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What is 3PL Warehousing?
In logistics and supply chain management, third-party logistics, 3PL in short, refers to the use of third-party companies to handle elements of distribution, warehousing, and fulfillment on the organization’s behalf. Generally speaking, third-party logistics providers undertake integrated warehousing and transportation operations, which can be scaled according to market conditions, so they can meet the product demands and delivery requirements for their customers.
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What Does 3PL Mean in Warehousing?
The term 3PL refers to the involvement of a third-party in the logistics operations of a company, on top of the carrier and the shipper/receiver. Products being shipped by a 3PL are not owned by (or title to) 3PLs. This third-party simply serves as a manager or intermediary between the other two.
An organization that provides some form of logistics service for hire is known as a 3PL today. As well as moving finished products from manufacturers to distributors and retailers, this includes moving parts and materials from suppliers to manufacturers. It is possible for a third-party logistics company to own its own assets, such as trucks and warehouses. The roles of a 3PL and a broker may overlap in some cases, but generally a broker is used to contract trucking for a specific shipment. 3PL companies help move clients’ freight by acting as brokers or using brokers.
Depending on the strategic requirements of customers, 3PLs can scale and customize their services to meet their needs. 3PLs become indispensable when a company’s supply chain becomes too complex for internal management. As a company grows through mergers and acquisitions, the capability of managing the supply chain in-house may outgrow the internal capacity.
Having worked with a variety of clients across many different industries, the 3PL offers wide-ranging experience. They offer technology solutions, such as transport and warehouse management systems that shippers would not be able to afford on their own. Relationships with carriers over the long run can result in better pricing and service during times of increased capacity. Everything from packing tape to ocean shipping can be availed cheaper, thanks to the large economies of scale.
What are the Main Goals of 3PL Warehousing Services?
Growing demand for your products may require greater warehousing capacity. Third-party logistics companies store your inventory for you temporarily or permanently. Warehouse services can help you pack your products and merchandise into different quantities and sizes according to customer orders.
Having all of your storage needs met in a warehouse makes it convenient for you and your business. Their services are so efficient that they can deliver products the same day, next day, or two days after the order is placed locally and worldwide.
Inventory management goes far beyond simply storing products. The 3PL should allow you to sync your inventory with your online store, monitor 3rd-party fulfillment center inventory levels in real-time, and proactively reorder inventory to avoid stockouts. When you store inventory close to your shipment destination, you can deliver on your customer’s expectations more effectively. Offering 2-day shipping to your customers at an affordable price can be achieved with the right 3PL provider.
When you work with a 3PL that has several warehouse locations, you can divide your inventory across them so that each order is shipped from the 3PL warehouse that is closest to your customers. This method is termed distributed inventory management. If your orders cannot be shipped from one fulfillment center due to extreme weather conditions or any other reason, you can still prepare by splitting inventories across 3PL warehouses. You will also have backup stock if you run out of inventory in one area when you distribute inventory over several locations.
In order for a shipping company or logistics provider to achieve success, it must focus on improving customer service, lowering distribution and transportation costs, and eliminating inefficiencies in the overall inventory management.
Why Do Companies Use 3PL Warehousing?
Order fulfillment can be outsourced to a 3PL for many reasons. Regardless of the capabilities of individual 3PL companies, all provide reliable logistics systems that help businesses maximize profits by managing inventory, packaging, and shipping.
Through a partnership with a 3PL, you can avoid the need to purchase or rent warehouse space, logistics services, labor, and the technology required for in-house order fulfillment. Using a 3PL also saves you time. With a 3PL, you’re able to use your time more efficiently, so you can focus on more strategic initiatives, such as product development and marketing, rather than packaging boxes and standing in line at the post office.
Your 3PL is staffed by e-commerce logistics experts so you don’t have to worry about staying updated on industry trends and complexities. You limit your company’s potential if you sell only in one region. You can expand your reach by partnering with a 3PL. Compared with in-house fulfillment, 3PL companies have extensive networks of fulfillment centers.
How does 3PL Warehousing Work?
3PLs can handle various tasks on your behalf, allowing you to focus on growing your business instead. You may be ready to outsource your 3PL service needs if you need shipping, freight, and other services. Let’s look at how it works.
If a 3PL lacks the required inventory, orders cannot be shipped. An inventory is “received” from a 3PL warehouse when it is accepted and stored. There are variations in the processes and capacity that each 3PL uses to receive and store inventory.
Your items are then stored at fulfillment centers once your inventory has been received. A separate location is dedicated to each SKU, whether it is a shelf, a bin, or a pallet. Each 3PL warehouse space is different and has its own storage capacity. When partnering with a 3PL, make sure they have enough storage space for all of your inventory. A 3PL storage system that can scale with your growing product line and order volume is, therefore, quite essential.
3PL fulfillment begins as soon as an order is placed. Your 3PL assigns warehouse picking teams to the orders they receive from you. When collecting the ordered products from their respective storage locations, the picker receives a list of items, quantities, and storage locations.
Having picked all the items in an order, it’s time to package them safely for shipment. The packing materials will be determined by the capabilities and preferences of the 3PL, as well as the items to be shipped. Some 3PLs include packing materials as part of their fulfillment management services, whereas others charge separately for packing supplies. 3PLs have the experience necessary to select the right packaging materials for protecting your products and achieving the lowest possible dimensional weight.
Shipment of your order is the next step. Most 3PLs will take care of purchasing and printing the shipping labels for you. Some 3PLs compare shipping costs from several carriers, while others have preferred carrier partners. The former allows 3PLs to offer customers the most affordable prices according to the delivery speed they opt for. For each order, the carrier and shipping speed depend on the 3PL’s partnerships and policies in addition to the shipment options that the client and the end customer select.
Return processing is another service that many 3PLs provide. Customers who return an order to your third-party logistics provider will have the order processed by the third-party logistics provider, who will then restock or dispose of the items according to your preferences and their policies.
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Conclusion
A 3PL company may seem like a no-brainer to you now, since it can save your company both money and time, allowing you to focus on product development, marketing, and business growth instead. Finding the right order fulfillment company is crucial, as it can help ensure your inventory is well handled, your customers are satisfied, and your business keeps expanding.
