A Basic Guide to 3PL in Healthcare
3PL stands for “third-party logistics”; it outsources parts of the supply chain, including:
3PL services help move high volumes of products. They’re not primarily for buying or selling of those products—although they can buy and sell as a secondary service. 3PL comes in handy for those who:
3PL often gets mixed up with distribution, fulfillment and warehousing, but it’s not always the same thing. 3PL is a type of distribution; fulfillment and warehousing are types of 3PL.
How Does 3PL Work?
3PL works by offloading the job of supply chain management to a company who specializes in it. It links two parties: those who buy products and those who supply them. 3PL services don’t primarily buy and sell products; they store and ship them.
When Should You Use Healthcare 3PL?
1. You’re short on time, money or personnel
The more volume and variety of items you manage, the more common this becomes. This happens often when businesses grow; their costs often also grow with their revenue. But this doesn’t just happen to businesses—it happens to every organization during large, unusual changes in supply and demand.
The COVID-19 pandemic was a perfect example. PPE (personal protective equipment) exploded in demand. Face masks, face shields and gloves were needed more than ever. Normally a quick, routine part of inventory management, managing PPE inventory became a job all by itself, creating unexpected costs for countless organizations. Some ordered too much PPE—some too little—and many couldn’t get PPE everywhere it was needed fast enough.
COVID-19 magnified this problem for governments everywhere. They didn’t just need more PPE in their inventories; they needed vaccines, vaccination kits, PPE and all the other equipment needed to run mass vaccination sites all over the globe. They also needed to materialize a cold chain for the vaccines.
This caused many health systems and government agencies to outsource the management of their medical supply chain. There wasn’t enough money, time or personnel in private and public health organizations to meet the sudden demand themselves.
2. Your supply chain is error-prone
Healthcare 3PLs can help improve a few key areas:
• Inventory accuracy
• Order picking accuracy
• Order fill rates
• Product waste
3PL companies often have extensive tools to manage inventory. They prevent errors with internal tools for employee use and external tools for partner use.
3. You need medical and pharmaceutical expertise
While 3PL services are common, 3PL companies that are tailored to healthcare are less common. Licensing, training, storage and handling of healthcare products can be expensive. Any organization not specifically built for healthcare and logistics might struggle to control those costs.
Healthcare 3PL companies often provide the best of both worlds. They can offer expertise in:
• Cold chain management
• Sterility
• Surgical kitting
• Biohazards
• Disaster preparation
• Disaster response
4. Disruption isn’t money lost—it’s lives lost
Points of failure. Bottlenecks. Choke points. In healthcare, these don’t just cause irritation—they can mean lives lost. Natural disasters, pandemics, economic fallout and global trade restrictions can all break an unprepared supply chain overnight. There are three major types of choke points:
3PL is often the silver bullet for creating redundancy. Adding people, warehouses, and supplies to your inventory can stop disruption from turning into a disaster for your organization.
5. You need more space
3PL services can expand your inventory beyond the walls of your own buildings. Outsourcing logistics to a third party also means that you don’t have to build more warehouses of your own, giving you access to turnkey fulfillment. This allows you to skip:
• Construction
• Waiting to become fully operational
• Acquiring permitting and licensing
• Finding, hiring and training employees
• Setting up automation for physical and digital processes
Expanding your inventory with a 3PL can take just a few days or weeks in some cases.
5. You need more space
Adding pins to the map can put strain on inventory. A single warehouse might not be enough to keep up with a large organization. For example, getting items from a warehouse gets more expensive the further away the shipping address is. For suppliers, it’s the same: the further a supplier is from a warehouse, the higher the transport costs. 3PL services can solve this by adding warehouses to your network.
7. You have restrictive contracts
Contracts can be a powerful way to protect both sides in a partnership. Contracts can also, of course, come with restrictions. They can limit the amount of control you have over your supply chain. This may be why 3PL services have seen growth over the years: they can benefit both sides of supplier-buyer agreements. This is because 3PL is primarily a logistics service—not necessarily a buying or selling agreement—allowing both to arrange warehousing and fulfillment in a way that best suits them.
6. You’re adding locations
This can help control transport costs. But in some cases, it can also speed up delivery tremendously.
Why Partner with ALTOS GROUP?
Altos Group Healthcare Solutions is a nationwide medical distributor and an expert in healthcare 3PL. For over 75 years, we’ve solved problems in the healthcare supply chain like warehousing, storage, transport, sourcing and outfitting new healthcare facilities with equipment, supplies and furniture
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