3PL Basics: Everything You Need To Know About Third-Party Logistics Services

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3PL companies are those companies that provide services such as transportation, distribution services, warehousing services, order fulfillment, and many other services. The process of the 3PL system is not as complicated as you might think. Companies that specialize in 3PL receive your products and take over the delivery, ensuring that they reach their intended destination in one piece. This article will highlight all the important details you need to know about third-party logistics (3PL) services.

What are third-party logistics (3PL) services?

The third-party logistics service is very common that provides various logistic services such as storage, distribution, transportation, etc. In logistics and supply chain management, third-party logistics refers to an organization’s use of third-party enterprises to outsource distribution, warehousing, and fulfillment services.

Companies that provide 3PL services allow various e-commerce business owners to accomplish more with more opportunities, tools, and infrastructure to finish their retail orders properly. The organizations that provide 3PL services are a vital part of supply chain management which has helped thousands of businesses around the globe to grow.

A third-party logistics company provides various types of services. For example, they provide inventory services to many other small companies. Moreover, they also offer to order and receive goods from somewhere else in the supply chain of the company. They also provide services like order fulfillment, transportation. Lastly, 3PL suppliers provide a wide range of services to commercial and industrial customers, including transportation, warehousing, supply chain management, and logistical operations.

What do 3PL companies do?

As we all know 3PL companies are those companies that provide various services which include transporting goods, storing various goods, procurement, order fulfillment, freight services, good distribution, etc. in this modern world to expand one’s business these 3PL companies play a vital role in the supply chain management. Without the help of the product, the supply chain will become very difficult, almost near impossible. 3PL companies do various kinds of work. For example:

Storing & Warehousing Services

Almost all of the 3PL companies provide services like storing and warehousing services. This is one of their principal responsibilities is to supervise the secure storage of items until they are required elsewhere.

They provide both public warehousing, contract warehousing services. Moreover, they provide warehousing services like a specialist storage facility for different kinds of goods like chemicals, foods, etc. which needs a special environment to store. Their services also include high security.

Distribution Services

Another service offered by the 3PL providers is distribution. They usually transport goods from the provider’s storage to the end customers. They also deliver the goods to other storage facilities or warehouses to be sent to the final consumer. As part of distribution services, the 3PL company provides services such as GPS tracking to track their product’s whereabouts.

Moreover, cross-docking, intermodal transport, brokerage, drop deck, and lowboy transport, full container load (FCL), less than container load (LCL), less than truckload (LTL), and truckload (TL) are all means of distribution methods. And these are all based on AI mapping and modeling. Therefore, customers have complete transparency about the information of their products.

Order Fulfillment Services

Another service provided by 3PL companies is order management and fulfillment. This includes receiving purchasing requests and orders from the customer and managing the inventory and deducting stock levels from the received order. Also picking up the ordered product and packaging and finally distributed to the final receiver. All of these are done by the 3PL providers.

Sometimes different companies finish different parts of the work like picking is done by one company and packing is done by another company. However, most of the time, all of the tasks are done by one single company but the cost can be slightly higher.

Freight Forwarding Services

Sometimes some of the 3PL companies offer freight forwarding services. Renting out space in distribution fleets, managing clients and providing various interactions, creating schedules, and tracking successfully. Also, freight forwarding services are operated with a variety of modes of transportation, including land, sea, and air.

Reverse Logistics

Some 3PL providers also offer reverse logistics services. Reverse logistics services include the return of unfit and problematic products. It usually enables a client to return an item and handles refunds, product forwarding, and the management or disposal of excess inventory.

How much do 3PL services cost?

The pricing system of the 3PL services is a little complicated as there could be some hidden costs involved that cannot be neglected. Also, many factors are involved which affect the final cost of the whole service. Usually, $25 to $50 per hour is the starting price of the 3PL services.

Also, some 3PLs charge a flat rate that varies depending on the order, batch, or item. For storage and warehousing facilities, the majority of 3PL companies’ charges are based on how much space a pallet or goods take up. Also, prices are varied based on the load, square foot, or square meter that a product or package takes up. Some factors change the cost of the services, varying from one 3PL company to the rest. They are:

Inventory Receiving

A fixed rate is set for receiving and sorting inventories from a warehouse. Most of the 3PL companies charge a flat rate based on the pallet of the goods.

Item Storage

After receiving the shipment, things will need to be stored in the bins, shelves, pallets, or even special locations like refrigerators or freezers after they arrive. Although most companies charge by cubic foot, some may charge by the number of bins, shelves, or pallets required. Also, some companies charge a little more for cold storage.

Kitting

For some products that need separate storage, customers need to pay a little more for that service. The extra charge is dependent on the complexity of the kitting requirements.

Packing Material

All the packing materials such as boxes, bubble wraps, plastic packets, and other materials add a little more cost to the service.

Shipping Cost

Customers have to pay for the shipping cost for each item and the cost may vary depending on the cost of the label and printing.

Return Processing

Most of the 3PL companies offer return and refund options as customer service. For this, they also charge extra for return shipping and restocking fees.

Apart from these services, there are some other factors and services which cause the extra charges. Every 3PL provider charges more for every service they offer.

The benefits of using a 3PL company

3PL providers are businesses that provide complete, sometimes one-stop solutions for enterprise supply chains in packaging, warehousing, transportation, and order fulfillment. Third-party logistics, or 3PL, is a service that allows companies to outsource or hire third-party companies to complete jobs in their supply chain.

The advantages of using a third-party logistics company are enormous. They help in the supply chain management and also help e-commerce companies to expand their businesses. For example:

  • One can easily save money and other investments as 3PL companies already provide transportation, warehouse space, different tracking technology, staff facilities, etc. Also one can easily minimize the extra cost. Moreover, there is always scope for discount and negotiation while doing business.
  • It’s difficult to predict and accommodate internal expertise in all the capacities and geographies required in today’s complex global market landscape. Transport documentation, import and export, international compliance, and economic rules are all areas where a 3PL service provider will have knowledge and experience. Therefore 3PL companies will be very beneficial in this part of business operations.
  • Furthermore, third-party logistics companies help a company to grow by giving them opportunities to enter a market and get established. It can save money to be able to handle inventory in a new market without having to spend money on warehouses, equipment, or staff.
  • Customer satisfaction is the most important in any business. The involvement of a third-party logistics company helps to improve services such as quick response, on-time deliveries, brand establishment and enhanced reliability, and many more. All of these result in higher customer satisfaction, improving the likelihood of a higher conversion rate.

When do you need to hire a 3PL company?

Many benefits come with hiring a 3PL company. If someone wants to expand their business, they should hire a 3PL company because it will help them generate more profit, higher customer satisfaction, and a more loyal customer base. Also, they can save a lot of expenses from it. The benefit of hiring a 3PL company is a lot.

No one will tell you to hire a 3PL company to take care of the logistics and inventories. You have to understand by yourself by looking at the position of your company’s financial statement and other internal conditions. It could be about time that you hire one if the customer service is piling up with more and more complaints and are unable to fix them. The 3PL company can help your business avoid these tricky situations as they can deliver on time and answer customers faster on your behalf.

Moreover, it may be about time to start thinking about working with a 3PL if your employees are unable to finish their tasks and the workload is increasing every day. A 3PL company understands the ins and outs of logistics hiring, as well as having a large talent pool to ensure that you always have adequate staffing levels to fulfill demand.

Also, companies may raise their safety stock as a buffer against concerns such as low inventory accuracy, poor visibility, and operational inefficiencies. Carrying too much safety stock or outmoded inventory is not only expensive, but it may also contribute to overcapacity in your warehouses which can lead to product damage and safety issues, as well as inhibit production. As 3PL companies specialize in this, they can provide visibility, analytics, and efficiencies over operations as well.

What does a 3PL process look like?

3PL companies and their services are very common in the modern world. They help in many ways and shipping and deliveries have become faster and easier, thanks to them. They act as an e-commerce fulfillment company that provides all the services needed to outsource various logistics operations of a company.

The process of a 3PL company is quite simple. They will ship your goods and services to their final destination or store them in their warehouse. They will directly ship the products to the 3rd party logistics warehouse from the factory. Third-party logistics companies can offer a variety of services once your inventory arrives. Meanwhile, they provide various services such as picking, packing, and shipping, inventory management, and many more.

How to choose a 3PL service provider

Choosing a good and stable 3PL service provider is very important. If you can choose a good provider, it will have a positive impact on the growth of your business. Otherwise, it can create a loss for your company. A 3PL company is in charge of a major task on which your company is completely dependant.

So, before choosing a 3PL company, you should do complete research on the company’s present situation and the technology that they use. Moreover, you should choose a company that has continuous improvement and capability to offer other various expertises.

You should also look for their shipping system, their position, and the situation of their warehouse as well as the condition of their storage for foods, chemicals, and other vulnerable items. The most important thing one should look at before finalizing the deal with a 3PL company is their customer service, their responsiveness towards their customers, their communication skills, and effective problem-solving capabilities.

These are the most important things to look for before choosing a company. And if you do manage to find a company that fits all the criteria, then that could be the one to go for at the end.

Conclusion

Hopefully, after reading this article, you got to know more about the basics of third-party logistics services. When it comes to managing a client’s transportation and supply chain, a 3PL provider takes an integrated and strategic approach. Just remember, a third-party logistics service provider plays a major role in your supply chain.

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