Anyone who is considering outsourcing their logistics has most probably thought about 3PLS. In short, these are companies which don’t just take charge of the transportation of cargo, but everything else from warehouse management and generally managing the stock of a company. As you may have gathered, they can prove to be invaluable for certain businesses.
Unfortunately, it’s rarely a case of simply finding the nearest or most convenient 3PL company. Instead, there is a whole host of factors to consider and one of the biggest revolves around whether they are asset or non-asset based. While in principle it may not sound like a big difference, it can actually have a huge bearing on how your business is run. Here, we’ll take a look at the two and showcase the pros and cons for each.
Asset Based 3PLs Asset 3PLs are exactly as they sound; the company owns all of the assets and this means that most people think it is a clear advantage. This is true to an extent, as having immediate access to vehicles and warehouses will prove to be a clear benefit in a lot of instances.
There are obviously other benefits in relation to this approach, as well. The fact that your business will only be managed by one company should prompt fewer hiccups in the future, while you’d also have to speculate that the costs would usually be lower by opting for this approach as everything is being performed in-house.
However, they are by no means a perfect solution and there are several reasons why not every business will opt for this approach. Even though the 3PL owns all of their assets, this can actually work to a company’s disadvantage from time to time. It means that the 3PL provider is probably going to be less flexible as they will only rely on their own assets, rather than outsource and use others. This can be detrimental from both a pricing and efficiency point of view, so it’s something to be wary of.
Non-Asset Based 3PLsAs you may have gathered, the non-asset based 3PL provider is the complete opposite and does not own any assets necessary to manage their business. Again, a lot of business owners will raise their eyebrows at this, but it simply means that the 3PL firm is something of an expert in negotiating deals with all of the relevant companies; whether it is warehouse owners or haulage firms. Whether or not the business will get a better deal will vary from scenario to scenario, but one thing that it does guarantee is that they are going to offer a much more flexible service. They don’t have to maximize the use of their own assets and can instead outsource tailored services to their client’s requirements.
The obvious downside to this approach is that you will never know exactly what type of service your business is going to benefit from. One month, the 3PL provider may use a budget haulage firm, while the next they may take advantage of one that uses the latest security devices by. Suffice to say, the latter is much more beneficial for your business but as there is so much negotiation involved in the 3PL cases, you’ll never know just what your company is going to benefit from.
Additionally, you’ll have to vet a non-asset provider much more than the alternative. You need to ensure that they are capable of negotiating, and also ask to see any examples of past clients. However, if you can find a gem, your business could be all the better for it.
While this piece may have given the impression that it’s an ‘either/or’ approach with 3PL companies, this no longer has to be the case. There are firms that claim to offer a combination of the two and this can prove to be very effective. However, research is again key and you should be looking for past examples prior to pledging your business with them.