How to Start a Third Party Logistics Company

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A third-party logistics company is a company that serves as a middleman in the logistics industry. Third-party logistics and order fulfillment are terms that are frequently used interchangeably.

The complete spectrum of eCommerce fulfillment services is offered by a third-party warehouse. This can include order processing, shipping, and receiving as well as warehousing.

The size of the worldwide third-party logistics (3PL) industry was estimated to be USD 962.1 billion in 2021. Growing at a CAGR of 8.58 percent over the forecast period, it is anticipated to reach USD 2018.22 billion by 2030.

In the third-party logistics (3PL) market, North America holds a dominant position. As of 2022, there were 20,406 Third-Party Logistics companies in the US, a 2.1 percent increase from 2021.

Steps on How to Start a Third-Party Logistics Company

1. Conduct Market Research

To be able to optimize revenue from your third-party logistics company, you would need a trustworthy market study if you were thinking about beginning a third-party logistics services company.

Creating a market-based research question that is in line with your firm’s ultimate goal and objective should be the first stage in the market research process for your third-party logistics services organization.

In this regard, you should look for information to help you grow your company, information that will give you trustworthy insight into what your potential market will require from a third-party logistics services provider and information to help you run your third-party logistics services stress-free.

Who is the Target Market for a Third Party Logistics Services Company?

E-commerce businesses
Merchants and Warehouse Operators
Importers
Exporters
Manufacturing companies
Corporate organization.

Is Third Party Logistics Services Company a Profitable Business?

Yes, the third-party logistics services business is very profitable. Available data shows that the industry’s total revenue experienced a steady increase each year, and in 2021 it grew to 347.9 billion U.S. dollars.

Are There Existing Niches in the Industry?

Yes, there are existing niches when it comes to third-party logistics services business and they are;

Standard 3PL Provider.
3PL Service Developer.
3PL Customer Adapter.
3PL Customer Developer.

Who are the Major Competitors?

UPS Supply Chain Solutions, Inc.
FedEx Corporation
Kuehne + Nagel International AG
H. Robinson Worldwide (CHRW) Inc.
Nippon Express Co., Ltd.
BDP International
XPO LogisticsInc
DB Schenker Logistics
Burris Logistics
CEVA Logistics
DSV Panalpina A/S
Yusen Logistics Co. Ltd. (Nippon Yusen)
.

Are There County or State Regulations or Zoning Laws for Third Party Logistics Services Company?

Yes, there are zoning rules or county or state regulations governing third-party logistics services providers. Participants in this industry are expected to comply with these requirements in the county where their company will operate.

When signs direct them to do so, trucks and vans used for logistical services are required to stop at motor carrier safety and weight check stations. Additionally, a Class B CDL is required for any truck or van with a rating of 26,001 pounds or greater.

Is There a Franchise for Third Party Logistics Services Company?

Yes, there are franchise opportunities for third-party logistics companies. Here are some of them;

A.S.S. Packaging And Shipping Specialists
Postal Annex+
AIM Mail Centers
Navis Pack and Ship Centers
Central Courier
InXpress Logistics
Unishippers Global Logistics
Pack & Send Franchise
United Charis Transport LLC
Intercargo
BlueGrace Logistics Franchise
AIT Freight Systems
World Options
Pak Mail
Our Town America

What Do You Need to Start a Third-Party Logistics Services Company?

A Feasibility Report
Business and Marketing Plans
Business Licenses and Permits
Ships or Collaborate with Ship Owners
Insurance
EIN (Employer Identification Number)/Federal Tax ID Number.
A Corporate Bank Account
Employees
Shipping Containers and Equipment

Choose a Memorable Business Name

When looking to start a business, before you can begin to file the necessary documents with the constituted authorities or start your website, it is necessary that you come up with a name that you will be recognized with. It is essential that the name you come up with can easily be pronounced, is unique and easily memorable.

Some of the catchy business name ideas suitable for a third party logistics business are;

Creative Third Party Logistics Business Name ideas

Trackers© Third Party Logistics Services Company, Inc.
Excel® Third Party Logistics Services Company, LLC
Air Nest© Third Party Logistics Services Company, Inc.
Cursor® Third Party Logistics Services Company, Inc.
Logan Martins™ Third Party Logistics Services Company, Inc.
Panamá City™ Third Party Logistics Services Company, LLC.
Fast Lift© Third Party Logistics Services Company, LLC
RISE Groups® Third Party Logistics Services Company, Inc.
Diamond Line© Third Party Logistics Services Company, Inc.
Red Tape© Third Party Logistics Services Company, Inc.
Send Fast® Third Party Logistics Services Company, LLC
The Wing® Third Party Logistics Services Company, LLC
Cally Silicon™ Third Party Logistics Services Company, LLC
Lindsay Tammy© Third Party Logistics Services Company, Inc.
Sammy Davids® Third Party Logistics Services Company, Inc.
Fernand Jackson™ Third Party Logistics Services Company, Inc.
Phil Nathan™ Third Party Logistics Services Company, Inc.
Bonny Halem© Third Party Logistics Services Company, Inc.
Carlos Alex® Third Party Logistics Services Company, LLC
Detroit Connect™ Logistics Services Company, Inc.

Register Your Business

What Type of Business Structure is Best for Third Party Logistics Services Company?

Although there are a number of possibilities, including sole proprietorship, partnership, limited liability company (LLC), and corporation, the one that the majority of participants in this industry consider when it comes to the business structure for a third-party logistics services company is an LLC.

An LLC is frequently taken into account by service providers that seek to safeguard themselves against legal action. Please note that if an LLC has any workers or needs to file any of the excise tax forms listed below, it will also need an EIN. Most newly formed single-member LLCs will need to obtain an EIN because they are considered disregarded entities.

Steps to Form an LLC

Choose a Name for Your LLC.
File Articles of Organization.
Choose a registered agent.
Decide on member vs. manager management.
Create an LLC operating agreement.
Comply with other tax and regulatory requirements.
File annual reports.

What Type of License is Needed to Open a Third-Party Logistics Services Company?

General Business License
Zonal Permits
Signage Permit
Operational State Facility Inspections for your ships and yards (warehouse)

What Type of Certification is Needed to start a Third-Party Logistics Company?

You don’t need any certifications to start a third-party logistics services company.

What Documents are Needed to Open a Third-Party Logistics Services Company?

These are some of the basic legal documents that you are expected to have in place if you want to legally run a third-party logistics services company in the United States of America;

DBA
EIN
Business and liability insurance
Federal Tax Payer’s ID
State Permit and Building Approval (For your parking)
Certificate of Incorporation
Business License
Business Plan
Employment Agreement (offer letters)
Operating Agreement for LLCs
Insurance Policy
Online Terms of Use
Online Privacy Policy Document
Contract Document
Company Bylaws
Memorandum of Understanding (MoU)

Do You Need a Trademark, Copyright, or Patent?

Generally speaking, registering for intellectual property protection or a trademark may not be necessary if you are thinking about launching a third-party logistics business. This is because the nature of the business allows you to successfully manage the firm without having any reason to sue anyone for using your intellectual property.

Cost Analysis and Budgeting

How Much Does It Cost to Start a Third-Party Logistics Company?

Starting a typical third-party logistics service company will set you back more than $250,000.

What are the Costs Involved in Starting a Third Party Logistics Company?

The total fee for registering the business in the United States of America – $750.
Legal expenses for obtaining licenses and permits as well as the accounting services totaling – $10,200.
Marketing promotion expenses – $5,000
The cost of hiring a business consultant (writing of business plans inclusive) – $4,500.
Insurance (general liability, workers’ compensation, and property casualty) coverage at a total premium – $22,400.
The cost of logistics software, accounting software, CRM software, and Payroll Software – $7,500
The cost of leasing a warehouse facility (long-term lease agreement) – $120,600.
The cost for facility remodeling and installations – $20,000.
The cost for the purchase of vans, trucks, and bikes – $80,000
Other start-up expenses including stationery – $500
Phone and utility deposits will cost – ($2,500)
Operational cost for the first 3 months (salaries of employees, payments of bills et al) – $80,000
The cost for store equipment (cash register, security, ventilation, signage) – $3,150
The cost for the purchase of office furniture and gadgets (Computers, Printers, Telephone, TVs, tables, and chairs et al) – $20,000.
The cost of launching an official website – $600
The cost for our grand opening party – $10,000
Miscellaneous – $25,000

What Factors Determine the Cost of Opening a Third-Party Logistics Company?

The size of third party logistics company (the number of vans, trucks, and bikes owned)
The choice of location
The required licenses and permits
The cost of hiring and paying a business consultant and attorney
The cost for branding, promotion, and marketing of the company
The cost for furnishing and equipping the facility
The cost of insurance policy covers
The cost of registering the business
Cost of recruiting and training your staff
The cost for the purchase and customizing of uniforms
The cost for the grand opening of the third-party logistics services company

Do You Need to Build a Facility? If YES, How Much Will It Cost?

Although it is not mandatory, but if you have the necessary funding you might consider building your own warehouse and administrative office. The fact is that you will have the chance to design a warehouse facility that properly reflects your overall business aims and vision if you build or renovate a warehouse facility.

What are the Ongoing Expenses of a Third Party Logistics Services Company?

Fueling
Utility bills (internet subscriptions, phone bills, signage and software renewal fees et al)
Salaries of employees
Vans, trucks, and bikes maintenance
Insurance
Marketing costs

What is the Average Salary of your Staff?

Chief Operating Officer (Owner) – $68,000 Per Year
Admin and HR Manager – $48,000 Per Year
Transport and Logistics Manager $48,000 Per Year
Marketing and Sales Executive (Business Developer) – $42,000 Per Year
Accountant $38,000 Per Year
Truck and Van Drivers – $36,800 Per Year
Material Handlers / Yard Spotters / Forklifts Operators – $28,000 Per Year
Customer Service Officer (Receptionist) – $26,100 Per Year
Security Guard -$24,000 Per Year

How Do You Get Funding to Start a Third Party Logistics Company?

Raising money from personal savings and sale of personal stocks and properties
Raising money from investors and business partners
Sell shares to interested investors
Applying for a loan from your bank/banks.

Write a Business Plan

Executive Summary

Send Fast© Third Party Logistics Services Company, Inc. is a registered and licensed third-party logistics services company that will be based in the heart of Albany, New York. We are a supply chain logistics company that offers a full range of services, including e-commerce fulfillment, reverse logistics, last-mile delivery, warehousing & distribution, transportation logistics, and cutting-edge technology.

Send Fast© Third Party Logistics Services Company, Inc. has been able to secure all relevant licenses and permits to operate in the United States. We will ensure that we abide by the rules and regulations guiding the shipping and logistics industry.

Products and Service

International Transportation Management (ITM).
Freight forwarding
Domestic Transportation Management (DTM)
Warehousing and Distribution (W&D)
Value-Added Logistics Services (VALs)

Mission Statement

Our mission is to help major participants in various industries by offering effective third-party logistics solutions. We will guarantee prompt delivery of the goods that enable modern life through partnerships with leading manufacturing and distribution businesses.

Vision Statement

Our vision is to become one of the preferred choices for individuals and organizations when it comes to the demand for third-party logistics services across the United States.

Goals and Objectives

The goals and objectives of a third-party logistics services company are to help businesses and organizations handle their order processing, shipping, and receiving as well as warehousing.

Organizational Structure

Chief Operating Officer (President)
Admin and HR Manager
Shipping and Logistics Manager
Marketing and Sales Executive (Business Developer)
Accountant
Truck and Van Drivers
Material Handlers/Yard Spotters /Forklifts Operators
Customer Service Officer (Receptionist)

Marketing Plan

SWOT Analysis

Strength:

Excellent operational history
Attention to detail.
Accurate estimates with no hidden costs.
Experience and trained professionals.
Large storage facility.
Excellent customer testimonials.
Access to reliable transport and logistics software.

Weakness:

Not enough existing clientele to run at full capacity immediately
Owner is new to large scale marketing
Will need a loan to build our facility and to purchase our first set of trucks and vans
Owner is currently running the business solo and will need to manage construction/build out the existing business
Lack of economies of scale.

Opportunities:

Growing import, export and eCommerce activities in the United States.
Build upon existing clientele
Online market, new services, new technology, and of course the opening of new markets.
Increase in production activities and warehousing.

Threat:

Loans diminish profitability until they are paid off
The first year will be financially tight while we gain customers and pay off loans
Competition in the area could increase
Management of employees requires time, money, and effort
Liability problems (Financing of trucks and vans that is bound to depreciate)
The transport department could change its regulatory status and decide to enforce strict regulations that can strangulate new businesses.

How Do Third-Party Logistics Services Companies Make Money?

Third party logistics companies make money by charging clients for the following services;

International Transportation Management (ITM).
Freight forwarding
Domestic Transportation Management (DTM)
Warehousing and Distribution (W&D)
Value-Added Logistics Services (VALs)

Payment Options

Payment via bank transfer
Payment with cash
Payment via credit cards/Point of Sale Machines (POS Machines)
Payment via online bank transfer
Payment via check
Payment via mobile money transfer
Payment via bank draft

Sales & Advertising Strategies

Introduce Your third-party logistics services company by sending introductory letters alongside our brochure to importers and exporters, merchants and warehouse operators, and key stakeholders in and around your city and state
Print out fliers and business cards and strategically drop them in offices, libraries, public facilities, train stations et al.
Use friends and family to spread the word about your business
Place a small or classified advertisement in the newspaper, or local publication about your company and the services you offer
Leverage on referral networks such as agencies that will attract clients who would need your customized services
Advertise our business in relevant magazines, newspapers, TV stations, and radio stations.
Attend relevant expos, seminars, and business fairs et al to market your services
Engage in a direct marketing approach
Encourage the use of word-of-mouth marketing from loyal and satisfied customers
Join local chambers of commerce and industry to market your services.

Financial Projection

How Much Should You Charge for your Service?

We anticipate billing our customers according to the costs of the package, which will be determined by the size, weight, and destination of their delivery.

How Much Profit Do Third-Party Logistics Services Company Owners Make a Year?

Although some owners of logistics companies make as much as $382,500 and as little as $41,500, the majority of their earnings fall between $113,000 and $276,000, with top earners in the United States getting an average of $358,500 each year.

What Factors Determine the Amount of Profit to Be Made?

The capacity of the third-party logistics company (number of trucks, vans, and bikes owned)
The types of related services offerings (advanced warehouse management, inbound freight coordination, order fulfillment, outbound shipping and delivery et al)
The location of the third-party logistics company is covering
The management style of the third-party logistics company
The business approach of the third-party logistics company
The advertising and marketing strategies adopted by the third-party logistics services company.
The number of years the third-party logistics services company is in business

What is the Profit Margin of a Third Party Logistics Services Company?

The third-party logistics services company’s profit margin is not fixed; it will, to a considerable extent depend on some elements that are particular to your type of service offerings. Depending on how far the goods need to be carried, it may range from 35 to 65 percent.

What is the Sales Forecast?

Below is the sales forecast for a third-party logistics services company. It is based on the location of the business and other factors as it relates to such startups in the United States of America;

First Fiscal Year: $550,000
Second Fiscal Year: $1.2 million
Third Fiscal Year: $2.5 million

Set Up your Shop/Office

How Do You Choose a Perfect Location for the Third-Party Logistics Services Company?

The demography of the location especially as it relates to commerce and eCommerce activities and shipping
The demand for the services offered by third-party logistics companies in the location
The purchasing power of businesses and residents of the location
Accessibility of the location
The number of third-party logistics companies in the location
The local laws and regulations in the community/state
Traffic, parking and security et al

What State and City are Best to Open a Third-Party Logistics Services Company?

Baltimore, Maryland
Pittsburgh, Pennsylvania
Pascagoula, Mississippi
Tampa Bay, Florida
Hampton Roads, Virginia
South Louisiana, Louisiana
New York City, New York
Dallas, Texas
East Rutherford, New Jersey
Long Beach, California
Baltimore, Maryland
Pittsburgh, Pennsylvania
Pascagoula, Mississippi
Tampa Bay, Florida
Hampton Roads, Virginia.

What Equipment is Needed to Operate a Third-Party Logistics Services Company?

You should be prepared to purchase forklifts, loaders, packaging containers, pallets and crates et al. You will also need computers/laptops, internet, telephone, fax machines, and office furniture (chairs, tables, and shelves) amongst others.

Hire Employees

When it comes to hiring employees for a standard third-party logistics services company, you should make plans to hire a competent chief executive officer (you can occupy this position), admin and HR manager, transport and logistics manager, marketing and sales executive (business developer), accountant, truck and van drivers, material handlers/yard spotters/forklifts operators and customer service officer (receptionist).

Launch the Business Proper

Nowadays, no firm providing third-party logistics services opens its doors for business without first planning an opening party to formally launch the company. If you have a limited budget, you may want to do a soft opening party. If not, you may want to host a grand opening celebration.

A successful launch of the third-party logistics company will enable you to formally notify residents of your city that your third-party logistics services firm is open for business.

What Makes a Third-Party Logistics Services Company Successful?

Choose a good location and reliable, software, trucks, and vans to launch the business
Hire only competent, hardworking, and trustworthy staff
Throw an open house grand party before officially opening the business
Be deliberate with your marketing sales approach
Encourage the use of word of mouth to promote your third-party logistics company
Leverage all available online and offline platforms to promote your third-party logistics services company

What Happens During a Typical Day at a Third-Party Logistics Services Company?

The business is open for the day’s work
The trucks and vans are cleaned and ready for deliveries
Loading and offloading of deliveries
Schedule maintenance of trucks and vans are carried out
Marketing/website upkeep
Supply ordering
Administrative duties
The business is closed for the day.

What Skills and Experience Do You Need to Build a Third-Party Logistics Services Company?

Business management skills
Customer services skills
Interpersonal skill
Logistics and material handling skills
Bargaining skill
Work experience in the shipping and logistics industry
Experience in managing people
Experience in business administration
Experience in handling logistics and shipping software.