Before You Start Your First 3PL Company

Published: 25th May 2011
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3PL companies work to set up and run logistics operations for other companies. Such services range quite a bit, a contract warehouse may simply manage and broker freight flows for a client or it may perform the more complex job of becoming a client's major warehouse distribution center for all operations.

If you have been toying with the idea of setting up your own 3PL company, there are a few things you should determine beforehand. You must have a firm grasp on the services you want to provide as well as the specific industry that will be your company's specialty. Get a firm grasp on the market especially those services and operational areas that will be a key part of your own business. Carefully go over the startup costs, finances and available funds. Consider how or if you will be able to run major distribution centers for client companies, train employees and the general complexity involved in this business. Before heading straight into business, go over the key areas involved in such a venture, and remember that there are quite a few ways to go about running a 3PL.

Although, you may be talented at keeping clients satisfied, 3PL companies may suffer from cancellation contracts for any number of reasons. You do not want your business to fail, so there are some important things to consider before you begin. To be successful in the 3PL world, keep in mind a few key ideas.

First, have a firm outsourcing strategy handy at all times, a plan that has been carefully considered in terms of outsourcing and possible outcomes as opposed to what your business' in-house abilities are. Observe the strengths and opportunities offered by outsourcing as well as the threats and weaknesses by undergoing a SWOT analysis. Knowing about these benefits and drawbacks will give you a clear picture of the challenges that lie ahead.

It is important to that there are no inconsistencies in procedure by setting operating procedures for those tasks being outsourced in stone. This way a client's expectations will always be met, and points of both accordance and discordance can be clearly documented. Performance standards must be clearly defined by your business. This will allow you to clearly see what tactics need to be improved, as well as how best to improve them. Gather information by using a Request for Information. This will not only highlight your own strengths and weaknesses, but those of other companies as well.

Make sure that your costing system is highly efficient; this will allow you to understand just how much money is going into outsourcing. Measure the cost against the benefits of the services. By grasping activity-based costing, you will be able to better see the differences between projected an actual costs. Companies that offer third party logistics services may differ greatly in what they do for each client. Such a company must have a thorough understanding of its own business model in order to create a respected business, one that will attract and keep clients for years to come.


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Stewart Wrighter recently stored the overstock from his store in aLos Angeles contract warehouse. He is using aLos Angeles 3PL warehouse to handle all the logistics for his company.

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