3PLs have logistical gifts to offer small retailers

The holiday season is well underway.

While big-box retailers typically have the right back-end support and logistics solutions in place to meet customer expectations over the holidays, smaller companies often find this to be a more daunting challenge.

Big-box retailers tend to have the advantage, as they can monitor trends to anticipate consumer demand, invest heavily in the latest technology, and use their enormous resources to support their logistics operations. The good news is, smaller retailers can organize their logistics approach to meet customer expectations as well.

To achieve that goal, it’s critical to understand that excellence in logistics entails more than finding the cheapest way to move products. Optimizing logistics for high volume periods like the holidays involves a commitment to delivering customer value and an openness to innovation.

For many smaller retailers, that can best be achieved by partnering with a third-party logistics provider (3PL). With the right partner, retailers can take advantage of these five benefits:

1. More time to focus on core competencies: Retailers are in the business of selling products to customers. Smaller retailers typically lack deep expertise in transportation. A 3PL partnership gives them access to that expertise so they can focus on building customer relationships, product innovation, marketing, sales, operations, etc. By outsourcing logistics, retailers can focus on what they do best and grow their business during the holiday season — and all year long.

2. Robust transportation technology and logistics infrastructure: Many big-box retailers invest millions in their logistics infrastructure and use cutting-edge transportation technology. That’s not an option for most smaller retailers.

However, a partnership with the right 3PL provides access to a sophisticated transportation management system and logistics operations infrastructure, eliminating the need for the retailer to make those investments.

3. Lower costs overall: Concerns about expenses prevent some smaller retailers from exploring an outsourcing relationship with a 3PL, leading them to choose to handle logistics internally instead. But the fact is, retailers who partner with a 3PL often find their overall costs are much lower.

The 3PL partner is in a better position to focus on transportation planning, software, sourcing capacity, rate agreement negotiations, etc., which they use to reduce expenses. 3PLs use data and analytics to optimize logistics and transportation, finding new efficiencies that also lower costs.

4. Economies of scale: Smaller retailers usually don’t ship at a high enough volume to negotiate deep discounts with carriers. A 3PL partner can harness the collective buying power of its clients to secure lower rates, but that’s just the beginning. With the help of a 3PL, retailers can also benefit from access to capacity at crucial times — such as during the holidays.

Working with a 3PL can offer other benefits as well, such as more consistent freight pricing and better technology to enable real-time track-and-trace capabilities.

5. Better customer service: Customer relationships are critical to retailers, especially over the holidays, when buyers are anxious to find the perfect gift. A partnership with a 3PL can result in improved customer service by finding expedited delivery options, increasing information, improving visibility, and achieving greater accuracy with your shipments. A 3PL partner can demonstrate these improvements with key performance indicators (KPIs) and vendor performance scorecards.

Customer expectations evolve over time. Thanks to big-box retailers and online giants, today’s customers have higher expectations than ever before about shipping speed. Smaller retailers who want to maintain market share and good relationships with their customers have to adapt to meet these higher expectations.

With the right relationship with a 3PL, smaller retailers can plan for the holiday rush with confidence, knowing they are prepared with a flexible logistics strategy to satisfy customer requirements. Working with a 3PL partner can provide the flexibility and capabilities retailers need for a successful holiday season.

Doug Waggoner is chairman and CEO of Echo Global Logistics.