Know The Basics of Third Party Logistics (3PL)

As businesses quickly expand, it gets increasingly difficult to handle the various operations in-house. Especially for small e-commerce businesses that are expanding at a fast rate and do not have the resources to efficiently carry out all activities on their own. This is where the services of a third party logistics partner become necessary. The 3PL partner takes care of the supply-chain operations thereby acting as the link between your business manufacturing and your end customers.

 

This blog is an introductory guide to everything you need to know about 3PL (third party logistics) which would help you decide if they are necessary for your business. 

Third-party logistics, also called 3PL, refers to a business model which involves outsourcing eCommerce logistics processes to a third-party business to fulfill their requirements for inventory management, warehousing, distribution, and other supply chain needs. 

 

With the growth and development of e-commerce, 3PL has become a common term and has increased the scope of its offerings. Currently, the supply chain integration of warehousing operations and transportation services has become synonymous with third-party logistics. 

 

A third party logistics company acts like an eCommerce fulfillment company and provides all the services needed to outsource business operations. Some of the services are

 

Different third-party providers have different areas of fulfillment and warehousing specialization. For example, some 3PL companies specialize in handling hazardous materials, whereas some store large, heavy, and expensive goods, while others deal in frozen products that need to be refrigerated. 

 

If you are a business owner who might need the services of a 3PL company, it is important for you to understand what goes on in a 3PL fulfillment center. 

Let us have a look at what takes place at a 3PL e-commerce warehouse after a customer submits an order to an online store. Here’s the process that can help, put things in order

For a 3PL company to ship an order, they need to have sufficient inventory in hand. In a 3PL warehouse, receiving inventory refers to accepting incoming inventory and then storing it. Every 3PL company is different and has its unique procedure in place to receive and store inventory. 

 

Once the inventory is received, the products are stored in fulfillment centers. Each SKU gets a dedicated storage space, which could be a shelf, a container, or a pallet. Different 3PL companies have different storage capabilities. So, it is taken that with each business growth, there will be a growth in the product line, which will increase the product volume. Therefore, it is important to choose a 3PL that can offer you additional storage space as the inventory increases.

After an order is sent to a 3PL company, it is assigned to the warehousing picking team. Picking is the process where the individual items of the customer’s order are picked from the warehouse.

Some 3PL companies have order systems requiring manual work, such as uploading customers’ order details from spreadsheets. This process is inefficient, time-consuming, and labor-intensive.

More advanced 3PL companies have implemented modern technology that has seamlessly integrated their e-commerce platform with the fulfillment process and thereby automated the shipping process.

After every item in an order is picked, they are boxed securely for shipping. Some of the most common packing materials include

 

The packing supplies used may be billed separately, or they may be included as part of the company’s fulfillment management services, depending on the type of 3PL chosen.

 

The next step is shipping, where most 3PLs will purchase and print shipping labels on behalf of the business. Some 3PLs provide competitive shipping prices, giving their clients the benefit of affordable pricing, while others have specific carrier partnerships. Pricing that is dictated by their carrier partners may be more expensive. The carrier for every order and the speed of delivery depend on the 3PL’s policies and partnerships, as well as the shipping options provided by the client and chosen by the end user. 

 

After an order is shipped, 3PLs will automatically send the tracking information to the online stores of the merchant. 

 

Return is an integral part of logistics, and several 3PLs offer return processing services. When a consumer returns an order to the 3PL, it processes the return and, according to the policies and preferences of the business, either restocks or disposes of the item. 

 

This process is convenient because customers can easily track the status of their return order, and businesses need not process their returns internally.  

 

The third-party logistics industry is growing at an exponential rate due to high market growth and fragmentation. Its versatility and adaptability to the latest market trends and technology will always give 3PLs a competitive edge. 

 

As for small- and large-scale businesses, outsourcing to 3PLs is a great way to increase capacity, reduce costs, and achieve more flexibility and reach for your business. Therefore, make an informed decision and opt for a 3PL company that would uplift your business in the long run.