3PL Value-Added Services Can Maximize Business Potential

Explore the value-added services that third-party logistics companies offer and how they improve business operations

Maximizing potential is typically one of the most important things that a business wants to accomplish. One way that businesses do so is by outsourcing supply chain and logistics operations to third-party logistics (3PL) providers. In addition to traditional logistics services, many 3PLs offer value-added services that can give a business a competitive edge. In this blog, we will explore:

What value-added services are
The value-added services offered by 3PLs
How they can improve customer satisfaction and retention.

3PLs act as an extension of a business’s logistics department. They utilize their expertise, technology, and resources to streamline and optimize supply chain operations. This enables businesses to focus on their core competencies and leave the complexities of logistics to the experts.

What Are Value-Added Services?

Value-added services (VAS) include specialized logistics and supply chain services that enhance the value of a product or service to the customer. Value-added services go above and beyond the services that third party logistics providers already offer. Additionally, they can be included as part of the service package provided by a 3PL or can be purchased as add-ons. Typically, the value-added services that businesses utilize are unique to their company requirements. For instance, product customization or assembly services can help to:

Reduce delivery times

Improve product quality

Make the product more appealing to customers

Similarly, inventory management services can help to keep costs down by reducing the amount of inventory held, helping businesses manage stock levels more effectively.

Datex Fast Fact

According to Adelante SCM’s recent research, 63 percent of organizations that use value-added services consider it a “very significant” business function.

Examples of 3PL Value-Added Services

Let’s take a closer look at some examples of value-added services offered by 3PLs.

Kitting

Kitting refers to the process of assembling individual products into kits or packages that are ready for sale. This can include bundling products together, adding promotional materials, or customizing packaging.

Suppose an online business sells skincare products. The business may choose a 3PL partner that offers kitting services. This enables the business to bundle different skincare products together, creating a skincare kit that customers can purchase at a discounted price. The third-party logistics provider can assemble the kits, add promotional materials, and ship them directly to customers.

Postponement

Postponement is a variation of kitting that helps logistics providers as well as their clients save money by reducing inventory storage costs. This inventory management strategy involves postponing the kitting of products until they are ready to be picked, packed, and shipped. By utilizing postponement, 3PLs remove the need for large inventories of pre-packaged products.

For example, camera equipment that is bundled with different accessories such as lenses, cables, memory cards, and software can be packaged on-demand when the customer places an order.

Assembly

Assembly involves putting together individual components to create a finished product. This can be especially useful for businesses that sell products that require assembly, such as furniture or electronics.

For example, a furniture business sells flat-pack furniture. This business may choose a 3PL partner that offers assembly services. This enables customers to purchase furniture that is pre-assembled, saving them time and effort. The 3PL can assemble the furniture and ship it directly to the customer’s home.

Customization

Customization involves modifying a product to meet the specific needs or preferences of a customer. This can include adding logos or branding, changing packaging, or modifying the product itself.

For instance, say a business sells products such as pens, mugs, and t-shirts. The business may choose to partner with a 3PL that offers customization services. This enables them to modify products to meet the specific needs or preferences of customers.

Postponement Packaging

Postponement packaging is a variation of customization. This service involves receiving inventory in bulk packaging and then repackaging the products for specific orders. In addition, it enables more products to be stored in warehouses and distribution centers. This service saves 3PL customers money by reducing labor, warehousing, and shipping costs.

A key benefit of postponement packaging is that it reduces the size of products transported, enabling more products to be transported. As a result, this service can support a business’s environmental sustainability goal (ESG) by reducing carbon emissions.

International Trade Management and Legal Compliance

An additional service that is especially helpful for companies that operate within the global market place is international trade management and legal compliance. With this value-added service, third-party logistics providers make sure that all international shipping regulations are followed such as:

Obtaining export and import licenses

Understanding customs rules of various countries

Managing the payment of tariffs or duties

By offering this value-added service, 3PL providers can help their customers comply with complex trade requirements, therefore reducing the risk of fines or penalties.

Reverse Logistics

Reverse logistics is a value-added service that has become a necessary component of business operations. Reverse logistics start at the end consumer, moving backward through the supply chain to the distributor or from the distributor to the manufacturer. Reverse logistics can also include processes where the end consumer is responsible for the final disposal of the product, including recycling, refurbishing or resale.

Reverse logistics is typically viewed as the process that moves products from customers back to sellers or manufacturers. However, 3PL’s that offer reverse logistics as a value-added service take the process a step further. For example, a third party logistics provider can do simple repairs to products at facilities near the end-consumer, rather than shipping them to the original producer which can sometimes be in another country. In doing so, companies can boost customer satisfaction by reducing wait times. Additionally, this process is also important because it helps businesses improve the environment by preventing returned products from ending up in landfills.

Cross-Docking

One of the most common value-added services offered by third-party logistics companies is cross-docking. Typically, cross-docking involves configuring warehouse docks for incoming freight. Freight can then be reconfigured and transferred onto outbound trucks for delivery to storage and distribution facilities as well as customers.

Cross-docking not only lowers shipping times and warehousing costs, but also the warehouse space needed to store inventory. In addition, cross-docking reduces the energy that warehouses utilize. This is especially essential to businesses that specialize in food and beverages or pharmaceuticals.

Integrated Warehousing and Distribution

Many 3PLs operate both warehousing and distribution processes for businesses. In doing so, they often operate with information technology (IT) systems. This enables them to not only run more efficiently but also facilitate enhanced transparency and flexibility.

A key benefit of integrated warehousing and distribution are track and trace capabilities. The track and trace feature enables businesses and consumers to follow products along their entire life cycle. This can include the manufacturing of products all the way to order fulfillment.

Retail Preparation Services

Retail preparation services prepare products for retail sale by ensuring that they have shipping labels, barcodes, and tags in the right place according to retailer and industry standards. By offering these services, 3PLs can streamline processes for their customers, saving them time as well as helping them to avoid costly mistakes.

How 3PL Value-Added Services Can Improve Customer Satisfaction and Customer Retention

Value-added services can have a significant impact on customer satisfaction and customer retention. By offering additional services that enhance the value of a product or service, businesses can differentiate themselves from their competitors and provide a more personalized experience for their customers.

For example, suppose an online business runs a subscription box service that offers a monthly package of curated products. By partnering with a 3PL that offers kitting services, a business can create a unique and personalized experience for customers. The business can bundle different products together based on their preferences and add personalized notes or gifts. This can help increase customer satisfaction and retention by providing a more personalized and memorable experience.

Datex Fast Fact

Over 80% of 3PL respondents described their value-added service offerings as an “important” or “very important” part of their overall growth strategy

The Future of 3PL Value-Added Services

As the logistics industry continues to evolve, the role of third-party logistics providers and the value-added services they offer is likely to become even more important. One trend that is shaping the future of third-party logistics is the increasing use of technology, such as automation and artificial intelligence (AI). 3PL providers that can leverage these technologies to optimize their operations and provide more personalized experiences for their customers are likely to be at a competitive advantage.

Another trend that is shaping the future of logistics is the increasing importance of sustainability. 3PL providers that prioritize sustainability in their operations, such as using electric vehicles or renewable energy sources, are likely to be more attractive to businesses that value sustainability.

Choosing the Right 3PL Provider for Value-Added Service Needs

Choosing the right 3PL is critical to maximizing the benefits of value-added services. When selecting a third-party logistics company, businesses should consider the following factors:

Expertise

Business should look for a 3PL that has experience in their industry and understands their specific needs. While many 3PLs offer the same basic services, not all offer the same value-added services or do them in the same way. If a 3PL does not have specific industry experience, they may make decisions that either do not work or lead to mistakes.

Technology

As supply chains digitalize, it is important that businesses partner with 3PLs that have the technology, equipment, and infrastructure to offer value-added services. Common software and equipment that a 3PL may need to offer value-added services include:

Warehouse Management Software (WMS)

A WMS system is extremely important to 3PLs that offer value-added services that requires them to manage inventory levels. For instance, a WMS can enable supply chain visibility into a business’s inventory at any time and location, whether in a facility or in transit. For example, warehouse management software can let warehouse operators and workers know when products are entering a warehouse, where they are being stored, and when the products leave the warehouse for order fulfillment.

In addition, a WMS can help streamline operational processes such as how workers pick products and pack orders. Furthermore, the right WMS is essential for 3PLs that operate shared warehouses. This enables 3PLs to perform specific value-added services for specific customers.

Shipping Software

Shipping software can help businesses automate the shipping process and make it more efficient. For any 3PL offering a value-added service that involves shipping, this type of software is a valuable investment.

Packaging Equipment

A 3PL offering a value-added service that involves packaging needs to have the right equipment in place. This might include things like packaging tables, carousels, conveyors, and sortation systems, and wrapping machines.

Scalability and Elasticity

Due to volatile market conditions, it is important that 3PL providers are elastic enough to scale their services up or down to meet the changing needs of their customers. To provide higher levels of service to clients, 3PL companies that are elastic can tailor their services to meet the specific needs of their customers. This not only benefits 3PL customers by enabling a more efficient supply chain, but also the 3PL through diversification.

Datex Fast Fact

78% of 3PLs said that they utilize warehouse management software to manage their value-added services

3PLs Benefit by Offering Value-Added Services

Increased Customer Satisfaction

Customers will be more likely to choose a 3PL for their supply chain and logistics needs if the 3PL offers additional services that enable added value and convenience. For example, instead of only shipping products for online stores, a 3PL can offer a complete service package that meets all the needs of e-commerce retail customers.

Greater Market Share

By offering value-added services, 3PL providers can attract more customers and gain a larger market share. If customers know they can get what they need from a “one-stop shop” 3PL, they’ll be more likely to choose that 3PL.

Improved Return on Investment

By offering value-added services, 3PL providers can increase their returns on investment (ROI) and improve their bottom line. This will enable them to reinvest their profits into new technologies and equipment, helping them to remain competitive as well as enable growth.

Improved Customer Loyalty

When businesses receive value-added services, they are more likely to stay loyal and remain with the 3PL provider. For example, if a 3PL can provide integrated business solutions, they can help their clients earn money, meet customer expectations, and customer demands. In turn, this will help to create long-term relationships that can benefit both parties.

A Look at Businesses That Have Successfully Utilized 3PL Value-Added Services

To illustrate the benefits of 3PL value-added services, let’s take a look at two businesses that have successfully utilized these services.

Case Study #1: Harry’s

Harry’s is a men’s grooming company that sells razors, shaving cream, and other grooming products. To improve its supply chain logistics operations and customer experience, Harry’s partnered with a 3PL provider that offered value-added services such as kitting and assembly. The 3PL provider assembled products into kits and shipped them directly to customers, reducing delivery times and improving customer satisfaction. As a result, Harry’s was able to scale its business more efficiently and effectively.

Case Study #2: HelloFresh

HelloFresh is a meal kit delivery company that delivers pre-measured ingredients and recipes directly to customers’ homes. To improve its logistics operations and customer experience, HelloFresh partnered with a 3PL provider that offered value-added services such as customization. The 3PL provider customized packaging and recipes to meet the specific needs and preferences of HelloFresh’s customers, enhancing the customer experience and increasing customer retention.

Conclusion

Businesses that outsource logistics to 3PLs do so to boost their business potential. However, many 3PLs now offer value-added services which can have numerous benefits for a business as well. These benefits can include cost savings, increased operational efficiency, and flexibility. Value-added services offered by 3PL providers can further enhance these benefits by improving customer satisfaction and retention.

When selecting a 3PL provider, businesses should consider factors such as expertise, technology, elasticity, and scalability. By choosing the right 3PL provider and leveraging value-added services, businesses can maximize their potential and stay competitive in an ever-evolving logistics landscape.