As the world becomes increasingly globalized and consumer demand for fast and free shipping keeps climbing, so does the demand for 3PL logistics (third-party logistics providers). These companies allow businesses to outsource their operational logistics- chiefly delivery, inventory management, and warehousing.
Before working with a third-party logistics partner, it’s essential to understand what 3PL is. This guide details everything you need to know about 3PL logistics to decide if they’re right for you.
What is a Third-party Logistics (3PL) Provider?
A third-party logistics provider, or 3PL for short, is an outsourced business that provides a wide range of logistics services to companies. These services include:
· Inventory management
· Picking and packing
· Shipping and receiving
· FTL and LTL freight shipping
· Reverse logistics (returns)
Some 3PL logistics also manage growth and revenue services for their client businesses. Simply put, a third-party logistics provider is a specialist company that manages single or multiple parts of a company’s transportation operations.
Growing businesses that struggle with logistics and supply chain management activities or new companies that lack warehousing and distribution resources can benefit immensely from the flexibility that 3PL providers offer. More importantly, 3PL logistics help save money by minimizing the risks businesses incur when they own and operate their warehouses.
The Growth of 3PL
The concept of 3PL logistics became popular during the early 1970s and 80s as many companies globally outsourced to third-party companies. Up to that point, contracts for transportation had featured only a second-party model (2PL), the shipper, and the carrier. Since the beginning of the 21st century, the third-party logistics industry has continued to develop rapidly due to the growth in e-commerce and increasing consumer demand for faster delivery and lower prices.
Many businesses decide to rely on third-party logistic providers as it means delegating certain duties to a knowledgeable and experienced company while also providing specialized skills and advanced technologies across the supply chain management.
5 Key Benefits of 3PL for Your Business
Companies gain many advantages by outsourcing logistics and supply chain management to a 3PL provider. Utilizing 3PL logistics offers an all-in-one solution for packaging, warehousing, and distribution. The following are five key benefits of using a 3PL provider.
1. Save time and cost: Perhaps the most significant advantage of 3PL logistics is the potential for time and cost savings. Outsourcing logistics to the 3PL provider will save your company a considerable amount of time and money. Using a 3PL provider does away with investing in technology, transportation, warehouse space, and staff to perform the logistics process. They have more leverage with trucking companies than individual shippers do. Additionally, working with a quality 3PL provider enhances efficiency and adds value to your business. It can allow your business to build a global logistical network with lower risk and higher returns. Plus, any money you save can be put to use in other areas of your business.
2. Better scalability and flexibility: The other major advantage of outsourcing to a 3PL provider is flexibility when it comes to scaling your business. In logistics, scalability means supporting business operations at their highest volumes, lowest volumes, and everything in between. For many businesses, it’s tough to predict when products will gain traction. Partnering with 3PL logistics, you can scale space, labor, and transportation to accommodate your needs. They have the necessary resources to make changes and improvements to each aspect of your supply chain services. Businesses with seasonal periods no longer need to stress over industry ups and downs and utilize more space and resources when required. Furthermore, 3PL logistics allows your business to expand into new regions without any barriers.
3. Seamless customer service: To retain a larger customer base, it is crucial to choose the right 3PL logistics that really understand the significance of customer service. A quality 3PL provider with a robust order management system can help you deliver a seamless customer service experience. They can optimize inventory and make it easier to offer customer-friendly services like shop online/ pick-up in-store and to order online from the store. 3PL’s omnichannel experience and knowledge also help to ensure that your customer enjoys the same quality of experience whether they’re shopping in-store, online, or by phone.
4. Optimised inventory management: An often-overlooked advantage of 3PL logistics is the opportunity to optimize your inventory management. While transport and logistical management are often the major reasons businesses choose to use 3PL, there is much more to be achieved. Most proficient 3PL companies provide inventory tracking and management services. This usually includes real-time tracking of inventory, giving you the most precise view of your orders possible. In addition, third-party logistic providers often use Warehouse Management Software (WMS) or Order Management Software (OMS) to automatically update inventory on the e-commerce company’s website or virtual marketplace. Enabling you to decide when you need new supplies, how much product you’re moving, and where everything is going.
5. Leverage industry experience: As an e-commerce professional, chances are you don’t have time to look into every detail of shipping and logistics. A 3PL provider is staffed by e-commerce logistics professionals, knowledgeable and up-to-date with the latest industry trends and developments in technology, logistics, and management- so you don’t have to be. Especially if you’re a start-up, who better to take care of your logistics than a company that specializes in them? Fulfillment, warehousing, and shipping come with major challenges of their own, and outsourcing to 3PL logistics allows you to focus on your core competencies.
3PL vs. 4PL: WHAT is the Difference?
Third-party logistics (3PL) and fourth-party logistics (4PL) are purchased professional services that help businesses plan and execute logistics initiatives to reach their goals.
So, what is the contrast between 3PL and 4PL?
The main difference of a 3PL and a 4PL logistic provider is the level of accountability and control. A 3PL focuses on logistics, while a 4PL handles the entire supply chain.
Here are some of the key differences between 3PL and 4PL:
· 3PL providers are more suitable for small-to-medium scale businesses, while 4PL logistic providers are good for medium-to-large scale businesses.
· 3PL providers focus more on daily operations, while 4PL providers function at the integration and optimization level.
· With 3PL providers, businesses often need to manage some aspects of the supply chain process internally, while 4PL logistic providers maintain a single point of contact for every business supply chain.
The Third-party Logistics Order Fulfilment Process
So, are you wondering what exactly happens at a third-party logistics warehouse once a customer clicks “Submit order”? Let’s dig into the entire 3PL logistics order fulfillment process from start to finish.
Step 1: Receiving
A 3PL cannot process the customer’s order if they don’t have inventory, so the first step in the process is moving your inventory to the third-party logistic provider’s warehouse. Each 3PL has its way of receiving and storing inventory.
Step 2: Picking
After a customer places an order, the 3PL’s picking team collects the item from their respective storage location and passes it to the next stage of the supply chain.
Step 3: Packing
After the items are picked, they are packaged for shipping. Depending on what packaging options your 3PL provider offers, you may be able to choose standard or customization for your orders. Typically, standard packaging includes unbranded boxes, packing tape, and bubble wrap. A good third-party logistic provider will provide the best material for packaging to protect the product along with keeping the shipping costs down.
Step 4: Shipping
Once the order is packaged, it is forwarded to a shipping center. Some 3PL’s have a preferred carrier partner, while others compare the cost to choose the best delivery speed and cost combination. Shipping carriers such as DHL, DTH, and UPS pick items from 3PL’s warehouse to ship.
Step 5: Returns
Returns, also known as reverse logistics, are a major concern for businesses handling large stocks of inventory on their own. When you hand over the returns process to a 3PL provider, all returns are directed back to the 3PL, making returns less painful. With 3PL’s return management service, returns are easily processed, restocked, or disposed of, depending on your company’s policy.
Who uses third-party logistics (3PL)?
There are a variety of industries that can benefit from the services of third-party logistics such as retail, medical, manufacturing, medical, pharmaceuticals, restaurants, and construction.
What is the main purpose of 3PL?
The main purpose of the 3PL provider is to improve the efficiency of shippers in some way. Whether that be by minimizing risk, saving money, or improving the operations. In short, when you partner with a third-party logistic provider, your supply chain operations become much simpler for you.
What is 4PL?
A fourth-party logistics provider (4PL) is a model that represents a higher supply chain management level for the customer than 3PL. They give their clients a “control tower” view of their supply chains.
Third-party logistics (3PL) providers can help streamline your supply chains and save time and money. Putting trust in the 3PL logistics provider with your shipping logistics can bring a lot of difference in how your business functions and focus on increasing your overall value to customers. The online transport and networking community like Vahak enables logistics companies to connect with truck owners, brokers, and transporters across the country through its platform.