A Definitive Guide to Third-Party Logistics (3PLs)

A Definitive Guide to Third-Party Logistics (3PLs)

Navigating logistics is a challenge that many different industries need to overcome in order to successfully deliver their goods to customers. Order fulfillment and supply chain management also depends on the planning and execution of transportation, storage, and acquisition. However, trying to manage the entire logistics process in house can be a real problem for businesses. This is where third-party logistics comes in.

Third-party logistics can help businesses control warehousing, inventory management, and their entire supply chain. When your logistics can function at an optimal level, you’ll have much more success with your order fulfillment and your customer satisfaction. In this article we’ll address everything you need to know about third-party logistics and why they matter to your business.

What Are Third-Party Logistics (3PLs)?

Third-party logistics, often abbreviated as 3PLs, refers to an outsource company called a third party that manages the ecommerce logistics process for a business. A 3PL will manage everything from warehousing to inventory management to procurement, making it easy for businesses to deliver their goods to customers.

Why Are 3PLs Important to Businesses?

The 3PL company creates the infrastructure to automate order fulfillment and improve the entire logistics process. Rather than spending internal resources on fulfillment areas, the 3PL takes on all of the responsibility for creating logistics visibility and ensuring that products are delivered efficiently and on-time.

Over the years, 3PLs have grown in popularity. More and more industries like ecommerce, retail, and even manufacturing are finding that a 3PL is a cost-effective option to streamline processes and increase profitability.

What Are the Types of 3PL Providers?

As you begin to examine 3PLs and consider them for your business, it’s important to know that there are a few different types of 3PL service providers that you might run across. Typically, these are divided into four types of 3PLs: standard, service developers, customer adapters, and customer developers.

Standard 3PL Providers

A standard 3PL provider offers basic logistics that will satisfy most ecommerce retailers. These types of providers offer minimal services as far as storage and transportation goes, but are a low-cost option that can be beneficial to small businesses or those who are still exploring the option of a 3PL provider.

3PL Service Developers

3PL service developers are able to offer more than the standard provider. They provide additional IT infrastructure and management services to help provide security, tracking, and compliance management for customers. This can help you get more visibility into your logistics and helps you understand more about your logistics process.

3PL Customer Adapters

A 3PL customer adapter provider will handle nearly all of the logistics for a customer. They will take control of the entire shipping process from beginning to end, and can even provide services like negotiating with carriers and shippers to help you get better overall costs on shipping. They also provide advanced technology that can help you improve your systems and allow you to get more hands on with the shipping process.

3PL Customer Developers

The final type of 3PL provider is a 3PL customer developer. This type of 3PL will completely take over a company’s logistics, acting as an entire logistics department for a business rather than an extension. The cost of this type of 3PL is the highest, but it comes with many benefits: They will manage everything that needs to be done for fulfillment, and are responsible for every aspect of the order fulfillment process.

How Does Order Fulfillment Work With 3PLs?

The fulfillment process is part of a complete supply chain management process. Therefore, there are some clear steps that take place during the order fulfillment process that align with your standard supply chain procedures. Whether you manage your logistics in house or have the help of a 3PL, the same steps ensure that an order can be completed.

Receiving

The first step of the order fulfillment process is receiving. Receiving refers to accepting inventory as it comes in, and then storing it until it’s ready to ship out to a customer. While receiving is standard across all types of 3PL, each has a slightly different method for receiving their inventory.

Warehousing

Once products are received by the fulfillment center, they need to be organized and stored. Each different SKU has its own location in the 3PL warehouse, and is tracked with a shelf, bin, or pallet number. 3PLs have different storage capabilities, and it’s important to remember that not all 3PLs have the same type or amount of storage. Warehousing is critical to order fulfillment success, so it’s essential to know if the 3PL you choose has the space to support all of your products. If you grow, the 3PL needs to be able to scale with you.

Picking

Picking is where the real 3PL process begins. When a customer orders an item, the 3PL is responsible for locating the order and getting it ready for packing and shipment. This means that the 3PL needs to keep track of inventory in the warehouse and have a way of getting the orders from your customers quickly in order to expedite the process. When picking a 3PL provider, make sure that they have the right technology in order to integrate with your ecommerce platform and manage the orders successfully.

Packing

The next step in the order fulfillment process is packing. Different types of products require different packing requirements, so your 3PL needs to be able to handle whatever your products require for safe transportation. Materials for packing typically include packing paper, tape, bubble mailers, boxes, and dunnage (packing material). 3PLs have the industry expertise to know what type of packing is best and can help make sure your products are safe for shipping. You might also want to make sure that the 3PL uses your special, branded packaging to help create a better impression with customers upon delivery.

Shipping

The 3PL is responsible for shipping your goods to the customer. The type of carrier they work with can vary widely. Some will go for the lowest shipping cost (regardless of the shipper), while others have a preferred carrier partner. Find out what type of shipping processes and transportation services the 3PL employs before you start working with them. Another factor to consider is the shipping label. Some 3PLs will purchase and print shipping labels for you, while others will push this cost back to you.

Returns

The final step of the order fulfillment proceeds is returns. Most 3PLs offer returns processing services for their customers if someone is displeased or unhappy with the order they received. They will process the returned goods and then either restock the item in your inventory or dispose of the item, depending on your policy.

Key 3PL Services To Consider When Selecting a Provider

Now that you understand the order fulfillment process, let’s take a look at some of the specific services that a 3PL can provide. Not every 3PL provides the same services, so make sure you know which are important for your needs and select a provider who can meet your requirements.

Inventory Management

There’s a lot more to logistics management than making sure every product has a shelf. A 3PL needs to be able to track inventory in real time and have warehouse management capabilities to allow you to view your inventory levels. This way you can manage warehouse space and restock when needed to avoid stockouts. You might also want to see if the 3PL is able to distribute the inventory management to send out inventory in multiple shipments to allow goods to reach all of the places they need to be sent out to.

Fast Shipping

Today’s order fulfillment world is much different than it was even a few years ago. Customers expect their orders to come in quickly. Research shows that 22% of ecommerce shoppers who abandon their carts do so because of slow deliveries. Two-day shipping is widely accepted as the best method of shipping to meet customer demand and maintain affordable prices. This means that your 3PL needs to be able to meet that requirement and have systems in place to quickly deliver products to customers.

Automated Order Fulfillment

Advanced technology can go a long way in helping the order fulfillment process run more smoothly. With the help of automation, a 3PL can get orders fulfilled and product restocked with ease. Automation will connect directly to your ecommerce store or website and can make sure that every step of the order fulfillment process is tracked and processed accurately. This helps orders get filled quickly and keeps all your information in the same database.

B2B, DTC, and International Fulfillment

Business to business (B2B) and direct to customer (DTC) fulfillment are two different things. Depending on the type of business you have, you’ll want to make sure that your 3PL can do one or both. A B2B ecosystem requires a different approach than DTC, so make sure your 3PL has a multichannel approach to logistics if you have direct and indirect customers. You might also need your 3PL to handle international shipping and fulfillment. International fulfillment allows you to tap into new markets and reach new customers, which is essential for growth and scalability.

Streamlines Returns Management

Many people think that the supply chain only goes one way and ends when the end customer receives a product. However, returns management is an important part of order fulfillment. You’ll want to make sure that your 3PL can handle the returns coming in — and knows what to do with those orders when they come back to the distribution center. Systems and inventories will need to be updated accordingly, so having advanced software is important for streamlining returns management.

Data Analytics

Speaking of advanced software, another 3PL service area to consider is the type of data analytics they provide. You’ll want to be able to collect as much data as possible to help inform your company decisions. Many 3PLs offer basic analytics tools, but you might want to gather deeper insights and more details about things like stock levels, delivery times, storage costs per unit, return data, and more.

The Benefits of Working With 3PLs

There are many benefits of working with 3PLs, and it’s important that you understand why using outside logistics sources can help you, especially after challenging years. Here are just a few of the benefits that you can get from a 3PL:

  • Reduces your costs: Working with a 3PL gives you the opportunity for major cost savings by eliminating the need of getting your own warehouse, paying logistics employees full salaries and benefits, and purchasing technology — among other costs. Instead, you pay your fee to the 3PL and allow them to manage the costs associated with logistics and order fulfillment.
  • Expedites order fulfillment: Rather than taking up the time of your employees with searching, packing, and shipping items, you can hand over all of those operational tasks to the 3PL. This saves you a significant amount of time and allows the order fulfillment process to be expedited to ensure a better customer experience.
  • Expands your market: When you handle your logistics internally, you tend to have a limited reach and can only sell to a single region. Working with a 3PL helps you expand your market, as they have networks that can expand across the country. They may even have international reach, which expands your reach without the hassle of figuring out the logistics yourself.
  • Simplifies scaling logistics operations: It can be difficult to figure out how you can scale your organization when you are held back by logistics complications and limited operations. The right 3PL will have the space and capacity needed to help you scale as needed without delays for acquiring warehouses or finding new shipping channels.

Top 3PL Providers

If you aren’t sure where to begin your search for a 3PL that can meet your requirements and help your business grow, here are a few of the top logistics services providers that go above and beyond and offer a wide variety of order fulfillment services.

  • Stord: Stord’s fulfillment, warehousing, freight, and cloud services scale with you and support both B2B and B2C needs. Integrate Stord with Anvyl to share inbound shipment details ahead of time and streamline your entire supply chain.
  • Flowspace: Connect your business to Flowspace’s powerful — and sustainable — nationwide network to provide your customers with next-day and same-day shipping. Flowspace even integrates with Anvyl for seamless, centralized fulfillment.
  • ShipBob: ShipBob is a popular 3PL that operates globally, offering a fee structure and shipment charge that covers services like receiving, storing, pick-and-pack, and shipping.
  • Whitebox: Whitebox is an all-in-one logistics company that can do everything, including fulfillment, warehousing, inspection, quality assurance, shipping, packing, photography, product descriptions, and applying shipping labels.
  • Omni Logistics: Omni Logistics is great for businesses of all sizes and has advanced shipping networks that can deliver goods across North America, Central America, Asia, and Europe.
  • Shipwire: If same-day shipping is an option you want to give to your customers, then Shipwire is a great fulfillment option that can help with shipping, retail sales, global fulfillment, and dropshipping for retailers.
  • Red Stag Fulfillment: Red Stag Fulfillment is a specialty logistics company for heavy products or products that require special packing. They also offer limited same-day shipping for certain orders and advanced security for the items in their warehouses.
  • FreightPros: FreightPros has excellent customer service and works with many different carriers and shippers to ensure that your products are delivered on time for the right price and as your individual needs require.

Develop, Maintain, and Track Third-Party Logistics With Anvyl

Third-party logistics help to ensure that your company is able to meet customer demand and successfully deliver your goods and products to those who need them. With the help of 3PL services, you can deliver more cost-effective and expedited services to improve customer satisfaction and improve the entire supply chain. Everything from transportation management to procurement and fulfillment center optimization can improve with the help of a third-party logistics provider.

At Anvyl, we offer crystal-clear logistics visibility for our customers. You can track shipments from any vendor, prepare for incoming shipments, and adjust for delays with ease. To learn more about how we can help you, get a logistics visibility demo and see how Anvyl can help your business grow today.

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