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Strategic Reasons for Using a 3PL

May 11, 2008
Companies can use 3PLs to help improve their global capabilities, reduce costs and achieve environmental objectives.

Tom Jones, senior VP and general manager of U.S. Supply Chain Solutions with Ryder System Inc., a third-party logistics provider, offers the following advantages manufacturers can gain by using a 3PL:

Improve global capabilities. 3PLs have on-ground knowledge of local markets, regulations and government agencies, and understanding of capacity constraints.

Reduce costs. 3PLs can help reduce excess carrying costs, return goods cost and lost sales. They can also help manufacturers move more material with fewer assets while still meeting customer requirements. In some cases, manufacturers can realize savings when consolidating warehouses and/or using shared facilities operated by 3PLs.

Achieve environmental objectives. Some 3PLs have the expertise to optimize distribution networks and consolidate routes, train drivers to incorporate fuel-efficient behaviors, specify equipment to reduce emissions, and leverage technology to streamline inventory and enhance vehicle performance.

Enhance security. 3PLs have the expertise to help navigate manufacturers through new security regulations and can provide counsel on best practices to improve security policy and procedures. In many cases, 3PLs can manage the implementation of a supply chain security program, from facility and asset security, to security monitoring services and training.

Tom Jones, senior VP and general manager of U.S. Supply Chain Solutions with Ryder System Inc.Improve quality. Working with a 3PL, manufacturers can expect to improve performance in areas such as reduction in inventory levels, greater product availability rates, fewer customer complaints and improved order accuracy. Manufacturers also will be able to better assess the performance of supply chain partners when they have good data.

Speed process change. It can sometimes be easier to make process changes with an outside provider, since you can tap into someone else's existing infrastructure, technology and people. This is critical for manufacturers who need to grow at an accelerated pace.

Eliminate hand-offs. Oftentimes, the lines can be blurred between what 3PLs do versus their customers. Manufacturers can benefit from synergies by engaging 3PLs in adjacent processes that take place "before" or "after" what is considered a traditional supply chain activity. When you eliminate hand-offs, you can increase speed to market and reduce costs.

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