The overall market for consumer packaged goods (CPG) – the items used by the average consumer – is on the rise. For example, in 2018, online sales of CPGs rose over 35%, and that trend doesn’t look to change anytime soon. What are CPGs? They are the everyday items that most people use on a regular basis. They are items that typically are repurchased to replace or replenish, and include food and beverages, household products, clothing and other consumables.
The rapid growth of technology gives the ability to companies to sell to virtually everybody, everywhere, and at any time of the day or night. A great problem to have, right? Indeed it is, but with that growth comes the responsibility of getting those products from Point A to Point B, in a timely as well as cost-effective manner. A few foul-ups along the way can easily taint your reputation, and there is plenty of competition out there, allowing fickle consumers to shop elsewhere.
WHAT ARE THIRD-PARTY LOGISTICS FIRMS?
Third-party logistics (often abbreviated as 3PL or TPL) firms are companies whose prime purpose is providing logistics and supply-chain services and management for other companies, including those in the CPG space. This includes warehousing and shipping and distribution services. In short, 3PL companies are in business full-time to handle the entire logistics chain from Point A to Point B. Also, there are many other related value-added services these firms can handle.
BENEFITS OF HIRING 3PL
One of the major benefits of hiring a 3PL company is that it puts a vital component of your business — ecommerce shipping logistics and distribution — into the hands of a company who has expertise in that field, allowing you to focus on your core competencies. It eliminates the need to dedicate an entire division to distributing, transporting and warehousing your products. That helps manage, control and reduce overall operating costs and streamlines your organization. In addition, it reduces exposure by not tying up assets in an area outside your company’s purpose.
The Industries that are able to achieve massive growth with the help of third-party logistics firms are generally those in the high-growth sectors — electronics, apparel, personal care and home goods products. But with the rise of online technology and ease of ordering, virtually every type of CPG has the potential to benefit from 3PL, due to growth in consumer purchasing. In Q3 2019, online sales increased over 17% from the same period in 2018 and accounted for over 10% of total sales during Q3 2019.
SELECTING THE RIGHT 3PL PARTNER FOR YOU
Choosing the right 3PL company for your business is really no different than doing your homework for any other partner company you are considering. It should offer a wide range of services to meet your exact needs as well as scalability to be able to work with you during your company’s ebbs and flows. It needs to be able to handle basic fulfillment as well as custom solutions. Other requirements are robust technology, stability and reputation and having the assets in place to handle your account.
When you partner with a pure-play company whose solitary focus is CPG logistics, you are eliminating the headache of having an entire division, employees and assets dedicated to creating a competitive advantage by lowering overhead and operating costs. It leaves the warehousing, shipping and distribution (and all other logistical aspects of your business, often customized to meet your exact requirements) to a company who specializes in CPG logistics.
Chris Capelle is a technology expert, writer and instructor. For over 25 years, he has worked in the publishing, advertising and consumer products industries.