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The Pros and Cons of 3PL Consolidation

Third-party logistics providers (3PLs) play an important role in helping companies acquire merchandise, from manufacturers to their customers. Over the past few decades, larger companies have purchased many of these 3PLs. These consolidations could benefit your company, but they might also create drawbacks that prevent your business from reaching its goals.

Pro: You Could Potentially Lower Costs

Large 3PLs that consolidate can potentially lower their costs by limiting competition. While this could eventually lead to problems in the industry, you might pay lower costs by using them.

This isn't always the case, however, since costs vary according to numerous factors. Make sure you get price quotes from several 3PLs to ensure that you choose an affordable option.

Con: Consolidation Can Limit Flexibility

Although consolidation can increase a 3PL's geographic reach, it can also limit flexibility. This is a major concern for small businesses that serve niche markets, such as specializing in fashion apparel and footwear logistics.

Large 3PLs meet client needs by streamlining the types of supply chains that most companies want to use. If your business needs custom services, then you may find that smaller companies are more effective for you. Their small size not only makes them more flexible but also encourages them to work with each client individually.

Limited flexibility probably won't cause problems every day. The drawbacks become obvious, however, when you encounter a problem. A small company can make quick changes to avoid delays when inclement weather and supplier disruptions threaten. Consolidated 3PLs, however, are often too large to make the changes you need.

Pro: Consolidation Could Give You a Wider Reach

According to research conducted by Supply Chain Quarterly, large 3PLs often purchase smaller firms so that they can expand their geographic coverage. By acquiring a small 3PL with connections to specific geographic areas, larger companies can immediately reach those areas. Instead of building connections on their own, they can adopt existing relationships to benefit their clients. This provides a clear advantage to retail stores that want to expand into new markets and reach new customers.

Con: Customer Service Can Suffer

If you work with a large 3PL, your unique needs may seem like a disruption. Such companies have so many other clients that they might not want to put in the extra effort when you need them to. Small 3PLs, however, need every client to succeed. This encourages them to focus on providing client services that will keep you happy.

You will often see symptoms of this when you try to reach your services manager. A small company will give you direct access to a manager who works hard to meet your needs. A larger company, however, focuses most of its resources on its top clients. If it sees you as a small fish in a big pond, you probably won't get the level of attention that you need.

With so many 3PL options to consider, you should talk to a professional to make sure that you choose services that will help your business thrive. Start by filling out this form to request a consultation with The Apparel Logistics Group.

Posted: 4/21/2016 2:17:18 PM by Global Administrator | with 0 comments


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