3PLs: What Are They, Why Do You Need Them

If you’re a business owner you know you need a third-party logistics company (3PL) to step in and make your operations more cost effective and efficient, but if you’re reading this guide you most likely don’t know what a 3PL even is or how to find the right one.

What is a 3PL?

3PL stands for third party logistics – it refers to a provider that offers outsourced logistics services that can help with the management of procurement and fulfillment activities. If you make something, you need to ship it and get it in the hands of customers. That’s where a 3PL provider comes into play. 3PLs can include everything from storing and warehousing items, to transporting and shipping.

3PLs provide expertise and best practices that can easily integrate into your existing supply chain. They can specialize in various regions and logistical areas.

3PLs can handle everything from procurement, transportation, distribution and shipping. Some focus on specific segments like freight shipping or product sourcing. Others fill multiple needs like distribution and warehousing.

As it relates to supply chain, there are three functional areas that a 3PL can fit into: Procurement, Transportation, and Distribution. The challenge for business owners is understanding where 3PLs can best fit in to the overall business strategy. To make the decision, leaders must do an analysis of operating strengths and weakness, and pinpoint where 3PL services can help cut costs and increase efficiencies.

How does one do that?

1. Procurement

Procurement is how you “procure” the products that you sell. These products can be made from scratch or by a manufacturer, or can be ready made wholesale goods sourced from domestic or international manufacturers. Either way, that’s procurement.

3PL companies that focus on the procurement process can help develop, manufacture and sources goods to sell. Generally these services include everything from product development, raw material sourcing, manufacturing scheduling, and production facilities scouting.

2. Transportation

Transportation here refers to domestic or international inbound shipping. Essentially how you get the product sent to you, the business. 3PL services can find carriers, streamline paperwork and meet schedules in a cost effective, efficient way. 3PLs that cover transportation and procurement generally offer domestic freight, import/export needs and overseas shipping services via both air and transoceanic shipping.

3. Distribution

Fulfillment needs of commerce companies have led to distribution being a fast growing sector of 3PLs. 3PL fulfillment services can scale quickly in response to growth, and can be much less costly than a warehouse.

3PL fulfillment services offer services like warehousing and inventory, order processing, order packing/kitting, returns management, stock level forecasting and other helpful operational services.

3PL services handle everything from order fulfillment, sourcing and manufacturing, importing/exporting and even online product listings. All your business needs to do is identify where and when it makes to leverage a 3PL to ensure optimal growth.