Logistics services in the economic growth of India largely depend on the benefits of 3PL as businesses strive to keep the wheel moving through optimization in day-to-day operations and improvisation in customer service. So, why is everyone going ga-ga over India’s prospects in the logistics industry? The launch of the National Logistics Policy (NLP) in September 2022 was the much-needed impetus, which aims to enhance the Logistics Performance Index ranking, minimize logistics costs in India and foster data-driven decision support mechanism. The vision of NLP to bolster business competitiveness and economic growth has prompted C-suite leaders to emphasize negating operational costs and increasing the supply chain’s visibility through third-party logistics providers and in-house logistics networks.
Where do 3PL and in-house logistics stand in India’s vision of a seamless, integrated, sustainable and cost-effective logistics network?
But let us pause for a moment. Why are we talking about 3PL and in-house logistics?
It must come as no surprise that customers are making purchasing decisions based on which retailers can deliver their orders the fastest. In June 2022, Attabotics conducted a study, noting that around 80% envisage same-day delivery as a strategy to boost revenue and reduce supply chain costs. Myriad companies seek various delivery models to optimize their supply chain operations. While some opt for third-party logistics providers (3PL) for their delivery services, others seek in-house logistics.
As the battle of 3PL vs in-house logistics heats up, take a trip down to find if the former gives run for the money to in-house logistics management.
What is 3PL?
3PL is a process of outsourcing logistics services to a third party for inventory management, inventory storage, freight forwarding, picking, packing, packaging and warehousing, labeling and fulfillment. Imagine your logistics needs have become too complex to be handled internally—a 3PL partner may come to your rescue to cater to sector-specific logistics systems, including pharmaceuticals, IT equipment, raw materials, cosmetics, sports goods and apparel.
3PL Providers—the Unsung Heroes
Amidst the influx of thousands of 3PL providers, you may face vagaries of challenges and a barrage of questions. Think about your short-term needs and long-term plan to foray into new markets and the consumer experience you desire to provide. Take, for instance, a startup e-commerce company contemplating extending its product offerings to Chennai, Manipur, Kolkata, New Delhi and Mumbai. 3PL can be the silver lining.
A 3PL company can streamline supply chain operations, inventory tracking, and forwarding and free up your team to focus on customer engagement and product development. Doesn’t that sound like a utopian world? Well, 3PL is the “logistics excellence” button, as the following insights corroborate why 3PL services are too good to be ignored.
Cost and Time Savings
When it comes to economies of scale, better shipping negotiation and reduced warehousing and logistics expenses, 3PL providers can be the silver bullet for cost efficiency and time savings. It will leverage you to focus on core competencies, including customer engagement, marketing and innovation and negate the need to spend time and money on warehouse space.
Foray of Cutting-edge Technologies
Automation tools and digital platforms have leveraged 3PL companies to enhance accuracy, boost efficiency and streamline operations. Think of AI algorithms which enhance warehouse management, route planning, service delivery and minimize costs. It enables 3PL providers to forecast demand with increased accuracy. Moreover, warehouse automation can ramp up the speed and accuracy of the fulfillment orders. Add to it the adoption of a transportation management system (TMS) and real-time tracking platforms to streamline outsourcing logistics services.
Managing Regulatory Changes
Staying compliant with the vagaries of regulations can be a daunting task. Your organization needs to align with the regulatory environment in which your business operates. To illustrate, a pharmaceutical company is expected to adhere to warehousing regulations. Worry not! Third-party logistics providers are adept at handling regulatory changes and compliance issues.
Quick Delivery
As quick commerce—or same-day delivery—gets busier and bigger, 3PL companies have joined the bandwagon to bolster last-mile delivery. Quick commerce partners are collaborating with multiple delivery partners to keep abreast of the fast delivery trend. What’s more, it also reduces the delivery cost as warehouses are strategically placed across the market. You ask how it is done. Well, outsourcing service providers use predictive analytics for inventory management and anticipate what customers will be purchasing.
Core Business
Hiring a 3PL partner is a blessing in disguise to leverage a company to focus on main business activities, instead of jostling their minds on the logistics part of the business. You can focus on expanding your customer base, developing products and investing in development and innovation. Doesn’t that sound like worth a bet?
The buzz for 3PL is such that e-commerce businesses such as Amazon and Flipkart are hiring 3PL partners to stay cut above the rest and prioritize core competencies.
Making Business Expansion Easier
It is Diwali time; you are inundated with the massive volume of orders and scrambling to fulfill the orders. Enters 3PL providers. Collaborating with them is like navigating a reservoir of advanced technologies, connections, resources and specialized knowledge to track the inventory levels and monitor the supply chain. Besides, access to various warehouses and carriers will help cut costs and streamline operations.
Cons of Choosing a 3PL partner
Not all that glitters are gold. There are a few chinks in the armor as investing in 3PL can come with its own set of challenges. Some factors that stand against 3PL in its battle with in-house logistics management are delineated below:
Lower Control
Choosing a 3PL partner means you are giving part of the control of the delivery process. The control can include, say, selecting packaging materials, alluding to a company’s commitment to delivery timings and sustainability. That is not all. The sword of data breaches keeps hanging, which may leave your company in tatters as you may share proprietary information.
Limited Customization
You are at the mercy of the third-party logistics service provider, as customization may not be entertained as they often have standardized systems and processes. What if you have unique supply chain needs—say—sustainable and fast deliveries? This sort of customization would have helped you boost customer experience. Meanwhile, customizing 3PL services can be expensive, putting a toll on the budget.
Chances of Miscommunication
With 3PL, miscommunication cannot be neglected; it can lead to errors, delays, supply chain disruptions and poor customer service. Communication also includes a contract, alluding to target milestones, point of contact information, goals to be achieved and escalation processes. You would like to negate miscommunication to streamline your supply chain, wouldn’t you?
What is In-house Logistics?
In-house logistics suggests businesses directly manage every aspect of logistics, including storing, distribution, inventory management, transportation and delivery. It will enable real-time adjustments and ensure that logistics practices are in line with organizational goals. Cashing in on in-house logistics advantages warrants considerable upfront costs, including investments in technology, infrastructure and human resources.
Amidst increased initial investments, big organizations may be tempted to seek in-house logistics for increased control and long-term savings.
Navigating in-house logistics Management
If you are after control, in-house logistics management is the way to go. This will also enable increased customization and provide a competitive edge in industries where logistics is sought. Furthermore, logistics practices can be aligned with ethical standards and organizational goals more seamlessly as in-house logistics teams can easily be integrated with your company’s values and culture.
Advantages
Customization
Customization can be a value differentiator in a highly competitive Indian market. Moreover, direct control complements customization, as specialized inventory tracking can be used for high-value goods, while custom routing can be done for quick deliveries. The ‘unique packaging’ can lead to social media buzz and positive word-of-mouth.
Personalization
If a survey is conducted on personalization, most businesses will be on the same page that personalization enables them to boost their brand positions. A personalized approach can help build long-term relationships with customers, enhance output and provide value-added services to your customers. For instance, a tailored packaging product can take the unboxing experience to a completely new level.
Data Security
Data breaches can have a cascading effect, denting the entire logistics network and leading to huge financial losses. Data protection can thrive if logistics is managed in-house as proprietary knowledge and sensitive data remain within the organization. The prevalence of cyberattacks and the need for compliance with privacy regulations in India solidify the case of in-house logistics management.
Cons
Increased Cost
If you have a small to medium-sized business or a startup and are contemplating in-house logistics, think twice. 3PL may be cost-effective due to its lower upfront investments. Since in-house logistics costs are fixed, the period of low demand may expose the grey areas (inefficiencies) of your business. In-house logistics advantages become curtailed since you will have to maintain expenses of storage space, fleet of vehicles and specialized staff. That is not all; you will need to rent a warehouse and deploy complex digital infrastructure to streamline logistics operations.
Scalability Issues
The flexibility to scale operations up or down in line with demand is prevalent in outsourcing logistics services, unlike in-house logistics management. You may grapple with fluctuating market demands and supply chain disruptions. It can dent your company’s growth and innovation on the back of overdependence on internal resources.
Your Trusted Partner for Logistics Services--WareDepot
What truly sets WareDepot apart is its presence in all Tier-1 and Tier-2 cities and personalized services such as branding and creating marketing promos for the companies. The warehouses in Pan-India, including New Delhi, Mumbai, Pune, Bangalore, Hyderabad and Kolkata, house experienced and skilled professionals with customizable logistics. The company caters to industries (including but not limited to) FMCG, apparel, automotive, IT, electronics, manufacturing, cosmetics and e-commerce. Some leading customers, including Pigeon (a house appliance brand), Vodafone (a telecommunication company), and Myglamm (a cosmetics company), stamp our hegemony in outsourcing logistics services.
Determine the Best Fit for Your Business
In the battle between 3PL vs in-house logistics, your decision should align with your business objective and strategic goals. Your decision should also be in line with your long-term vision and financial constraints. If you have a stable flow of goods, go for in-house logistics management; however, seasonal demand fluctuations allude to the need for third-party logistics providers.
Each logistics requires strategic management and you should assess the upsides and downsides to make more informed decisions that not only meet your present needs but also solidify your business for future growth.
If you are contemplating 3PL services in India, explore WareDepot's flawless range of tailored solutions designed to bolster your logistics today.
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