Research has shown that even if you are managing your own supply chain to a satisfactory degree, you can still benefit from outsourcing the logistics functions of your business. These benefits include reducing cost using 3PL leverage, bettering your service with higher provider focus, and increasing the buyer’s ability to concentrate on core competencies. When selecting the 3PL partner who can help you improve all of these areas within your business, one of the decisions you’ll be faced with is whether to work with an asset-based or non-asset based 3PL.
Asset based 3PL - Third-party logistics providers that own part of their supply chain, such as warehouses and trucks
Non-asset based 3PL - Third-party logistics providers that remain agnostic when it comes to choosing transportation and warehousing provider-partners.
Before you choose a 3PL company with which to do business, it is extremely important that you know which factors to consider when choosing between the two. Here are 4 reasons it’s advantageous to use a non-asset based 3PL.
1. Flexibility and Customization Businesses looking to decide on the type of 3PL that makes the most sense for their shipping needs must consider which provider would be most cost-effective and efficient. While an asset based 3PL provider can provide access to their complete arsenal, you may have difficulty with customizing your logistics to align with the best strategy for you. This is because along with owning their own warehouses, trucks, and more, they likely have a predetermined way of doing things and seek to fit your strategy with their assets.
On the other hand, a non-asset based 3PL creates a customized solution solely based upon each client’s objectives and can integrate you with the right suppliers, vendors, and carriers to meet these goals. Because non-asset based 3PLs work with so many different providers, they have a more robust and inherent ability to customize your business’s plan. Non-asset based 3PLs are able to flexibly determine how your current supply chain works, how it could be improved, and which providers would be best to meet the associated needs. When you hire a non-asset based 3PL you are essentially hiring their experience, expertise, and consulting and leverage.
2. Stability and Ability to Meet Future Financial Needs
Another major concern for companies looking to choose a type of 3PL is whether or not the provider is stable. Since your inventory is what’s being shipped, the last thing that you want is for the entity to go out of business or get caught up in regulatory issues without warning.
It’s undeniable that asset based 3PLs require more overhead. But while you may think that means they have more invested, this is not necessarily the case. Asset based 3PLs have fleets of depreciating assets, causing them to concern themselves with maintaining their assets rather than focusing on the needs of their clients. Although asset based 3PLs have their own assets, they are also putting all of their eggs into one basket. Alternately, non-asset based 3PLs have large portfolios of providers, work with more carriers, and have the ability to screen them for things such as insurance, DOT regulations, and more.
3. Costs and Buying Power
With the market pricing continually changing, price leverage and bargaining power is a major factor when it comes to choosing which carrier to utilize. Many smaller companies do not have the necessary leverage to achieve favorable negotiations. However, good 3PLs are able to bring this leverage for transportation spend to the table by doing things such as bundling freight purchases for numerous clients in order to achieve optimal rates.
Since asset-based 3PLs own their own assets, they are able to set their own pricing more easily. However, the main factors in pricing are leverage and capacity. Even if an asset based 3PL goes outside of its own assets, the leverage that has been accumulated by non-asset based 3PLs is exponentially greater. Non-asset based 3PLs often have large and trusted networks, established relationships, and buying power in order to ensure more cost-effective solutions. They can use their wide network to source a carrier that most closely aligns with your specific needs.
4. Conflicts of Interest
One of the most important differences between an asset based and non-asset based 3PL is whether they have any inherent bias or conflicts of interest that would impact how they do business with your company. Sometimes asset based 3PLs can have vested interests that influence their decisions. In fact, it is difficult to argue that this type of 3PL is not inherently biased, as it is in their best interest to have their shipping clients utilize their warehouses and trucks over any others.
Since non-asset based 3PLs work with other outside providers, they have the advantage when it comes to offering claims assistance and uncovering variances between your quote and your invoice. Additionally, non-asset based 3PLs will act to protect you in the event of a claim for damages, as it is in their best interest to receive the highest payment for your claim. Their interests are more closely aligned with their shipper-clients than their carrier-partners.
Choosing the Right 3PL Provider for Your Company
When you understand that much of your business’s reputation rests on the dependability of your providers, your choice in a partner becomes much more important. Regardless of the type of 3PL you choose, you should work with a quality outsourced provider that understands your business and the freight solutions you need, when you need them. Take a close look at the characteristics of your freight so you can choose the 3PL that is most closely aligned with your business
Not completely sure what a 3PL can do for your business? Download Victory Supply Chain Service's free eBook to learn more.
Victory Supply Chain Services is a dynamic 4PL with both the experience and the network of alliances conducive to helping you execute a well-planned, thoughtful supply chain. We take a holistic approach to logistics, providing unparalleled strategy, expertise, and customized solutions tailored to your business and your comprehensive supply chain management goals. To learn more about how Victory Supply Chain Services can help you to save money and improve your current operations, contact us at 833-4VICTRY (833-484-2879) or email us at info@victoryscs.com today!