A third-party logistics (3PL) provider stores, handles and distributes goods on your behalf. For many importers, suppliers and NGOs it is cheaper and more flexible than running a warehouse. It is not right for everyone.
Signs it is time to outsource
- Your volumes rise and fall, so your own space is either too full or half empty
- You spend more time managing stock and staff than selling or delivering
- You need stock close to the port or the capital, but cannot justify a lease
- You serve several delivery points, such as branches, customers or project sites
- Your clients or donors need clear stock and delivery records
Own warehouse or 3PL?
| Own warehouse | 3PL | |
|---|---|---|
| Cost structure | Fixed: rent, staff, security, systems | Variable: you pay for space and handling you use |
| Flexibility | Limited by the lease and the building | Scale up or down with demand |
| Control | Full day-to-day control | Control through agreed rules and reports |
| Management time | High | Low |
| Best for | Large, steady, specialised operations | Variable volumes, growth and project work |
Questions to ask any 3PL
- How is stock recorded, and how often will I get reports?
- How are goods secured, and what insurance applies?
- What are the charges for receiving, storage, picking and dispatch?
- Can you handle my goods' special requirements?
- Can you also clear and deliver, so I deal with one partner?
Start small. Move one product line or one delivery route first, check the reports and service, then expand.
Frequently asked questions
Is a 3PL more expensive than my own warehouse?
At low or uneven volumes, usually not, because you pay only for what you use. At very high, steady volumes, your own operation can be cheaper. Compare the full cost, including staff, rent, security and management time.
Will I still know what stock I hold?
A good 3PL gives you regular stock reports and reconciles them with your records. Agree the reporting schedule in writing before you start.