JIT Transportation

5 Ways 3PL Services Cut Supply Chain Costs

Outsourcing logistics to a 3PL can cut supply chain costs by up to 25%. Here’s how:

These strategies not only save money but also improve efficiency and customer satisfaction. Whether it’s reducing warehousing expenses, optimizing shipping, or leveraging advanced tech, 3PL providers help businesses scale without the heavy upfront investment.

6 Ways 3PLs Reduce Logistics Costs for Their Partners

1. Better Transportation Planning

Did you know fuel costs can make up more than 30% of logistics expenses? That’s where 3PL providers step in, using advanced technology and strategic planning to cut costs while ensuring your deliveries stay on schedule.

Smart Route Planning with Technology

AI-powered route optimization tools are a game-changer. They analyze real-time traffic, weather, delivery deadlines, and vehicle capacity to create the most efficient routes. This approach can save up to 20% on logistics costs and millions in fuel annually. A great example is UPS, which uses its AI-driven system, ORION (On-Road Integrated Optimization and Navigation), to save 10 million gallons of fuel each year. For e-commerce businesses, this translates to faster deliveries and reduced shipping expenses - directly boosting profitability.

Combined Shipping and Load Management

3PL providers excel at consolidating shipments and optimizing vehicle loads, which reduces the number of trips and eliminates costly empty truck runs. Rather than sending out partially filled vehicles, they combine smaller shipments into full loads. Take Hardie’s Fresh Foods, for instance. In 2020, they boosted delivery capacity by 14%, managing 330 extra loads daily - without adding more trucks or drivers. They also cut total mileage by 20% and reduced driver-related costs by 12%. This smarter load management not only trims expenses but also ensures drivers have balanced workloads and deliveries arrive faster. Plus, it aligns with sustainability goals by lowering the environmental footprint of transportation.

"This software will cut down on labor hours considerably. We'd had issues with our client sending the list of stops late at night, requiring planners to accumulate overtime as manual routing took up to 4 hours." – Luis Flores, Bee Imagine

For e-commerce brands experiencing growth, these strategies enable you to handle more orders without a proportional increase in shipping costs, making your operations more scalable and profitable.

Getting Better Rates Through Volume Discounts

One of the biggest perks of partnering with a 3PL is access to discounted shipping rates. Since 3PLs handle shipments for multiple clients, they leverage their volume to negotiate lower rates with carriers. Their strong relationships with various shipping companies create a competitive bidding environment, ensuring you get the best prices. Additionally, smart 3PLs maintain a network of specialized carriers and keep backup options ready to further drive competition. For high-volume e-commerce brands, these lower rates make scaling up more affordable and efficient - something that’s hard to achieve as a standalone business.

These transportation strategies set the stage for streamlined warehouse solutions, which we’ll explore in the next section.

2. Flexible Warehouse Solutions

Warehouse expenses can take a significant bite out of your budget, especially if you're stuck in long-term leases for space you don’t fully use. That’s where 3PL providers come in, offering flexible warehouse solutions that adapt to your business needs. These solutions help cut overhead costs while keeping operations efficient. Let’s dive into how this works.

Shared Warehouse Space: A Smarter Way to Save

Think of shared warehousing like a co-working space, but for inventory. Multiple businesses share the same facility, splitting costs for essentials like rent, utilities, labor, and technology. This setup is especially useful for growing e-commerce brands because you only pay for the space you actually use, with costs tied to your usage.

This approach eliminates the hefty fixed costs of dedicated space. You also gain access to shared resources like material handling equipment, racking systems, and advanced warehouse management software - tools that would be costly to implement independently.

Labor, which accounts for over 40% of 3PL costs, is managed with impressive efficiency in shared setups. It’s no surprise that 83% of businesses and 90% of Fortune 500 companies rely on 3PL providers.

Scalable Warehouse Solutions for Seasonal Demand

Seasonal spikes can wreak havoc on your cash flow if you’re locked into a traditional warehouse lease. With scalable solutions, you can adopt a pay-as-you-use model, expanding or reducing storage space based on real-time demand.

The warehousing market, valued at $124.8 billion in 2024, is expected to grow to over $272 billion by 2030. Nearly 87% of business leaders are scaling up their warehouse operations to meet rising demand. During high-demand periods like Black Friday or the holiday season, scalable solutions allow you to ramp up storage and distribution capacity. Once the rush is over, you can scale back down, avoiding unnecessary expenses.

This flexibility is vital, especially as 54% of companies are integrating automation into their operations to improve efficiency.

Long-term leases
Pay-as-you-use model

High fixed costs
Cost-efficient scaling

Unused space
Optimized usage

Rigid commitments
Adaptable to demand

Local Fulfillment Centers: Faster Delivery, Lower Costs

Today’s customers expect speed. 61% want their purchases delivered within three hours, and 80% prefer same-day shipping. Beyond just scalability, strategically located warehouses help reduce transit distances, cutting costs and delivery times.

By storing inventory closer to your customers, you can lower shipping fees and speed up delivery. This strategy also minimizes transit-related issues, reducing returns and replacements. Shorter delivery routes aren’t just cost-efficient - they’re also better for the environment, reducing emissions.

Local fulfillment centers make same-day or next-day delivery a reality, meeting the high expectations of modern shoppers. They also allow you to consolidate shipments, taking advantage of volume discounts to lower per-unit shipping costs.

When deciding if local fulfillment is right for your business, consider factors like order volume, product dimensions, customer expectations, return rates, and seasonal demand. Partnering with a 3PL provider experienced in your niche ensures they understand your specific needs.

This adaptable and efficient warehousing approach naturally sets the stage for improved inventory control, which is the next step in reducing operational costs.

3. Better Inventory Control

Effective inventory control is a game-changer for reducing costs. Poor management can drain resources - too much stock ties up capital and increases storage costs, while too little leads to missed sales. By using advanced technology, 3PL providers help businesses strike the perfect balance, keeping inventory levels just right and expenses in check.

Live Inventory Monitoring

Real-time inventory monitoring is a must for staying ahead. 3PLs use tools like IMS, barcodes, RFID, and WMS to track stock levels accurately. This approach can cut stockouts by up to 50% and boost inventory accuracy by 30%. With this level of precision, businesses can adjust quickly to demand changes or supply chain hiccups.

"Cogsy allows us to have an exact understanding and visualization of what is going on in terms of product availability... Leveraging that information helps [our] team with data-driven internal and external planning to capitalize on all opportunities."

– Mark Riskowitz, VP of Operations at Caraway

Take Adidas, for example. When they teamed up with CEVA Logistics, they saw a 20% improvement in inventory accuracy and a 15% drop in stockouts during peak seasons. CEVA’s real-time tracking solutions didn’t just streamline operations - they also helped Adidas cut logistics costs by 10% [Source: Nautical Manufacturing & Fulfillment Case Study, 2024].

To make the most of live inventory monitoring, consider adding real-time reporting tools and dashboards for full visibility. Regular communication with your 3PL provider - via meetings and updates - can also ensure everything stays on track.

Predicting Demand to Optimize Stock

Demand forecasting is another key piece of the puzzle. By predicting customer needs, 3PLs help businesses keep costs down while meeting expectations. Advanced analytics make it possible to fine-tune inventory management, creating a supply chain that can adapt to market shifts.

For growing businesses, the results can be transformative. BAKblade, for instance, saw a 291% increase in sales over three years after partnering with a 3PL to improve demand forecasting and inventory management. Similarly, Allbirds reduced fulfillment costs, sped up shipping, and improved customer satisfaction.

"We were not set up to fulfill thousands of orders or prepared to manage the complexities of shipping. It just made a lot more sense for us to put our trust in somebody we knew that was number one in their game and would continue to get better and better."

– Matt Dryfhout, BAKblade Founder and CEO

When searching for a 3PL partner, look for providers who use advanced analytics and machine learning. Seamless integration with your e-commerce platform, shopping cart software, and warehouse management system is also essential. These tools not only improve forecasting but also pave the way for cost-saving strategies like direct transfer.

Direct Transfer to Cut Storage Costs

One of the simplest ways to save on inventory costs is to reduce the time products spend in storage. Direct transfer methods, like cross-docking, move goods straight from inbound shipments to outbound orders. This approach minimizes storage needs, lowers costs, and speeds up deliveries.

Traditional Storage
Direct Transfer & Cross-Docking

Long-term warehousing costs
Minimal storage expenses

Multiple handling steps
Streamlined product flow

Higher carrying costs
Reduced inventory holding

Slower delivery times
Faster customer fulfillment

For example, a national retailer partnered with a 3PL specializing in cross-docking, cutting storage costs by 40% and speeding up restocking. A packaged foods supplier reduced delivery times from 72 hours to under 24 hours while lowering carrying costs by 30%. During peak seasons, an online retailer slashed late shipments by 45%, and a parts distributor decreased fuel usage by 25% with more efficient outbound loads.

To implement direct transfer effectively, focus on optimizing dock scheduling and staging areas to avoid congestion. Train staff on warehouse management systems and establish clear standard operating procedures for cross-docking activities. With businesses spending an average of 11% of their revenue on logistics in 2019 - and transportation and inventory accounting for 72% of that - these efficiency improvements can significantly impact your bottom line.

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4. Advanced Technology That Enhances Efficiency

In today’s fast-paced logistics world, technology plays a critical role in making 3PL (third-party logistics) operations more efficient and cost-effective. By partnering with a tech-forward 3PL provider, businesses can tap into advanced systems that might otherwise be too expensive to develop and maintain on their own. These tools not only reduce costs but also improve accuracy, speed, and decision-making.

Automated Warehouse Management Systems

Warehouse Management Systems (WMS) have become a cornerstone of 3PL operations. These platforms handle everything from inventory tracking to order processing and billing, often for multiple clients within a single system. The difference they make is striking: companies relying on outdated tools like Excel face up to 88% more errors compared to those using WMS solutions, which significantly minimize mistakes.

WMS platforms do more than just reduce errors - they also streamline labor by cutting down on manual tasks, optimize storage through advanced put-away strategies, and ensure accurate billing by tracking every operational detail. The introduction of AI-powered WMS has taken things even further, with some early adopters reporting service improvements of up to 65%.

Take Luís Simões’ distribution center near Madrid, for example. Housing around 100,000 pallets and processing over 4,000 orders daily, the facility uses an Automated Pallet Shuttle system paired with Easy WMS software. This setup organizes, sequences, and schedules orders for efficient distribution. Similarly, Logiscor, a logistics provider for Spain’s Supermercados Piedra, revamped its Córdoba facility to meet the demands of omnichannel operations and growing online sales. By implementing an AS/RS for boxes and a put-to-light system, they automated the movement of more than 400 boxes daily while maintaining complete traceability for 1,500 SKUs - all managed by Easy WMS.

When choosing a 3PL partner, it’s vital to prioritize providers with WMS platforms that are easy to integrate, scalable for future growth, and user-friendly. These features ensure seamless alignment with your business goals and pave the way for further advancements like ERP integration.

ERP Integration for Smooth Operations

Once warehouse automation is in place, integrating Enterprise Resource Planning (ERP) systems can take efficiency to the next level. ERP systems connect 3PL operations with other business functions, creating a unified flow of information that eliminates time-consuming manual processes. Real-time data synchronization ensures all departments are working with the most up-to-date information, reducing errors and improving collaboration.

The impact of ERP integration is undeniable - 95% of businesses report improvements in at least some processes, and nearly half see benefits across all areas of their operations. In 3PL, ERP systems act as a central hub, bridging internal workflows with logistics partners to streamline the supply chain.

For example, Steel Blue, an Australian safety footwear manufacturer, partnered with Precise Business Solutions to integrate their ERP system. The results were impressive: a 50% reduction in shipping times, a 10–15% decrease in order preparation time, lower shipping costs, and full visibility across their supply chain.

To ensure a successful ERP-3PL integration, businesses should start by defining clear goals and analyzing their logistics processes. It’s also crucial to involve key stakeholders, choose integration tools that are compatible and scalable, and thoroughly test the system before full deployment.

Data Analysis for Cost Control

Building on automation and ERP integration, data analysis offers another layer of efficiency by turning raw operational data into actionable insights. With the help of analytics, 3PL providers can pinpoint revenue leaks, optimize transportation routes, and cut fulfillment costs. In fact, 58% of shipping companies have reported supply chain cost reductions of up to 25% thanks to data analytics.

Real-time analytics empower businesses to adapt quickly to changing circumstances, minimizing disruptions. By evaluating metrics like cost per unit, lead times, and optimal routes, 3PLs can identify inefficiencies and improve profitability. Additionally, analyzing data on delivery times, product quality, and compliance helps businesses select suppliers that balance cost and service quality.

To make the most of data analysis, use the tools offered by your 3PL provider to uncover cost-saving opportunities. Consider implementing IoT devices for real-time data collection, setting clear KPIs like order fulfillment rates and inventory turnover, and creating interactive dashboards to visualize performance metrics. With 62% of 3PL warehouses emphasizing the role of analytics, partnering with a data-driven provider can be a game-changer for cutting costs and improving operations.

5. Lower Overhead Through Outsourcing

Outsourcing logistics can turn fixed overhead costs into variable expenses, meaning businesses only pay for the services they actually use. This shift in cost structure allows companies to access top-tier logistics solutions without the heavy upfront investment required to build these capabilities in-house. It also opens the door to additional savings, especially when it comes to managing labor.

Shared Labor for Lower Costs

Running logistics in-house typically requires dedicated staff for warehousing, transportation, customer service, and administrative tasks - costs that remain constant regardless of seasonal changes or fluctuations in demand. Third-party logistics (3PL) providers tackle this issue by spreading labor costs across multiple clients. This approach not only reduces expenses but also complements the savings gained from more efficient transportation and warehousing.

The results can be game-changing. For example, Wyze, a smart home device retailer, cut its full-time fulfillment staff by 50% after partnering with Amazon Multi-Channel Fulfillment (MCF) and order management platform Pipe17. Eric Morris, Principal Technical Program Manager at Wyze, shared:

"With MCF and Pipe17, we automated our order fulfillment, halved delivery times, and reduced full-time staffing."

3PL providers also offer flexible staffing that scales with demand and take on back-office tasks like billing, documentation, and invoicing across their client base. During peak seasons, such as Black Friday or the holidays, 3PLs can ramp up operations quickly - eliminating the need for businesses to hire, train, and manage temporary workers.

Compliance and Risk Handling

Navigating logistics regulations, customs requirements, and industry compliance is both costly and risky for companies managing these processes on their own. Errors in documentation, missed regulatory updates, or poor risk management can lead to fines, delays, and strained customer relationships.

3PL providers bring specialized knowledge in compliance, ensuring that shipments meet all regulatory requirements without the need for an in-house compliance team. They stay up to date on changing regulations across different regions, reducing the risk of legal issues.

Risk management is another area where 3PLs excel. They prepare for disruptions - like severe weather, transportation strikes, or supply chain interruptions - by implementing contingency plans. Businesses in hurricane-prone areas, for instance, often rely on their 3PL partner’s disaster response systems instead of developing their own costly backups.

By addressing challenges such as shipment delays, customs hold-ups, or documentation errors, 3PLs help minimize disruptions that could harm a company’s reputation and customer satisfaction. Their expertise simplifies operations, leading to smoother workflows and reduced administrative headaches.

Simple Billing and Lower Admin Costs

Managing logistics in-house often involves juggling multiple vendor relationships, tracking various service charges, and reconciling complex invoices from different providers. Warehousing, transportation, packaging, and technology vendors all come with separate billing cycles and terms.

3PL providers simplify this process with consolidated billing that covers all logistics services under one roof. Instead of dealing with multiple vendors, businesses work with a single point of contact who handles everything.

This streamlined approach reduces administrative workload, allowing companies to focus on key priorities like product innovation and customer acquisition. The variable cost model of 3PLs adds another layer of flexibility: businesses only pay for the services they use, making it easier to adapt to changes in demand without renegotiating contracts or managing complex vendor relationships. This is especially beneficial for e-commerce businesses experiencing rapid growth.

Haley, Marketing Manager at A1 Quality Logistical Solutions, summed it up well:

"Outsourcing logistics reduces operational costs by leveraging 3PL expertise and economies of scale, leading to cost-effective solutions and enhanced efficiency in supply chains."

Conclusion: Achieving Cost Savings with 3PL Services

To wrap things up, the five strategies discussed earlier highlight how 3PL services can significantly reduce costs throughout your supply chain. By streamlining transportation routes, utilizing shared warehouse space, adopting cutting-edge technology, and outsourcing to lower overhead, 3PL providers transform rigid, fixed expenses into adaptable, scalable solutions.

Here’s a telling statistic: outsourcing logistics to a 3PL provider can slash supply chain costs by as much as 25%. On top of that, 86% of shippers report that working with a 3PL has helped them cut logistics expenses. These numbers speak volumes about the financial and operational advantages of partnering with a skilled 3PL provider.

Requires heavy capital investment
Pay-as-you-go flexibility

Full-time staff expenses
On-demand workforce

Higher individual shipping rates
Bulk shipping discounts

Costly system development
Access to advanced tools

By outsourcing logistics, businesses can reallocate resources to critical areas like product innovation and marketing. This strategy, widely adopted by Fortune 500 companies, has become a go-to solution for businesses looking to stay competitive in today’s fast-moving market.

For e-commerce companies on the rise, working with a 3PL provider - such as JIT Transportation - offers access to nationwide networks, advanced logistics technology, and scalable infrastructure without the burden of hefty upfront investments. This partnership not only grows with your business but also helps ensure long-term savings.

The evidence is clear: 64% of businesses report reduced operating costs, and 73% of shippers see improved customer satisfaction when working with a 3PL. Choosing the right 3PL partner means finding one that aligns with your goals and scales alongside your growth, paving the way for a more efficient and cost-effective supply chain.

FAQs

How do 3PL providers use technology to make transportation routes more efficient and lower fuel costs?

3PL providers rely on cutting-edge technology like Transportation Management Systems (TMS) and GPS to streamline delivery routes. These tools assess real-time factors such as traffic, weather, and road conditions to map out the quickest and most fuel-efficient paths. The result? Businesses save both time and money while improving delivery efficiency.

On top of that, AI and machine learning have become game-changers. By analyzing vast amounts of data, they can predict delays and suggest adjustments before problems arise. This proactive approach ensures smoother logistics, cuts down on fuel usage, and reduces transportation costs, making operations run more effectively.

How do flexible warehouse solutions from 3PL providers help businesses manage changing demand?

When businesses partner with 3PL providers for warehouse solutions, they gain the ability to adjust storage space as needed. This flexibility means companies can scale up during busy seasons or unexpected demand surges and scale down when things slow, keeping costs under control. It’s a smart way to ensure orders are fulfilled on time without worrying about overstocking or running out of products.

What’s more, these solutions eliminate the burden of long-term storage commitments. By cutting overhead expenses and streamlining inventory management, businesses can redirect their energy toward growth, trusting 3PL providers to handle demand shifts with accuracy and care.

How does working with a 3PL provider improve inventory management and help avoid stockouts?

Partnering with a third-party logistics (3PL) provider can be a game-changer for managing inventory and avoiding stockouts. With tools like real-time tracking and automated reorder systems, 3PLs help businesses keep stock levels just right while responding quickly to shifts in demand. This means your customers can count on finding what they need, when they need it.

What's more, 3PL providers often consolidate inventory across multiple sales channels. This simplifies management, reduces surplus stock, and cuts down on storage costs. The result? Better cash flow and happier customers, thanks to fewer delays and shortages. Tapping into a 3PL's expertise can make your supply chain smoother and more dependable.

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