Houston, Texas

Third-party logistics(3PL) is the outsourcing of a business’s logistics, including distribution, warehousing, and fulfillment services, to a 3rd party. Whether you are an ecommerce business, a retail business, or a B2B company, 3PL’s can help fulfill your logistical needs and allow you to scale your business faster than you could by yourself. This guide will provide you all the information you need to fully understand 3PL’s!

Table of Contents

What is a 3PL?

A 3PL is a company that allows you to use their warehousing, labor, equipment, and other logistical resources in order to fulfill your company’s logistical needs. 3PL’s are companies that have their own logistical infrastructures in place, and once you decide to use their services you are given access to their resources. Here is an example to help you better understand:

  • You are a large brick & mortar apparel brand that has just started selling their merchandise online. For the first few months you were able to comfortably handle the volume of orders you received, but now your online business is growing popular and your company’s existing infrastructure isn’t enough to keep fulfilling orders yourself. This is where you decide to take the services of a 3PL and outsource your logistics to them. The 3PL stores your merchandise, receives orders that were placed in your online store, and ships them to your clients.

What services do 3PL’s provide?

(We wrote a whole article on the topic, click above to go there)
  1. Fulfillment/Pick & Pack

Generally, the best 3PL companies offer integrations that work seamlessly with the largest sales platforms. Once 3PL companies receive your orders, they ship them out. The process of order receiving and shipping is called fulfillment.

  1. Storage

Once merchandise has been received at the 3PL warehouse, the inventory is stored in a fulfillment center. Each item is given a dedicated SKU (stock keeping unit) and then separated into dedicated storage locations, either on a pallet, shelf, in a bin, or some other speciality location for items such as cold chain products.

  1. Shipping/On-demand transportation

One of the most critical parts of eCommerce is the shipping of products. Most 3PLs will offer to purchase and print shipping labels for you. Some third-party logistics providers work with preferred carriers, while others compare the costs from numerous carriers. Comparing prices allows 3PLs to offer clients the most affordable shipping methods available at the delivery speed chosen by the customer.

On-demand transportation includes FTL(Full Truck Load), LTL(Less-than Truckload), Expedited services, and International Expedited.

  1. Custom value-added services

A good 3PL will be flexible according to your needs, and provide you services you require to run your business. Examples of custom services include returns handling, FBA prep, kitting, labeling, and so forth.

"A 3PL is a company that allows you to use their warehousing, labor, equipment, and other logistical resources in order to fulfill your company’s logistical needs. 3PL’s are companies that have their own logistical infrastructures in place, and once you decide to use their services you are given access to their resources"

Advantages of using a 3PL

  1. Cost savings

Every time you ship merchandise to your clients you save money on shipping, since 3PL’s have access to discounted shipping rates from major carriers

  1. Time savings

Working with a 3PL allows you to focus on your core competencies, your company’s growth, and so on.

  1. Direct access to expertise in logistics/supply chain, and direct access to a 3PL’s vast resources

3PL’s allow you to pool their expertise in logistics, dealing with carriers, and give you access to their resources and their technology. This allows you to keep growing your business without having to learn and do everything by yourself.

  1. Provide scalability and flexibility

You can scale your business instantly, and can remain flexible based on current business needs without committing capital to logistical operations.

  1. Improved customer satisfaction

Due to an increased consistency in quality-control of the packages being delivered to your customers, you will have less customers receiving the wrong or damaged item. A few 3PL’s can also handle your returns, making the whole consumer-facing logistical process far more efficient!

  1. 3PL’s help you compete with Amazon/Shopify

If you’re not selling on Amazon and want to match Amazon’s delivery performance(such as 2-day deliveries) working with a 3PL is the way to go. Same applies to Shopify, even though SFN is far smaller in scale compared to Amazon’s fulfillment network.

  1. 3PL’s help you work with Amazon/Shopify

If you are selling on Amazon and don’t want Amazon to ship your products because you want custom branding, or because Amazon has imposed inventory limits on your account, or for some other reason, a 3PL can handle your inventory to keep your sales flowing smoothly.

Disadvantages of using a 3PL

  1. Lack of control over your logistical process

A perceived disadvantage of using 3PL’s is that business owners lose control over their logistical processes. However, a good 3PL with quick response times, clear communication, and flexibility in their services allows you to maintain a higher degree of control than a 3PL with poor customer service and overall performance.

2. Increased physical distance between you, your products and the logistical process.

Conclusion

3PL’s are crucial to meet the logistical demands of an increasingly globalized economy. Whether you are a small Amazon seller or a large retail business, working with a 3PL allows you to enhance your business’s capabilities on many fronts, and lets you focus on growth. 

A Definitive Guide to the Dynamics of E-commerce and 3PLs

This comprehensive guide delves deep into the role and impact of third-party logistics providers (3PLs) in e-commerce. We dissect the complexities of warehouse selection, order fulfillment, and logistic providers’ offerings while shedding light on the inevitable growth and challenges of e-commerce logistics

Read More »