs that leverage video technology to keep transportation teams safe. With real-time visibility across facilities, fleets, and end-customer services, Samsara provides actionable insights to enhance safety and efficiency. Its AI-driven workflows and reporting tools streamline operations and enable data-driven decision-making.
Top 3rd Party Logistics Companies:
It is one of the fastest-growing tech companies in America.
2. FedEx Supply Chain:
It was formerly known as GENCO and is the major 3PL provider in the USA and Canada.
3. Rakuten Logistics:
It provides its customers with a network of logistics experts, fair and transparent prices, and assures to boost sales. It is USA-based.
It is a strategic fulfillment partner. It is based in the USA.
5. UPS Supply Chain Solutions:
It manages every aspect of the global supply chain. It is one of the largest providers of logistics and transportation services in the world. Based in the USA.
Skills Required To Secure A Third-Party Logistics Job:
Skills that are required for securing the job are listed below:
These skills are necessary to think quickly, assess the situation within minutes, and provide instant solutions.
2. Technology Proficiency:
In 3PL companies, you cannot escape the use of technology. They even require individuals who are not only comfortable with using them but are always up to date with the latest digital trends in logistics.
3. Customer Service Focus:
These are necessary skills to possess as this field requires either direct or indirect dealing with customers.
4. Organization skills:
Being in command of what comes first is a great ability to possess by not getting distracted by various issues. Time management and prioritizing are a must-have for an employee.
When Should A Seller Hire A Third-Party Logistics Company?
Most e-commerce companies should be using 3PL. The signs that allow your company to be ready for its use are:
No. of orders has increased to more than 100 per month. Then, it is better to outsource logistics to allow easy shipment.
The volume of orders has increased to such an extent that storage facilities are running out of space.
Companies that provide two-day shipping tend to satisfy their customers more; however, this can take a toll on their profitability. Amazon's third-party logistics is the king in carrying out two-day shipments.
In conclusion, 3PL is a company hired by businesses for the responsibility of logistics. The role of the 3PL service providers is to deal with the supply chain. They are the most important link between the manufacturer and the customers. The 3PL services include warehousing, inventory management, freight forwarding, kitting and reverse logistics, and many more. Furthermore, third-party drop shipping is an e-commerce business model where SKUs are listed for online sales. When a third-party logistics company hires another company to manage its particular affairs, it becomes a fourth-party logistics company. Also, TMS is a type of technology that allows 3PL to run its operations in supply chain management smoothly. TMS pricing falls under the category of transactional or subscription. It is one of the most highly demanded software.
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