Third-party logistics (3PL) is a rapidly growing industry that provides companies with the opportunity to outsource their distribution and transportation services.
With the rise of online commerce, many businesses are realizing the value of outsourcing these services to 3PL providers due to their expertise, knowledge and experience in delivering goods on time, every time.
3PL providers offer a wide range of services including:
- Order fulfillment
- Warehouse management
- Freight forwarding
- Inventory control
- And more
As an essential part of any business’s supply chain strategy, 3PL helps companies reduce expenses, increase efficiency and improve customer service.
And if you sell on Amazon, you’re probably wondering if you should use a 3PL vs. FBA prep for your e-commerce supply chain.
However, in this blog post, we’ll explore the role of 3PL in the modern business world, how it can benefit your company and best practices for selecting a reliable partner.
By understanding the unique strengths that come from leveraging third-party logistics services alongside the potential pitfalls associated with them, you can make an informed decision about how best to use 3PLs to benefit your business.
Use this outline to skip to any section of this page:
- What is a 3PL in simple words?
- What is the role of a 3PL?
- How do 3PL companies work?
- What services do 3PL companies provide?
- Third-party logistics examples
What is a 3PL in simple words?
A 3PL means “third-party logistics” – which usually means a supply chain company that provides some combination of warehousing, fulfillment, distribution, and logistics for other companies. This can also include functions such as receiving, storage, picking, packing, order processing + customization, and transportation management.
What is the role of a 3PL?
A 3PL company provides outsourced logistics services to companies of all sizes. This can include anything from:
- Warehousing
- Fulfillment
- Transportation
- Distribution
By outsourcing these services, companies can save money, improve efficiency and scale much faster – instead of worrying about the management hassles of running a warehouse and fulfillment operation.
3PLs are beneficial for small businesses in particular, as they often don’t have the infrastructure or manpower to handle all of their own logistics needs. A 3PL can help a business scale up or down as needed, without having to invest in new facilities or hire additional employees.
How do 3PL companies work?
Warehouse location with trained staff
3PL companies provide a much needed service for businesses that need to outsource their warehousing and distribution needs.
By having a warehouse location with trained staff, 3PL companies make it easy for businesses to store and distribute their products. The process usually works like this:
- The business sends the products to the 3PL company’s warehouse, and the 3PL company then stores the products and distributes them as needed.
- This can be a huge relief for businesses that don’t have the time or resources to manage their own warehousing and distribution.
- Plus, 3PL companies can often provide a lower cost than if the business were to manage these services in-house.
Handling complex packaging + shipping requirements
3PL companies can provide a range of services – such as packaging and shipping, order fulfillment, inventory management, customer service support, returns processing and more.
By providing these services at an affordable rate, 3PL companies can help businesses save time and money while still meeting the demands of their customers.
- Many 3PL companies employ a staff that is familiar with international regulations regarding importing and exporting goods—
- This makes 3PL partners a great resource for businesses that need to ship goods across borders.
- They often offer value-added services such as web-based shipment tracking systems, real-time data reporting on supply chain performance and analytics.
- This can help businesses make better decisions about their logistics operations.
This makes it easy for businesses to have visibility into their supply chain and make more informed decisions about their warehousing and distribution needs.
By outsourcing to a 3PL company, businesses can take advantage of all the benefits these services offer without having to manage them in-house. Thus, 3PL companies can be a great asset for businesses looking to improve their supply chain operations.
Coordinate with distribution + logistics partners
In order to succeed in the ever-competitive world of third-party logistics (3PL), companies need to have strong partnerships and relationships with distributors and other logistics providers. This can take a number of different forms, but often includes things like co-locating facilities, sharing resources, or collaborating on transportation.
By working together, 3PLs can provide their customers with a comprehensive distribution and logistics solution that meets their needs. This can be especially important for companies that are looking to expand into new markets or are struggling to keep up with demand.
The benefits of these partnerships can be significant:
- By collaborating with a trusted partner, 3PLs can improve their efficiency and speed, while also reducing costs.
- This can be a huge advantage in a competitive market where margins are thin.
- Ultimately, this type of collaboration is essential for companies that want to be successful in the 3PL space.
By building strong relationships with distributors and other logistics providers, they can create a competitive edge that allows them to stand out from the competition.
What services do 3PL companies provide?
In terms of inventory management, 3PLs encompass everything from picking to packing to shipping. In other words, if your business needs help with any part of inventory prep, a 3PL company is who you turn to.
Picking
Also called order fulfillment, picking is the process of gathering items from inventory and getting them ready for shipping. This can be a time-consuming and labor-intensive task, especially if you have a large inventory. But with a 3PL company taking care of things, you can rest assured that your orders will be filled quickly and accurately.
Most 3PL companies also cover pick-by-item, where individual items are selected from your inventory and packed for shipping. Beyond that, there’s group picking – which involves multiple items from one order combined in the same package. Wave picking is when several orders are collected at once to increase efficiency.
Packing
Packing refers to putting items in boxes or containers based on your specific requirements – so that they can be shipped with full compliance (and without being damaged).
This usually involves using packing materials like bubble wrap or packing peanuts.
- If you’re selling fragile items, it’s especially important to use proper packing techniques so that your products arrive at their destination in one piece.
- When it comes to selecting the appropriate packing materials for cushioning and protecting the contents during transport, a 3PL is there to deliver.
- If your business requires specialized packaging options, such as custom labeling or branding, a 3PL company can also provide these services.
3PL companies can also handle additional services related to packing, such as SKUs and barcoding. If necessary, they can even create customized packaging solutions tailored to the specific needs of your business.
For example, if you need to include promotional materials with each shipment, a 3PL provider can help you come up with an efficient solution for doing so without sacrificing package integrity.
Shipping
The best 3PLs have unique relationships with UPS, FedEx, or DHL – allowing you to take advantage of special cost-saving rates. A 3PL company can take care of all the details for you, including booking transportation and tracking packages until they arrive at their destination.
By arranging transportation, tracking packages through their delivery networks, and providing timely customer service, most companies typically find 3PLs to be a useful partner to grow and scale their business.
- They’re also responsible for ordering the right supplies needed to fulfill orders, like boxes and labels.
- By outsourcing these activities to a 3PL company, businesses can save time and money while ensuring that their customers receive quality products in a timely manner.
- 3PL providers also provide scalability by allowing businesses to manage peak periods having to invest heavily in additional personnel or equipment.
- Plus, they can provide cost-efficient ways of transporting goods across borders as well as access to global markets.
Ultimately, 3PLs offer comprehensive logistics solutions that enable businesses of all sizes to quickly and efficiently manage their supply chain operations.
As you can see, there are many different services that 3PL companies provide. If your business is struggling with any part of the supply chain, working with a 3PL company is a great solution. These companies can take care of everything from filling orders to packing and shipping products—all while saving you time and money in the process.
Third-party logistics examples
Inventory management
One way that 3PLs are helping businesses manage their inventories is by providing tracking and visibility solutions.
These solutions provide real-time data about your inventory levels so that you can quickly identify any discrepancies or shortages in your stock levels at a glance.
- Some 3PLs even offer customizable reports that allow you to analyze this data over time
- This allows you to better understand your customer demand patterns and anticipate any potential inventory problems before they arise.
- 3PLs can also provide valuable insight into how to reduce costs associated with inventory management without sacrificing quality or customer satisfaction.
From negotiating better rates with vendors to developing more efficient shipping methods, a 3PL company can help you find ways to reduce costs across the board.
Staying organized
Organization is incredibly crucial when it comes to inventory management. Why? Because it can be difficult for small businesses to stay organized without the proper guidance or assistance from outside sources.
A 3PL company will work with you to develop systems that keep track of all aspects of your inventory, from incoming shipments to outgoing orders. This ensures that everything runs smoothly and there are no disruptions in service due to mismanagement or lack of organization.
Bundling and kitting
If you are a business looking to increase efficiency, reduce costs, and save time, then a third-party logistics (3PL) provider is likely a good fit.
Some 3PLs (like ZonPrep) specialize in the bundling, kitting, and shipping processes. Let’s look at some specific examples of how these types of services can help companies with bundling and kitting.
- Bundling is the practice of packaging multiple products together into one package.
- This helps reduce shipping costs because it allows companies to combine multiple orders into one shipment instead of having to send out separate shipments for each product order.
- A 3PL provider can help businesses with this process by providing efficient software solutions that allow them to easily bundle multiple items into one package
- This allows you to avoid having to manually assemble each package individually.
- They can also provide specialized materials such as bubble wrap or packing peanuts for extra protection during transit.
Kitting is similar to bundling – but involves combining multiple products together into a single kit that customers can purchase as a complete package instead of buying all the components separately.
- Kitting services from 3PLs reduce shipping costs because it eliminates the need for individual packaging and allows companies to ship complete kits rather than individual components.
- A 3PL provider can help businesses with this process by providing specialized software solutions that allow them to quickly and accurately assemble custom kits based on customer orders.
- They can also provide specialized materials such as boxes or dividers to ensure that each component arrives safely and securely intact.
Shipping
A 3PL company can help companies streamline their shipping process by offering automated labeling services that eliminate the need for manual labeling of packages prior to shipping.
They can also provide integrated tracking solutions that allow companies to keep tabs on their shipments from start to finish, so they know exactly where their packages are at all times.
As a nice bonus, they can also secure discounted rates from major carriers like FedEx or UPS – which can further reduce overall shipping costs for businesses.
To sum it up:
- Third-party logistics providers can help increase efficiency, reduce costs, and save time when it comes to bundling, kitting, and shipping processes.
- From automated labeling services to integrated tracking solutions, these providers offer cost-saving solutions that allow companies to focus on what matters most—their core business operations.
- 3PL companies are experts in this field – with years of experience dealing with these types of tasks. With their help, you’ll be able to get your products out faster while ensuring they arrive safely at their destination every time!
Overflow warehousing
Storing inventory (with efficiency and cost-effectiveness) is a challenge that many companies fall short of – especially when you experience an overflow of inventory.
This can happen during seasonal periods, where you expect to move a lot of inventory but sales volume doesn’t quite pan out.
Fortunately, there are Third-Party Logistics (3PL) companies that offer an array of services that can help you manage inventory overflow and make sure that your products are stored & shipped efficiently – without needing to throttle production, tie-up inventory or waste unnecessary storage fees.
Let’s take a look at some of the advantages that working with a 3PL company can offer, when it comes to having too much inventory on hand:
- Overflow warehousing helps to meet this need by providing temporary, offsite warehouse space for businesses that are experiencing a surge in their product inventory.
- This type of warehousing offers additional space during peak times without the need to invest in long-term warehouse infrastructure.
- Overflow warehousing can also help prevent stock outs or excessive inventory investments.
As a result, it can offer both cost savings in terms of costs associated with hiring more personnel or acquiring more physical space as well as improve customer service by ensuring product availability when needed.
On top of that, overflow warehouses often provide flexible rental agreements and access to vast resources such as experienced staff and updated equipment that make storage operations more efficient.
Final thoughts on 3PLs
Third party logistics companies play a pivotal role in the supply chain.
They’re a valuable asset for any business looking to increase efficiency and cost savings – while providing a number of services, including:
- Warehousing
- Transportation
- Inventory management
- Order fulfillment services
- Distribution
- And more
By outsourcing these tasks to third party logistics companies, businesses can focus on their core competencies and reduce the costs associated with managing their own supply chains.
Third party logistics companies also help businesses keep up with changing market trends by providing innovative solutions and strategies.
- For example, they can help businesses manage their inventory more effectively by utilizing data-driven technology solutions that make it easier to track demand and optimize stock levels.
- Additionally, they offer value-added services such as product customization services that enable businesses to respond quickly to customer requests and demands.
- Beyond that, third party logistics companies are often more cost-effective than managing the supply chain operations in-house because they have access to better resources and infrastructure.
In short, third party logistics companies are invaluable in helping businesses streamline their operations while simultaneously reducing costs.
