The Indian logistics service provider industry is growing rapidly and is expected to reach $357.3 billion by 2030. This is mainly because of eCommerce companies and the manufacturing sector’s expansion.
Many small business owners and startups try to first manage orders by themselves. They package the ordered product and ship it to the customer’s doorstep. However, as the business grows, the staff does not have enough time to package each product and ship it every time. They had two options then: tour the workforce or outsource logistics activities.
Logistics providers offer various services like warehousing, transportation, and shipping. Businesses can outsource these activities, focusing on core operations like product development and exploring new markets.
What Is a Logistics Service Provider?
Logistics service providers or 3PL providers specialize in handling, logistics, and supply chain operations. The goods can be raw materials for making a product or finished goods to be delivered to the customer’s doorstep.
A logistics service provider manages the entire supply chain efficiently and enhances a business’s customer satisfaction. There are various logistics providers available in the market. So, companies need to check their experience, expertise, access to technology, and target markets before outsourcing their storage, inventory management, warehousing and transportation activities.
How does a Logistics Service Provider work?
A logistics provider is a middleman between the business and the end customer.
The business transports its products to the logistics provider. The staff scrutinize all the products properly and then store them at their strategic warehouse locations. Whenever a customer orders from an e-commerce website, the order information is transferred to the 3PL logistics provider, including the number of products, the type of product, the order size, etc. The 3PL provider’s WMS system finds out the product availability in the nearest warehouse to the customer’s location. The logistics provider’s staff will pick up the ordered product and pack it properly to ensure it will not get damaged during the shipping logistics. The staff then hands it to the shipper, who transports the product to the customer’s doorstep.
What Services Does A Logistics Provider Offer?
A logistics service provider offers a range of services, including the following.
1. Warehousing
A third-party logistics service provider offers one of the essential solutions, i.e., warehousing service. It enables business products to be stored safely till they are shipped to the end customers. Now, most logistics providers’ warehouses leverage advanced technology like a warehouse management system, which optimizes warehouse space, assigns tasks to the staff, and manages inventory appropriately.
2. Order Fulfillment
A third-party logistics service provider receives orders from the ecommerce company. The warehouse team will pick up the ordered product, do packaging, and hand it to the shipper for order fulfillment. The shipper delivers the product to the customer’s doorstep.
3. Transportation
The logistics service provider transports goods by air, rail, or road. It chooses the transportation method based on distance, type of goods, road conditions, etc. Most logistics providers use advanced technology like transport management systems to select effective routes and ensure timely and cost-effective delivery to their destination.
4. Returns
Sometimes, customers don’t like the ordered product and place a return request. The ecommerce logistics service provider staff will pick up the product from the customer and bring it back to the warehouse. The staff inspects the product thoroughly and keeps it on the warehouse shelf again if it is in good condition.
Different Types Of Logistics Service Providers
1. 1PL
Here, the companies will manage all the logistics operations by themselves, such as warehousing, transportation, inventory management, and last-mile order fulfillment. They have complete control over the supply chain and logistics operations but have to make a high initial investment. Companies even have to face scalability problems when their business grows in the future.
2. 2PL Logistics
Here, companies manage warehousing and inventories but outsource transportation activity to an external provider. For example, a retailer contracts with the best transport company to transport goods from the seller to the distribution centers.
3. 3PL Logistics
Third-party logistics Providers are the most common, managing almost the entire business supply chain. The third-party logistics companies provide various services, including warehousing, inventory management, order fulfillment, transportation, and value-added services.
4. 4PL Logistics
4PL Logistics Providers and multiple third-party logistics providers manage the entire client supply chain. They use advanced technology like IT systems and data analytics to optimize the logistics network of the business through outsourcing multiple 3PL companies.
Benefits Of Choosing The Best Logistics Service Provider
There are various benefits to choosing the 3PL logistics service provider. Here is a list of them below.
1. Reduces cost
Buying land and building a warehouse for storing products requires a high initial investment. The business even needs to spend money on purchasing heavy equipment like forklifts to lift heavy goods, so it has to manage staff and pay utilities. Every small and medium enterprise can’t spend large amounts of money on storing products, buying equipment, and managing staff. Hence, they outsource their supply chain solutions and logistics activities to a third-party provider. A logistics provider takes care of product storage and reduces overall costs.
2. Access to Modern Technology
Most logistics service providers can access modern warehouse technology like WMS, OMS, etc. It provides real-time data on the products stored and reduces problems like overstocking and out-of-stock issues.
3. Improves Customer Satisfaction
Today, most customers want their ordered products delivered cost-effectively as soon as possible. However, as the business grows, managing all the supply chain processes efficiently and fulfilling orders faster becomes impossible. A third-party logistics service provider does everything for an ecommerce business, like procurement, storage, distribution, and order delivery. They have multiple warehouses in India and fulfill orders faster to enhance customer satisfaction.
4. Focus On Core Activities
When a business manages the entire supply chain by itself, it does not have time to focus on its core operations. Outsourcing supply chain activities enables enterprises to focus on core activities like product development, exploring new markets, etc.
How to Choose the Right Logistics Service Provider in India?
Choosing the right logistics service provider is essential for the smooth supply chain operations of an ecommerce business. Here is a list of a few factors a company needs to consider when choosing the right logistics service provider.
1. Understand Requirements
A business must first understand its requirements, e.g., whether it needs warehousing, inventory management, transportation, or value-added services. Then, the logistics service provider has to be selected accordingly.
2. Check The Reputation
Businesses must check clients’ reviews and testimonials before choosing the right logistics provider. Choose the one that has positive reviews or has good testimonials.
3. Technology
The third-party logistics provider should have access to advanced technology like data analytics to monitor products in real-time and manage various warehousing operations efficiently.
4. Scalability
The logistics service provider should provide scalable solutions, which means it should be able to accommodate products when the business expands.
Final Words
When a business cannot efficiently manage its supply chain operations, it outsources these activities to a logistics service provider. Hiring a third-party logistics service provider has various benefits, such as reducing costs and enhancing customer satisfaction. However, a business must choose the logistics provider wisely by checking various factors like scalability, technology access, and reviews.
AAJ Supply Chain Management
