The traditional business model of running all or many of the operations in-house is not always the most productive. This is especially noticeable in small eCommerce businesses. Third Party Logistics (3PL) services allow you to partner with other professionals in one of the most important aspects of your business. This allows them to operate on marketing, growth, and customer satisfaction.
What is 3PL in logistics?
3PL logistics (Third-Party Logistics), also known as third-party logistics, refers to all the services that a company hires from a provider that handles its logistics, as well as storage, order preparation and freight transport. Thus, the 3PL company becomes responsible for managing the company's products and getting them to the end customer.
Third-Party Logistics (3PL) Basics
Third-party logistics providers manage inbound and outbound transportation for their customers, as well as warehousing. Most 3PL companies have their own storage spaces (some for rent). They typically do not own their own fleet of trucks, but have contracts with other carriers.
Third-Party refers to the fact that you are outsourcing a number of services. You don't own the store, but rather rent shelf space in a large warehouse shared with several companies. The 3PL company works with various carriers to deliver orders to its customers.
Third-party logistics warehouses are designed to maximize speed and efficiency.
The 3PL process
When the service is outsourced to a 3PL company, the products are shipped directly from the factory to the third-party logistics warehouse, where they have a range of services to provide.
Integration of the e-commerce platform. Most eCommerce companies rely on multi-channel selling. The 3PL provider must support all of your sales channels or be able to create a custom API. You should be able to track the progress of orders in real time online via a dashboard.
Shipping and receiving FTL and LTL. Freight Full (FTL) and Freight Partial (LTL) can be essential money-saving tools. This is particularly necessary if shipping wholesale orders to retailers or to ship products between warehouses to a closer distribution point.
Collection, packing and shipping. The 3PL company manages the entire collection, packaging and shipping process from the moment the customer places an order until it is received.
Same day shipping. The third-party logistics provider may offer same-day shipping. There is usually a time limit to request this type of shipment.
Reverse logistics. It's a fancy term for returns. Returns are a simple fact of life in e-commerce. The return rate will depend on several factors, and the 3PL provider will include a number of steps in the process to reduce the time undamaged products can be available for sale again.
Benefits of Third Party Logistics
Lower cost of goods sold. When you purchase products in advance, you will pay the wholesale price. The more you buy, the lower the costs and the higher the profit margins.
Greater flexibility in the supply of products. You can get products from multiple manufacturers, all of which will be stored in the same space, so multiple product orders can be shipped in the same box, saving shipping costs.
More control over logistics operations. By using a third-party service, you can hire the one that best suits the needs of your customers.
Faster order fulfillment. Different warehouse locations mean that orders can be delivered faster.
Faster returns processing. Fulfillment warehouse that seamlessly handles returns improves customer satisfaction and allows for quick restocking.
You don't need your own storage space. You have the flexibility to increase or reduce the storage space at the logistics service provider.
Other benefits: Orders are processed by professionals. The supplier's shipping volume gives you the option to negotiate reduced shipping prices. You gain a partner in your business. And the biggest benefit to outsourcing logistics operations may be the freedom to focus on the core mission of the business and use that energy to expand marketing and increase sales.
Extra information: 1PL, 2PL, 3PL, 4PL, 5PL...
1PL (First-Party Logistics): Transportation is outsourced through agencies that are in charge of the fleets and the drivers necessary to transport the merchandise. Companies retain control of their own warehouses.
2PL (Second-Party Logistics): In addition to transport, the logistics operator is also responsible for storage tasks. However, the management continues to be on the side of the contracting company, which is the one that organizes the fleet and the material flows.
3PL (Third-Party Logistics): Logistics operators are in charge of transport and storage and, in turn, the management and organization of both activities.
4PL (Fourth-Party Logistics): They are logistics operators that act as consultants and auditors of the 3PLs with the purpose of validating, optimizing and improving the activity. They do not have a logistics infrastructure, they only advise.
5PL (Fifth-Party Logistics): They carry out a total integration of the services offered by 3PLs and 4PLs, thanks to their size and experience.