With the rise of e-commerce businesses, the importance of freight forwarding companies is rising. And these businesses need more than just transportation companies to make international sales easier. They want logistic partners that process all the orders with care and diligence. They want a complete solution from picking inventory from the manufacturers to storing these goods appropriately near potential customers to processing orders and delivering them to the customers.
As you can see, almost all parts of the logistics process are outsourced to these companies making them a crucial success factor for modern digital retailers. So, if you want to start a 3PL company, you should excel in all components of logistics management and should have a presence in different regions of the world.
This post will detail how you can start up your 3PL company.
Note that 3PL operations need big investments. First, you need warehousing space to store goods for your customers. To cater to varying storage needs for various types of goods, you will need several warehousing solutions and technologies. Because you are also tasked with outbound logistics, you must have a system for scanning the products, tracking their navigation, and packaging them.
Plus, you will need to build partnerships with transportation agencies or decide to keep it in-house. Keeping this department in-house can be both rewarding and difficult. Note that even if you choose to outsource the fleet forwarding department, you will invest millions of dollars in your 3PL startup.
First off, it will be a major profit center and you can earn up to one-third of your company’s revenue from this department. But there are many hassles involved. For example, you may not find quality talent in some countries. The UK is one of those countries that observe a stark shortage of HGV drivers. So, be ready to keep the training section in-house as well so you can train them to be a relevant talent for your company, including providing them with comprehensive knowledge and skills related to HGV truck parts and their maintenance.
Note that the typical licensing route for an HGV driver in the UK is taking a theory test that is followed by driving skill training and then a practical test. Note that these tests require professional competence so the candidates are required to give enough time to practice HGV theory test and practical test.
Think of Partnerships
Once you have decided between the departments that you will keep in-house of those that you will outsource, you need to look for partnerships for all the areas that will be outsourced.
Unsurprisingly, 3PL customers are small to big businesses that want near-perfect logistic solutions for their operations. In short, the processes are unforgiving and you need to ensure quality in every step. To ensure quality, you must partner with those service providers that are a trustable and perfect fit for the gaps in your operations.
You will be working with multiple partners in each area of business from fleet forwarding to scanning and tracking the goods. Make sure to take time to scrutinize the operational model and reliability of each partner before signing the contract.
Don’t Forget the Legal and Technological Matters
Fleet forwarding involves lots of legalities including insurance, damage liabilities, contract laws, and more. Whether you are operating nationally or internationally, you need to understand the transportation laws in the relevant jurisdictions.
At the same time, you need to understand the technological changes that are impacting this industry. For once, these developments will change your business’ operational model. The logistics industry is already capital intensive as it invests more in procuring and maintaining plant and equipment than in talent management.
With time, this dependence will become more lopsided. AI invasion will erode many other jobs and you will have to respond to this advancement by adapting to new operations. These can include allowing real-time tracking of the products or inventory number, using driverless vehicles to cut down labor costs, and switching to cryptocurrency to make transactions streamlined.
Developing an agile and technically sophisticated management team is essential in today’s fast-paced business environment.
The 3PL industry is all about long-term contracts and trust. In the initial years, you will have to invest a lot in marketing your services. You can choose to target large businesses from the get-go or you can choose to build a diversified portfolio of clients regardless of their size and build your reputation from the ground up.
Once you have attracted enough clients to make a profit, you need to ensure to retain them. Understand that your success as a 3PL company depends a lot on the customizability of your contracts with your clients and your reliability.
Exercise total quality management (TQM) within your departments and those that you have outsourced and keep a close eye on KPIs.
In the end, the management should understand that 3PL services can make or break an e-commerce business. This service is essential and should be carried out with exceptional professionalism. Keep benchmarking your operations against industry leaders. Build partnerships and stay ahead of the competition by learning and implementing new profitable technologies on time.
You will need to believe in continuous improvement and development. It doesn’t mean you can let your current operations lag. Instead, insist on periodic analysis of your strength and weaknesses and refine operations. Stay present in your business in the initial phases and keep an agile mindset to combat hurdles to sustainability and growth.
3PL businesses are becoming more and more important every day. These businesses help e-commerce businesses with their major need of receiving goods from the manufacturer and storing them before packaging and delivering these goods to the customers.
This post talks about the strategy you need for building a 3PL company. Note that this business model needs millions of dollars in investment and if you want to build a business in the same industry but don’t want it to be this at a million-dollar scale, you can choose to start a 4PL business. Unlike a 3PL company, a 4PL agency only connects e-commerce retailers with 3PL service providers.