From warehousing, inventory management and order fulfillment, 3PLs are at the heart of the supply chain. For companies that rely on these logistics operations, the receipt, storage, and transportation of inventory are key components of their growth—especially when supply chain management can be complex. With the specialization of logistics functions becoming a necessity for many organizations, especially with the rise of e-commerce and omni-channel fulfillment, the outsourcing of these specific responsibilities has fallen to third-party warehouse operations known as 3PLs or third-party logistics warehouses.
But what exactly is 3PL? What are they doing? What’s the reason for hiring one?
What is third-party logistics?
Third-party logistics or 3PL is used interchangeably with fulfillment warehouse or fulfillment center. Companies that offer 3PL services offer many of the same services as order fulfillment companies. These services include:
Warehousing
Inventory management
Shipping and receiving
FTL and LTL Freight
Pick and Pack
Kitting and Customization
Reverse Logistics (Returns)
A third-party logistics company acts as an e-commerce fulfillment company. It provides all the services you need to outsource your logistics business.
Different 3PL service companies specialize in different types of fulfillment and warehousing. Some come with cold fulfillment. These warehouses can store and deliver food that needs to be refrigerated or frozen. Other 3PL companies are prepared to store and transport hazardous materials.
What is not a 3PL?
Private warehouses or warehouses that only fulfill orders for their own products are not considered 3PLs. These types of warehouses are usually owned and managed by a manufacturer or retail store. They use specific accounting, billing, and shipping software that often doesn’t have the flexibility to manage inventory and billing for multiple customers. If private warehouses want to profit from additional warehouse space, they may need to invest in a warehouse management system (WMS) designed for 3PL.
The benefits of third-party logistics
This operating model has several benefits.
1. Reduce the cost of goods sold. When you pre-purchase a product, you will pay the wholesale price. The more you buy, the lower your costs and the higher your profit margins.
Greater flexibility in product sourcing. When you use an e-commerce fulfillment business model, you can more easily source products from multiple manufacturers. All your items will be stored in the same warehouse, so orders containing products from multiple suppliers can be shipped in the same box. This saves on shipping.
Greater control of your logistics operations. You can choose an order fulfillment partner that delivers the service your customers expect.
Faster order fulfillment. You can choose a third-party logistics service with warehouse locations for fast delivery of your order.
Easier returns processing. The 3PL warehouse that ships your products can provide customer service and process any returns seamlessly. This increases customer satisfaction and allows you to quickly put products back in stock.
2. Leverage industry expertise
As an ecommerce professional, you may not have the time to master every detail of shipping and logistics. That’s where a 3PL comes in: Comprised of e-commerce logistics professionals, your 3PL will be knowledgeable and up-to-date with the latest industry trends and complexities – so you don’t have to.
3PL companies also have technical resources and a network of partners—including marketing agencies, custom packaging suppliers, and more—that enable them to continuously improve supply chain efficiencies and perform supply chain optimizations to help drive e-commerce success.
3. Expand your reach
If you only sell in one region, you are limiting your business potential. Partnering with a 3PL can help you expand your reach.
3PL companies have a huge network of fulfillment centers, which in-house fulfillment lacks. 3PLs with fulfillment centers in major U.S. cities can help you reduce shipping costs and shipping times for your orders.
Shipping orders from one location also means higher postage for packages that span multiple shipping zones.
