What are the Pros & Cons of a 3PL?

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If you own an e-commerce business, order fulfillment is an essential part of your daily operations. As your company grows, you may discover that fulfilling customer orders in-house is no longer a viable option. You’ll need to expand your fulfillment strategy at this point, which for many businesses means outsourcing fulfillment to a third-party logistics (3PL) company.

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What is 3PL?

Third-party logistics (or 3PL) refers to the outsourcing of e-commerce logistics processes such as inventory management, warehousing, and fulfillment to a third-party company. With the tools and infrastructure to automate retail order fulfillment, 3PL providers enable e-commerce merchants to accomplish more.

With the introduction and growth of e-commerce in the 1990s and 2000s, the term 3PL has become commonplace, and 3PLs’ services have expanded. Third-party logistics refers to the integration of warehousing operations and transportation services in the supply chain.

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What does a 3PL company do?

If you’re thinking about working with a 3PL company or are new to outsourcing shipping, what happens in a 3pl fulfillment center may appear to be a mystery. However, the 3PL fulfillment process does not have to be – and should not be – a mystery!

Here is what happens at a 3PL’s e-commerce warehouse once a customer clicks “Submit order” on your online store:

Receiving

A 3PL cannot ship orders unless it h as inventory on hand. “Receiving” in a 3PL warehouse refers to the acceptance of incoming inventory followed by storage. Each 3PL has its inventory receiving and storage processes and capacity.

3PL Warehousing

They store your items at their fulfillment centers once they receive your inventory. Storage capacities vary between 3PLs; not all 3PL warehouse space is created equal. Working with a 3PL that has more than enough storage space for your current inventory is critical – as your product line and order volume expand, your 3PL storage must be able to scale with you.

Picking

When you send an order to your 3PL, it is assigned to a warehouse picking team. The picker is given a picking list that includes the items, quantities, and storage locations at the facility, and he or she is responsible for collecting the ordered products from their respective locations.

Packing

When all of the items in an order have been selected, they must be securely packed for shipping. The packing materials used will be determined by the capabilities of your 3PL, your brand preferences, and the items being shipped.

Shipping

The following step is to ship your order. The majority of 3PLs will buy and print shipping labels on your behalf. Some 3PLs work with preferred carrier partners, while others compare shipping costs from multiple carriers. The latter enables 3PLs to offer clients the most competitive pricing for the delivery speed that each customer selects.

Returns

Many third-party logistics providers also provide return processing services. If a customer ships an order back to your 3PL, the 3PL will process the return and restock or dispose of the item based on their policies and your preferences.

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Is 3PL Worth it?

Third-party logistics has several advantages, but it is not suitable for everyone. We’ll go over the pros and cons of 3PL so you can decide if it’s right for you.

Pros: The tedious tasks are handled by someone else

You don’t have to worry about the time-consuming steps involved in distribution and inventory management when you use third-party logistics. All of that is handled by a team of dedicated professionals, so all you have to do is track your inventory remotely. This frees up your time to focus on more important aspects of running your business, while also saving you money on labor.

Cons: You lose some control over your inventory

The fact that you don’t get to observe the process in person is perhaps the most significant disadvantage of a 3PL. Most business owners want to have control over their goods, which isn’t always possible with outsourced logistics. Nonetheless, if you work with a quality 3PL provider that has real-time tracking programs, you can monitor your inventory levels, deliveries, incoming shipments, and more in real-time.

Pros: Adaptable service options

Many 3PL companies will provide additional services to help you run and manage your business. For instance, you could outsource your customer service and shipping needs to the warehouse’s fulfillment center. This will virtually stream your third-party logistics provider, reducing the amount of time you have to worry about your own.

Cons: Poor service reflects poorly on your company

There are bad 3PL providers out there, and their inefficiency may reflect poorly on your company. Your customers are unconcerned about who is in charge of delivering the product to them. Hence, before you entrust your reputation to your logistics team, make sure they have experience with the services you require.

Pros: You will have money in the long run

Third-party logistics is an investment that will eat into your profits at first. Keeping this in mind, most businesses save money in the long run by using 3PL providers because they can manage higher inventory volumes more efficiently than they can on their own. The 3PL process also lowers labor costs throughout the supply chain, from sorters to deliverers and everyone in between.

Cons: Starts with a large sum of money

Setting up your third-party logistics can be an expensive endeavor. If you cut corners on warehousing and distribution, you’ll get what you pay for. This will eventually affect how your customers perceive your company, and it may hurt your profit margins in the future.

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Conclusion

In most cases, the advantages of third-party logistics far outweigh the disadvantages. You simply need to make certain that you find a company on which you can rely from the start. You will enjoy years of stress-free inventory management for your business if you are in the right hands.