Feb 16, 2023 | Blog
Your 3PL logistics partner is an extension of your business. As a business owner, it’s your responsibility to tell them exactly what you do and don’t want. But how do you know what you want? You aren’t as familiar with the logistics industry as them, so it would make sense that you might not know exactly what to ask for. In this article, we’ll review how to manage and improve your 3PL partner’s performance so you can both experience a successful partnership. Let’s dive in!
What is 3PL Performance?
3PL performance refers to the level of service and efficiency offered by a third-party logistics company in managing your business’s supply chain management. It includes several measurements which are key performance indicators of the success of logistical infrastructure. A few examples of what to measure would be delivery accuracy, order fulfillment speed, inventory management, and customer satisfaction. Let’s dive into what that looks like:
- Delivery Accuracy – A 3PL’s ability to deliver orders on time and in the correct quantities, without errors or damages.
- Order Fulfillment Speed – The speed at which 3PL processes and delivers orders, including the time taken to pick, pack, and ship orders.
- Inventory Management – The ability of a 3PL to accurately track and manage inventory levels, ensuring that the right products are available when and where they are needed. This includes minimizing stock shortages, reducing carrying costs, and improving the accuracy of inventory reports.
- Customer Satisfaction – The ability of a 3PL to get packages to customers on time, intact, and with no errors.
How to Measure 3PL Performance
Measuring 3PL performance involves evaluating the effectiveness of a third-party logistics service provider in managing a company’s supply chain operations. Using the same four examples above of measuring delivery accuracy, order fulfillment speed, inventory management, and customer example let’s dive into how you can measure the 3PLs performance in these areas.
- Delivery Accuracy – This can be measured by the percentage of deliveries that are on time and without errors or damages. To improve delivery accuracy, a company can set clear expectations and goals with its 3PL logistics provider, and track performance using real-time data and reports.
- Order Fulfillment Speed – This can be measured by the average time taken to pick, pack, and ship orders. To improve order fulfillment speed, a company can use automation tools and processes, as well as set clear performance targets and regularly monitoring progress.
- Inventory Management – This can be measured by the accuracy of inventory reports, stock levels, storage of pallets, and the amount of inventory carrying costs. To improve inventory management, a company can implement real-time inventory tracking and reporting, regularly review stock levels and work with its 3PL to optimize inventory management processes.
- Customer Satisfaction – This can be measured by surveying customers and tracking key performance indicators, such as order accuracy, delivery speed, and product quality. To improve customer satisfaction, a company can work with its 3PL to provide regular updates, resolve any issues quickly, and regularly review performance data to identify areas for improvement.
Overall, the key to effectively measuring 3PL’s logistics performance is to establish clear performance targets, regularly monitor performance data, and work with the 3PL to continuously improve processes and systems.
How to Manage 3PL Performance
Managing a 3PL’s performance starts with you! Here are a few tactics to help you ensure your 3PL is meeting your performance needs.
Set Clear Expectations From the Start
Clearly defining what you expect from your 3PL in terms of performance, services, and delivery time frames is essential for a successful relationship. If you require a 99% accuracy rate for deliveries, make sure that this is agreed upon and included in your contract. As an example, if your company wants to work with a 3PL for order fulfillment you will first define the scope of work as receiving, storing, and shipping orders within their fulfillment center. Then you’ll set KPIs such as order accuracy, cost savings, and on-time delivery. If they have warehouse management software, you’ll also want to communicate how you plan to use it. Then review any special requirements such as unique packaging needs. Once all this is discussed, you should form a specified contract (which many 3PLs create for you). The agreement should be documented and signed between your business and the 3PL. This way, the company and the 3PL both have a clear understanding of the expectations and can work together effectively.
Designate One Point of Contact With Your 3PL
Having one designated point of contact with your 3PL can improve communication and help to prevent confusion or misunderstandings. This person should be responsible for managing the relationship with the 3PL and ensuring that all performance expectations are met. The designated point of contact should be an individual within your organization who is responsible for managing the relationship with the 3PL. This person should have a clear understanding of your company’s objectives, policies, and procedures and effectively communicate these to the 3PL. This individual should be available to answer questions and address any concerns that may arise during the course of the partnership.
Keep the Lines of Communication Open
Good communication is key to a successful 3PL partnership. Encourage regular check-ins, have open and honest discussions about performance, and make sure that you have a clear process in place for dealing with any issues that arise. To keep the lines of communication open, schedule regular check-ins with the 3PL. These check-ins could be bi-weekly, monthly or quarterly and can be in-person, via email, or through a video conferencing platform. During these check-ins, review performance metrics, discuss any challenges that have arisen, and share updates on any changes to the relationship or business. Additionally, setting up a shared project management platform or email chain can be a helpful tool for communication. This allows all parties involved to keep track of updates, questions, and issues in one centralized location. Encourage open and honest communication, and create an environment where any questions or concerns can be brought to the table. This builds trust and a stronger partnership between your company and the 3PL.
Set Up Formal Performance-Review Periods
Regular performance reviews help to keep the 3PL accountable and provide an opportunity to discuss any issues or areas for improvement. Schedule regular meetings, and make sure that performance data and metrics are reviewed and discussed. When setting up a formal review with your 3PL, it is important to cover key areas to assess their performance and identify areas for improvement. During the review, you should discuss specific metrics and warehouse KPIs (Key Performance Indicators) that are relevant to your business. This can include order accuracy, delivery times, customer service levels, inventory management, and cost-effectiveness like the above, or it could include other metrics relevant to your business. The review should also include an evaluation of the overall relationship between your company and the 3PL, including their ability to effectively meet your expectations and support your business goals. Additionally, it is important to address any operational or customer-related issues within the 3PLs fulfillment center that have arisen and discuss any areas where the 3PL can improve in the future.
Establish an Escalation Process
Having a clear escalation process in place helps to quickly resolve any issues or problems that arise. This process should outline how issues will be reported, who will be responsible for resolving them, and the steps that will be taken to resolve them. For instance, if there’s a problem with an order, the first step could be to contact the designated point of contact at the 3PL. If a resolution isn’t reached after a certain amount of time, the next step could be to escalate the issue to a higher-level manager at the 3PL. If the issue still isn’t resolved, the next step could be to involve a senior executive from your company or a third-party mediator to help resolve the situation. It’s important to have a clear escalation process in place so that issues can be resolved efficiently and effectively without causing undue stress or harm to the relationship with the 3PL.
By using these tactics, you can help to ensure that your 3PL logistics performance remains on track and that your 3PL continues to deliver the level of service that you require.
Tips for Managing 3PL Performance
Regular Check-Ins
It’s important to keep a pulse on the 3PL’s performance. Schedule weekly or monthly check-ins to review progress and address any issues. For regular check-ins, you could create a shared dashboard to track metrics and KPIs. This allows both you and the 3PL to see areas for improvement and track progress.
Working Together
Treat the 3PL as a partner, not just a vendor. Collaborate on processes and procedures to ensure a seamless flow of operations. Their fulfillment center should be an extension of your business. To work together, hold joint training sessions where both parties can learn from each other and create a mutual understanding of the operations.
Clear Communication With 3PL
Open and transparent communication is key to success. Clearly outline your expectations and communicate any changes or concerns promptly to avoid misunderstandings. To ensure clear communication, use a project management tool to keep all stakeholders in the loop and record all discussions and decisions made. This way, there is a clear record of expectations and agreements.
Key Takeaways
In conclusion, outsourcing logistics activities to a 3PL can provide numerous benefits to small business owners, including increased efficiency, cost savings, and improved customer service. However, you and your 3PL logistics service provider need to both agree on what metrics and KPIs they are expected to hit, and the progress of hitting these metrics should be regularly reviewed. No provider is perfect, but clear communication allows you to both agree to expectations, air out any issues and set your partnership up for success. If you haven’t scheduled a review with your 3PL, do so today!
3PL Performance FAQs
How is 3PL Performance Measured?
A 3PL provider typically measures their own performance through a variety of metrics such as order fulfillment accuracy, order processing time, inventory accuracy, shipping accuracy, delivery time performance, customer satisfaction, and cost control. They use these metrics to evaluate their performance and identify areas for improvement, so they can ensure they are delivering the best possible service to their clients. For example, if order fulfillment accuracy is low, they may take steps to improve their processes, such as implementing new software or hiring additional staff, to increase accuracy and improve overall performance. Additionally, by monitoring delivery time performance, they can ensure that orders are reaching their customers in a timely manner, which maintains customer satisfaction and reduces the risk of customer churn. Overall, a logistics service provider should have a performance measurement strategy that provides insight into their operations, enabling their client, (you, the business owner) to make informed decisions that lead to better results and improved customer satisfaction.
Why is KPI Important for a 3PL?
KPI (Key Performance Indicator) is important for a third-party logistics firm because it provides measurable and quantifiable targets that help the provider evaluate their performance, track progress, and make informed business decisions. Warehouse KPIs serve as benchmarks for success and provide valuable insights into areas for improvement. They also help 3PLs to monitor their operations, identify areas for improvement, measure customer satisfaction, and optimize resources. By setting and tracking KPIs, 3PLs can monitor their performance and ensure they are meeting their goals and delivering the highest level of service to their customers.
How Do You Measure Logistics Performance?
Let me give you an example. Sarah sells handmade jewelry online and relies on a 3PL provider to handle the shipping and delivery of her products to customers. To ensure that her 3PL provider met her expectations, Sarah reviewed their fulfillment center setup, then shared key performance indicators (KPIs) to measure their performance. By consistently monitoring these KPIs, Sarah could assess the performance of her 3PL provider and make data-driven decisions to improve the overall customer experience. Over time, she saw a significant improvement in her KPIs, which translated into happy customers and increased sales.
Feb 16, 2023 | Blog
As a business owner, you are faced with many challenging growth stages. But when using a 3PL with an inventory management system, logistics doesn’t have to be one of them. Streamline your supply chain and boost your business success with inventory optimization through a 3PL provider. As customer demands and expectations skyrocket, it is costly to be left with long stockouts or delays in shipping. Say goodbye to stock shortages and forecast errors, and hello to real-time visibility, cost savings, and expert support when partnering with an expert 3PL. In this article, we will cover the power of a 3PL inventory system and how it can take your business to the next level!
What is Third-Party Logistics (3PL)?
Third-party logistics (3PL) is an outsourcing solution for companies to handle their supply chain and logistics operations. Instead of managing storage, transportation, and delivery in-house, a company can work with a 3PL provider to handle these tasks for them. And because providers offer logistical infrastructure as a product, you can utilize their expertise, technology, and resources to handle any logistical needs you might have. This means you save money, improve your supply chain efficiency, and have more time to focus on core business activities!
What is a 3PL Inventory Management System?
Inventory management software is a solution used by third-party logistics providers to manage the storage, movement, and tracking of inventory across fulfillment centers for their clients. The system helps 3PLs to efficiently track inventory levels, manage stock movements, generate reports, improve forecast accuracy, and provide real-time data to clients. With this software, you gain inventory management visibility and get your logistics operational challenges streamlined. You’ll also likely see a reduction in manual errors, and improved accuracy of inventory data.
How Does 3PL Software Help eCommerce Businesses?
Cost Reduction
3PL software can help eCommerce businesses to reduce costs by streamlining operations, reducing forecast errors, and improving efficiency. By outsourcing logistics operations to a 3PL provider, eCommerce businesses can also reduce the need for in-house logistics staff and infrastructure. An example of this would be an eCommerce business that can use 3PL software to automate order fulfillment processes, reducing manual labor and the risk of errors. Plus, because they ship in bulk 3PLs can get negotiated pricing and reduce your shipping costs as well!
Increased Transparency
Real-time data from 3PL software provides visibility into inventory tracking, delivery status, and other logistics operations. This increased transparency helps eCommerce businesses make informed decisions and avoid stockouts or overstocking. As an example, an eCommerce business could access real-time data on their inventory across fulfillment centers and delivery status through 3PL software, enabling them to make informed decisions and provide better service to eCommerce customers.
Customer Experience
By outsourcing logistics operations to a 3PL provider, eCommerce businesses can focus on improving their customer experience. This software can help to streamline delivery processes, reduce shipping times, and provide accurate tracking information to customers. Meaning, an eCommerce business could use 3PL software to track delivery times, monitor shipping, provide more shipping options, and provide eCommerce customers with real-time updates on their orders.
Real-Time Visibility
3PL software provides real-time data on inventory levels, shipping status, and other key metrics. This way an eCommerce business can use 3PL software to track inventory optimization and inventory needs in real-time, enabling them to quickly respond to changes in demand and avoid stockouts.
Scalability
Software that offers the above benefits also allows for scalability because of the additional technological resources which speed up workflows. Then if a company also outsources logistics operations to a 3PL provider, eCommerce businesses can focus on their core business activities, while their 3PL handles the logistics. This way they have access to additional inventory storage space, delivery vehicles, and shipping options, which are all assets that the business itself didn’t need to purchase.
3PL Inventory Management Services and Benefits
Third-party logistics (3PL) inventory management services offer several key benefits for both off and online businesses. One of the main benefits is cost savings, as outsourcing logistics operations to a 3PL provider can reduce the need for in-house logistics staff and infrastructure. Another benefit is improved efficiency, as 3PLs use specialized software and technology to streamline operations, reduce manual errors, and improve forecast accuracy. With real-time data and visibility into inventory levels, delivery status, and other logistics operations, 3PL inventory management services can also increase transparency and help businesses make informed decisions. By outsourcing logistics operations, businesses can also focus on their core activities and improve their customer experience by providing faster and more accurate shipping information. Additionally, 3PLs can help online businesses to scale their business operations by providing access to additional resources and technology.
What are the Core Competencies 3PLs Provide?
3PLs provide a range of core competencies to their clients, including:
- Storage and warehousing: A 3PL warehouse offers inventory storage solutions for inventory and raw materials, handling the management and organization of these items.
- Transportation and delivery: 3PLs handle the transportation of goods, including pick-up, delivery, more shipping options, and tracking of shipments.
- Order fulfillment: 3PLs manage the process of picking, packing, and shipping orders to customers.
- Supply chain management: 3PLs help to optimize supply chain operations by providing real-time data and visibility into inventory levels, delivery status, and other logistics operations.
- Technology and innovation: 3PLs use specialized software and technology to streamline operations, reduce forecast errors, and improve accuracy.
- Cost optimization: 3PLs help to reduce costs by optimizing logistics operations and providing access to additional resources and technology.
- Customer service: 3PLs provide support to customers by handling inquiries, tracking shipments, and providing real-time updates on orders.
What is the Difference Between a 1PL, 3PL, and 4PL?
A 1PL refers to a company that handles its own logistics operations in-house. This includes storage, transportation, and order fulfillment processes. An example of a 1PL is a retail store that manages its own shipping and delivery operations. Think of Walmart which manages its own storage, transportation, and order fulfillment, or Apple, which manages its own shipping and delivery operations. The primary benefit of a 1PL is that the company has complete control over its logistics operations and can ensure that its processes align with its business objectives.
A 3PL refers to a logistics company that provides logistics services to other businesses. This includes storage space, transportation, and order fulfillment processes. The primary benefits of a 3PL warehouse are cost savings and increased efficiency. By outsourcing logistics operations to a 3PL, businesses can reduce the need for in-house logistics staff and infrastructure, and benefit from the 3PL’s specialized software and technology.
A 4PL refers to a logistics company that acts as a logistics integrator, coordinating and managing the logistics operations of multiple 3PLs. An example of a 4PL is Accenture, which provides logistics management services and integrates the operations of multiple 3PLs. As an example look to DHL supply chain who provides logistics management services and integrates the operations of multiple 3PLs for their clients. The primary benefits of a 4PL are improved supply chain visibility and coordination. By integrating multiple 3PLs, a 4PL can provide inventory optimization, delivery status, and other logistics operations, helping businesses to make informed decisions and optimize their supply chain operations.
Other Than Order Fulfillment, How Else Can a 3PL Help My Business?
3PLs aren’t just there to help you store and ship your inventory. They offer a wide range of other benefits as well. Let’s review a few.
Professional Services and Knowledge
3PLs bring a wealth of professional services and knowledge to the table, including expertise in transportation, storage, and supply chain management. By outsourcing to a 3PL, businesses can benefit from their experience and expertise, ensuring that their logistics operations are handled efficiently and effectively.
Cost Savings for Sellers
When you reduce the need for logistics staff and infrastructure, you save money. Logistical infrastructure is expensive, constantly changing, hard to maintain, and there is continually new technology available to utilize. If you let a 3PL take on that cost and pay them a flat monthly fee instead, you can then reinvest that money back into your own business.
Inventory Management
With the software a 3PL warehouse provides, this will likely include advanced inventory management services, including real-time visibility into inventory levels, demand forecasting, and safety stock management. Through software and dedicated staff, you can be sure their inventory is in safe hands and know they won’t overstock or understock.
Expertise
3PLs bring specialized expertise to the table, including knowledge of transportation and delivery, customs regulations, and compliance requirements. By outsourcing to a 3PL, businesses can benefit from their expertise, ensuring that their logistics operations are handled efficiently and effectively.
Business-to-Consumer Fulfillment (B2C)
When working with a B2C business, 3PL companies offer several services which are key to their success. This includes end-to-end fulfillment services, including order management, picking, packing, and shipping. This means a business-to-customer company knows its product will reach their customer quickly and intact.
Business-to-Business Fulfillment (B2B)
3PLs provide fulfillment services for B2B businesses, including order management, improving logistics efficiency, picking, packing, and shipping. B2B businesses can then ensure that they can rent more or less warehouse space as needed so their products can be found in stores across the nation.
How to Find the Best 3PL for Your Business
All this is good, but as a business owner how do I find the best 3PL for my business anyways? There are so many options. How do I know which is the best one?
Research the different 3PL warehouse providers and their offerings, and ask for recommendations from other businesses in your industry. Attend trade shows and conferences to network with 3PL providers and gain a deeper understanding of their services. Reach out to industry associations and trade organizations, such as the National Retail Federation or the Council of Supply Chain Management Professionals.
Develop a detailed RFP and send it to several 3PL providers, asking for proposals and pricing quotes. This will allow you to compare the services and costs of different providers and make an informed decision. Send out an RFP to a select group of 3PLs, such as UPS Supply Chain Solutions, ShipHero, FedEx Supply Chain, or DHL Supply Chain.
Schedule on-site visits to the 3PL facilities you are considering. This will allow you to assess the provider’s operations and processes firsthand and ensure that they have the capacity and capabilities to meet your needs. Schedule visits to 3PL facilities, such as the Amazon Supply Chain fulfillment centers or a ShipHero warehouse. That way you can see the warehouse space and understand exactly how your inventory will be managed.
Contact references provided by the 3PL provider and ask about their experience working with the provider. This will give you valuable insight into the provider’s performance and reliability. Reach out to companies that have used the services of the 3PL you are considering, such as companies that have used the fulfillment services of ShipHero or Flexe.
Want to chat with an expert? ShipHero to the rescue!
Key Takeaways
Inventory management visibility is a huge key to your success as an eCommerce business. You can maximize your profitability and customer satisfaction with a 3PL and its inventory system software! Not only are they an expert in their industry, but when peak season comes around, they’ve got you covered. When you partner with a reliable 3PL provider to streamline your inventory management, and increase transparency, you’ll take your business operations to new heights.
Inventory Management + 3PL FAQs
What Is the Biggest 3PL Company?
The biggest third-party logistics company is DHL Supply Chain, a subsidiary of the German multinational courier delivery services company Deutsche Post DHL Group.
What Is Meant by Inventory Management?
Inventory management refers to the process of overseeing and controlling the movement of goods, including their storage, stock levels, and delivery to customers. The goal of inventory management is to ensure that a business has the right amount of inventory in the right place at the right time, while minimizing the costs associated with storage space and carrying excess inventory. The goal of these common strategies is to help both off and online businesses reduce stock shortages, lower carrying costs, improve customer satisfaction, and increase profitability.
What Is Logistics Inventory Management?
Logistics inventory management is a subset of inventory management that focuses on the coordination of the physical flow of goods, information, and financial transactions within a supply chain. This involves overseeing the storage, handling, and transportation of goods from the manufacturer to the end customer, ensuring that the right amount of inventory is available at the right time and place. The goal of logistics inventory management is to optimize the efficiency and cost-effectiveness of the supply chain while meeting customer demands and improving overall business performance.
Feb 16, 2023 | Blog
Running an e-commerce business or a retail operation is no easy feat.
From managing inventory to fulfilling orders, the logistics involved can be overwhelming and time-consuming. But what if we told you that there’s a way to streamline your logistics operations and take back control?
With third-party order management, you can do just that. It’s the ultimate solution for businesses looking to improve their logistics efficiency and customer satisfaction. But what exactly is 3PL order management and how does it work?
What is 3PL Order Management?
3PL Order Management is a game-changer for businesses looking to level up their logistics. It is the process of managing customer orders from the point of sale to delivery and involves a wide range of tasks, including receiving orders, processing them, picking and packing products, and shipping them to customers. It’s a powerful solution that streamlines and automates order fulfillment and removes many manual processes other companies can be stuck in today. This means while your 3PL partner handles order management, you can focus on growing your business. With 3PL order management, you can kiss logistics stress goodbye and say hello to streamlined, efficient, and profitable operations.
How Does 3PL Order Management Work?
Let’s say that John runs an eCommerce business that sells outdoor gear. His business has been growing rapidly, and he’s finding it difficult to keep up with the logistics and distribution side of things. So, he decides to work with a 3PL provider to handle his order management. Once John’s 3PL provider receives an order from his online store, the order is automatically imported into the provider’s order management system. The system checks the inventory levels to make sure that the items are available, and then assigns the order to a picker.
The picker goes to the warehouse and uses a barcode scanner to locate and pick the items specified in the order. Once the items are picked, they are taken to the packing station, where they are packaged and prepared for shipment. The 3PL provider then creates a shipping label and invoice for the order, and ships the package to the customer. Along with that, the provider notifies the customer of their order status and tracking information so they can follow the package on its way to them.
In the meantime, the 3PL provider also updates John’s inventory levels in real-time, so he can see exactly how many products he has in stock. They reorder items as needed to ensure that John’s inventory doesn’t empty. And they give him reports on which products sell and which products are stagnant.
This is the beauty of order management. Thanks to 3PL’s expertise and technology, the provider handled the order process efficiently, making sure that the customer received their package on time and that John looked like a rockstar!
Features of 3PL Order Management
Third-party logistics order management systems offer a plethora of features that make them a popular choice for businesses looking to streamline their logistics and supply chain operations.
- Real-time inventory management, businesses to have clear visibility into inventory levels, allowing them to make informed decisions.
- Automated order processing, multi-channel integration, and customizable workflows enable businesses to optimize their logistics processes, improving efficiency and reducing costs.
- Reporting and analytics tools are included to provide businesses with insights into their logistics operations, helping them identify areas for improvement.
3PL order management systems are also scalable, adapting to the changing needs of the business, making them an ideal choice for businesses looking to scale up or down.
Order Management Services Provided by a 3PL
Now that you understand how order management works, let’s dive into the specific order management services which are offered by many 3PLs.
Warehouse Storage
Warehouse storage services are typically a key offering from your potential 3Pl provider. This means they own and operate a warehouse where they store and manage their clients’ inventory. They handle all the receiving, storing, maintaining accurate inventory counts, and organization within this warehouse.
Inventory Distribution
For a 3PL it is key to manage the flow of products from the warehouse to your customers. They will often distribute your inventory between multiple warehouses so they offer faster delivery no matter where your customer is located. This includes managing the shipping and handling of products, as well as providing tracking information and delivery updates to customers.
Inventory Management
Whether it is something you can integrate with or not, most providers use inventory management software to track stock levels. This ensures that the necessary items are available to fulfill orders. If this software can integrate into your online store, it will likely automatically update stock levels as orders are placed. This benefit is a large reason why you want to find a 3PL partner who also has a software offering.
Picking and Packing
Once an order is placed, the 3PL provider’s team will pick the items from the warehouse shelves, using barcode scanning or other identification methods to ensure that they are picking the correct items and quantities. Once the items are picked, they are packed and prepared for shipment. Many top-tier 3PL use robots and automated conveyor belts to reduce human error and speed up the efficiency of this process.
Shipment Tracing and Tracking
Most 3PL providers also handle the shipping and tracking of orders. They create shipping labels, track packages and provide tracking information to the customer so they can follow the package on its way to them. This level of tracking and visibility often offers a large boost to customer satisfaction.
Reverse Logistics
When a customer initiates a return, the 3PL provider will typically receive the returned product and inspect it to make sure it is in good condition. If there is an issue with the product, the 3PL provider will contact the customer to resolve it. Once the return is approved, the 3PL provider will then process the return by updating the inventory, and if necessary, restocking the product. They will also refund the customer or issue a store credit, depending on the customer’s preference and the store’s return policy. If needed, they can often handle the process of disposing or refurbishing the products that can’t be sold again within the compliance of any relevant regulations.
Need the services of a 3PL? ShipHero to the rescue!
Benefits of Letting a 3PL Manage Orders
With an understanding of exactly what is available, you are now armed and dangerous when it comes to sourcing and picking out a 3PL that enhances your business. Here are a few benefits you’ll experience with a strategic 3PL provider in your corner.
Integration Throughout the Supply Chain
By letting a 3PL provider manage orders, businesses can integrate their logistics operations with the rest of their supply chain, which can improve efficiency and reduce costs. This integration can also help to improve inventory management and forecasting, allowing businesses to make better decisions about their supply chain.
Cross Platform Fulfillment
3PL providers can handle orders from multiple sales channels such as e-commerce platforms, marketplaces, and brick-and-mortar stores, allowing businesses to manage orders from multiple sources in one place. This means anywhere you sell from, your orders will be processed in one place so now you have visibility into your entire inventory and orders within one location.
Greater Customer Experiences
In today’s world, the customer experience is key. That’s because a happy customer is a returning customer. When it comes to shipping a customer favorite is the ability for the customer to track their order as it works its way through your 3PL provider’s processes. Plus, you know the 3PL is motivated to get their order to their doorstep quickly and efficiently because they likely have contracted KPIs to do so.
Fast and Efficient Pick and Pack
When advanced automation and robotics are put in place within the picking and packing process, the error becomes greatly reduced. This means that not only do your customers get their orders faster, but you also pay less for it to be shipped out. Especially if your 3PL provider is continually enhancing their warehouse operations with the newest technology.
Enhanced Inventory Visibility
With real-time inventory management, businesses have clear visibility into inventory levels, allowing them to make informed decisions. This can help to reduce stockouts and improve inventory forecasting.
Reliable Order Fulfillment
We’ve already talked about a reduction of human error. When 3PL providers have the resources, technology, and expertise to handle the logistics and distribution side of things, it means you and your customer experience more reliable order fulfillment.
Key Takeaways
Third-party logistics order management is an efficient and cost-effective solution for businesses looking to streamline their logistics operations, manage inventory, and fulfill orders. Their strategic knowledge gives you a competitive advantage and amplifies your business. It is a comprehensive service that covers all aspects of logistics management, including receiving orders, processing them, picking and packing products, and shipping them to customers. Plus with real-time inventory management, automated order processing, multi-channel integration, and reporting and analytics tools, businesses now have the knowledge to make more informed decisions more quickly. This allows businesses to focus on growth while leaving the logistical order management process to the experts.
3PL Order Management FAQs
What Are the Three Types of 3PL Providers?
Third-party logistics (3PL) providers come in three main types:
- Traditional 3PL: These providers offer a wide range of services, including transportation, warehousing, and distribution. They typically handle the entire logistics process, from receiving products at the warehouse to delivering them to customers.
- Asset-Based 3PL: These providers own and operate their own transportation assets such as trucks, ships and planes. They are specialized in the transportation and logistics of goods and usually handle the delivery and transportation process of the products.
- Niche 3PL: These providers specialize in a specific aspect of logistics, such as hazardous materials handling or temperature-controlled transportation. They are experts in their specific field and provide specialized services to businesses that require it.
What Is the Difference Between 3PL & 4PL?
Third-Party Logistics (3PL) and Fourth-Party Logistics (4PL) are both service providers that assist businesses with logistics and supply chain operations, but they differ in their scope and level of services provided.
3PL providers are responsible for handling specific logistics functions, such as transportation, warehousing, and distribution. They typically handle the entire logistics process, from receiving products at the warehouse to delivering them to customers. They own the resources, technology and expertise to manage the logistics process.
4PL providers act as an integrator that assembles and manages the resources, capabilities, and technology of multiple 3PLs, transportation companies, and other service providers to create a comprehensive logistics solution for the customer. They are often referred to as “logistics integrators” or “lead logistics providers” and they act as the single point of contact for their clients, coordinating all logistics activities and managing all the other service providers involved. They don’t own resources but have the capability to manage them.
Feb 16, 2023 | Blog
What is a 3PL?
In today’s business landscape, where challenges abound, a Third-Party Logistics (3PL) partner serves as a skilled assistant for your operations. In the realm of ecommerce fulfillment and online commerce, having the right tools and 3PL systems is crucial. With the ascent of Ecommerce, the efficiency and technology provided by 3PLs have become indispensable. They specialize in logistics tasks such as warehousing, transportation, and inventory management, allowing businesses to focus on their strengths while leaving logistics to experts.
How Does a 3PL Work?
Consider “Fashion Avenue,” a growing retail clothing brand. As the business expands, owner Sarah faces logistics challenges. By partnering with a party logistics provider, a 3PL provider, she crafts a tailored plan encompassing warehousing, transportation, and inventory management. The 3PL oversees logistics, from receiving shipments to timely delivery. This empowers Sarah to focus on fashion curation while accessing real-time data for smooth operations.
Ecommerce Integration with 3PL
Integrating Ecommerce with a 3PL connects your online store with logistics services, facilitating information exchange. This integration enables:
- Directing online orders to the 3PL for prompt fulfillment.
- Reflecting real-time inventory updates on the store based on the 3PL’s stock.
- Generating shipping labels and providing tracking through the 3PL.
- Streamlining customer returns processing.
Integration depth varies by 3PL and eCommerce platform, with options like built-in integrations or API connections.
Dispelling 3PL Myths and Misconceptions
Several myths surround 3PLs:
- Expense Myth: 3PLs often save money through economies of scale and better shipping rates.
- Control Myth: 3PLs enhance rather than control your business; you retain inventory and customer relations control.
- Inventory Myth: Partnering with a 3PL provides visibility and control through real-time data.
- Capability Myth: 3PLs offer varied services, including order fulfillment, reverse logistics, and eCommerce integration.
Differentiating Between 3PL Logistics Partners and Brokers
While a 3PL offers comprehensive tailored solutions, a Broker connects shippers and carriers, offering less control. A 3PL handles intricate technology and tasks, with an advanced 4PL providing higher-level supply chain management.
Industries Relying on 3PL Logistics Partners
Sectors such as e-commerce, retail, healthcare, and automotive trust 3PLs. In the online sales landscape, efficient storage and logistics are crucial. Retailers and ecommerce websites can benefit from 3PL services, including specialized packaging options.
Managing Your 3PL Logistics Partner
Effective management involves clear communication, performance monitoring, and understanding customer orders and product needs. 3PL expertise is invaluable. Business needs and customer satisfaction are paramount.
Monitoring 3PL Partner Performance
Ensure optimal performance by employing Service Level Agreements (SLAs), Key Performance Indicators (KPIs), data reports, and audits. Strong partnerships, order management system and communication with your 3PL are vital.
The Power of Clear Visibility in Supply Chains
Supply chain visibility is a game-changer in today’s logistics landscape. It’s all about tracking products from start to finish. This real-time tracking helps companies make smart decisions, keep customers happy, and improve the way they work. When companies, third party logistics providers and 3PL partners team up, they can share data easily and keep the flow smooth.
New Ways to Ace the Last-Mile Delivery Game
Getting that last mile of delivery right is super important. New ideas like drone delivery, self-driving vehicles, and crowdshipping are rocking the last-mile scene. These innovations speed things up and make customers smile. Businesses teaming up with 3PL pros can use these cool ideas to make that last stretch even smoother.
Sustainability
From eco-friendly boxes to smarter routes, companies are finding Earth-friendly ways to ship stuff. When a business links up with a 3PL partner, they can work together to make the shipping and fulfillment process even kinder to the planet.
Expertly Navigating Global Logistics and Customs
When business goes global, things get tricky. International logistics and customs rules can feel like a maze. But teaming up with a 3PL whiz can help. They know the ropes, from duties to paperwork. With them on your side, global shipping becomes a breeze.
Smart Moves with Data Analytics and AI
Numbers and smart tech are changing the logistics game. Data and AI are like power-ups for entire supply chain. They help businesses know what customers want and find the best routes. Businesses working with 3PL pals can use these tools to make things run even smoother.
Outsmarting Disruptions with Smart Planning
In a wild world, being ready for surprises is key. That’s where risk management and contingency planning come in. They help businesses bounce back when things go wrong. Businesses that partner with 3PL pros can breathe easy. They’ve got backup plans and tricks up their sleeves to keep things moving.
Elevating Shopping Joy with Integrated Logistics
Ecommerce + 3PL = Happy Customers! When shopping is smooth, customers smile. That’s where the Ecommerce business and 3PL magic happens. Orders fly out faster, tracking is a breeze, and returns are a snap. When businesses and 3PL champs join forces, shoppers can’t help but grin.
Tomorrow’s Logistics: Trends to Watch
Logistics is changing fast, and tech is leading the charge. Think blockchain, IoT, and digital twins. These cool ideas make tracking and moving stuff even cooler. Businesses joining forces with other 3PL providers and trendsetters can ride the wave of change and stay ahead.
Building Strong Bonds with 3PL Partners
Great partnerships are gold. That’s true for businesses and their 3PL partners too. Clear talk, shared goals, and teamwork make things awesome. When businesses open up to their 3PL pals and stick to promises, the partnership shines. And when problems pop up, 3PL wizards have solutions ready to roll.
Expanding Product Offerings and Diversifying Sales Channels
Ecommerce businesses often look to expand their product offerings and diversify sales channels to reach a broader audience. The article could explore how partnering with a 3PL provider enables businesses to manage a wider range of products and efficiently handle inventory for various ecommerce sales channels and platforms, such as marketplaces, social media, and brick-and-mortar stores.
Managing Seasonal Fluctuations and Peak Demands
Seasonal fluctuations and peak demands can strain logistics operations. The article could discuss how Ecommerce logistics businesses can leverage 3PL expertise to effectively manage increased order volumes during peak seasons, ensuring smooth operations, timely deliveries, and customer satisfaction.
Enhancing Returns Management and Reverse Logistics
Efficient returns management and reverse logistics are crucial for customer satisfaction. The article could delve into how 3PL partners assist businesses in streamlining the returns process, reducing return shipping times, and inventory levels and optimizing product refurbishment, restocking, or disposal. Learn more about measuring performance of your 3PL system here.
Key Takeaways
Trust in a 3PL elevates business operations, ensuring timely, cost-effective order deliveries. Warehouse services are central to the supply chain. Every aspect of customer experience, from storage to savings, matters.
Ecommerce Integration with 3PL FAQs
How to Integrate with 3PL?
Integration requires communication, collaboration, and planning.
What is 3PL in Ecommerce?
3PL manages warehousing, shipping, and order fulfillment for online businesses.
What are Ecommerce Integrations?
Connections between eCommerce platforms and tools streamline operations.
For deeper insights into choosing the right 3PL software, check this article.
Feb 16, 2023 | Blog
What is a third-party logistics provider (3PL) and how could it improve your business? In a world of continual shipping restraints and high customer expectations, a 3PL could be your solution. Below we will detail exactly what you can expect from using a 3PL and the benefits you’ll gain when using one for your business. Let’s dive in!
What is a 3PL?
A 3PL is a company that offers outsourced logistics and supply chain management services to businesses. These services can include transportation, warehousing, inventory management, and other related functions. When contracting with 3PLs you are provided a cost-effective solution for companies that do not want to invest in their own logistics infrastructure, allowing them to focus on their core competencies. Have you ever felt unsure of what to do next when you encounter a logistical problem? That’s another area 3PLs can help. They often have specialized expertise and technology so you can optimize your supply chain operations and improve efficiency.
Third-Party Logistics Definition, Process, & Resources
The infrastructure within a 3PL is rather impressive. They have poured their revenue into streamlining logistical operations with technology many others couldn’t afford to utilize if they tried to create their own logistics infrastructure.
With this infrastructure, they utilize a wide range of processes and resources to manage logistics and supply chain operations for their clients. These processes can include:
- Transportation management involves coordinating the movement of goods by road, rail, air, or sea.
- Warehousing and distribution, which involves storing and distributing goods in an efficient and cost-effective manner.
- Inventory management involves tracking and managing stock levels to ensure that products are available when customers need them.
To support these processes, 3PLs often invest in sophisticated technology. These technologies allow them to automate and streamline logistics operations, so they can provide real-time visibility into inventory levels, delivery schedules, and other key metrics to their clients. Often, they will also utilize a wide range of resources, such as a fleet of vehicles, warehouses, and equipment, to support their logistical processes. These technologies and resources work in tandem with a skilled workforce that includes logistics experts, transportation planners, warehouse managers, and inventory analysts who work to optimize their client’s supply chain operations.
Lastly, a main part of most 3PL processes includes working closely with their clients to understand their specific logistical needs and to develop customized solutions that align with their business goals. They also continuously monitor and analyze logistics trends and market conditions to identify opportunities for cost savings and process improvements. Basically, they are like a logistics superhero your business can call upon to make their logistical operations as efficient as possible!
Third-Party Logistics (3PL) Basics
When you’re setting up your business with a 3PL provider, they’ll need some basic information from you in order to get things moving. They’ll need to know all about the products you’re shipping, like their dimensions, weights, and any special handling requirements. They’ll also want to know your current and projected shipping volume, so they can plan accordingly. Additionally, they’ll need to know your preferred shipping methods and carrier preferences, and any specific delivery requirements, restrictions, or compliance requirements you might have.
Are 3rd-Party Logistics the Same as Order Fulfillment?
Third-party logistics is a service in which a company outsources its logistics and distribution functions to a third-party provider. This provider takes on the responsibility for all or some of the company’s logistics operations, such as transportation, warehousing, and distribution.
Order fulfillment, on the other hand, refers to the process of receiving, processing, and delivering customer orders. This process includes tasks such as receiving the order, picking and packing the items, and shipping the order to the customer. Order fulfillment can be handled by a company’s own logistics and distribution team or by a third-party provider.
In summary, 3PL is a broader term that encompasses all logistics and distribution functions, while order fulfillment is a specific aspect of logistics that refers to the process of fulfilling customer orders. A company may use a 3PL provider for both logistics and order fulfillment, or it may handle logistics in-house and use a separate 3PL provider for order fulfillment.
3PL Services vs. Drop Shipping
Third-party logistics companies offer a wide range of benefits over traditional drop shipping methods. One of the biggest benefits of 3PL services is the level of control and visibility they provide. With a 3PL provider, businesses have real-time access to inventory levels, shipping costs and information, and other logistics data, allowing them to make informed decisions about their entire supply chain. This level of control and visibility is often not possible with drop shipping, where businesses may have limited visibility into the logistics process. 3PL providers also bring specialized knowledge and expertise in logistics and supply chain management. They have the resources, technology and experience to optimize the entire logistics process, which can result in cost savings, improved efficiency, and increased competitiveness in the market.
Benefits of Third-Party Logistics
Are you tired of spending countless hours and resources managing logistics and supply chain operations for your business? Are you looking for a way to streamline your logistics processes and improve efficiency? Then look no further than third-party logistics.
By outsourcing logistics and supply chain management to a 3PL, you can free up valuable time and resources to focus on your business’s core competencies. A 3PL can handle the transportation, warehousing, and inventory management on your behalf, allowing you to focus on growing your business.
They can also help you save money by finding more cost-effective solutions for logistics and supply chain management. They have the expertise and technology to optimize logistics operations and improve efficiency, which can result in significant cost savings for your business.
Moreover, a 3PL can help you improve delivery times and increase customer satisfaction by optimizing logistics operations to meet customer demands. They can also help you improve inventory management by implementing inventory management systems that provide real-time visibility into inventory levels and stock management.
By outsourcing logistics and supply chain management, you can also take advantage of their networks of resources, such as transportation and warehousing facilities, and their skilled workforce, which includes logistics experts, transportation planners, and inventory analysts. Partnering with a 3PL will help your business grow. Instead of spending precious time and revenue packing orders, you can get those same orders to your clients faster and cheaper!
Will Your Business Benefit From Third-Party Logistics?
Here are several signs that indicate a business could benefit from using a third-party logistics provider:
- Lack of logistics expertise: If your business does not have the necessary expertise in logistics and supply chain management, it may be beneficial to outsource these functions to a 3PL.
- Capacity constraints: If your business is experiencing growth and is struggling to keep up with the demand for logistics services, a 3PL can provide additional capacity and support.
- High logistics costs: If your business is spending a significant amount of money on logistics and supply chain management, a 3PL may help you reduce costs by finding more efficient solutions.
- Difficulty in meeting customer demands: If your business is struggling to meet customer demands for delivery, a 3PL can help you optimize your logistics operations to improve delivery times and increase customer satisfaction.
- Difficulty in tracking and managing inventory: If your business is struggling to keep track of inventory levels and manage stock, a 3PL can help you implement inventory management systems to improve visibility and control.
- Difficulty in managing returns: If your business is struggling to manage returns and reverse logistics, a 3PL can help you handle these processes more efficiently.
If any of these sound familiar, your business will absolutely benefit from a third-party logistics solution!
The Third-Party Logistics Process
Are you curious about the inner workings of a 3PL fulfillment center? It can be difficult to understand the process if you’re new to outsourcing shipping. But the truth is, the 3PL fulfillment process is not as mysterious as it may seem. Let’s dive into the ins and outs of what happens in a 3PL eCommerce warehouse from the moment a customer clicks “submit order” on your online store to the final delivery.
eCommerce Platform Integration
An eCommerce platform is the software that powers your online store. Many 3PL companies have an eCommerce platform integration that will connect seamlessly with your store. This means when a customer is ready to check out and provides their billing and shipping information, this information is then processed by your 3PL partner. It goes to the fulfillment center where it is received and the order begins its journey.
Inventory Management
As the 3PL provider begins to check the inventory for the order they will often consult inventory management software which is usually connected to both your eCommerce platform and your overall inventory. That way the 3PL provider can know right away if the product is available, and can update stocking levels for you both to view.
Picking, Packing, and Shipping
Once the inventory is confirmed, the 3PL provider’s team will pick the items from the warehouse shelves. They use barcode scanning or other identification methods to ensure that they are picking the correct items and quantities. After the items are picked, they are packed and prepared for shipment. This may include packaging the items in protective material, creating shipping labels and invoices, and any other necessary preparation for shipping. After the order is packed, the 3PL provider will ship the order to the customer using the shipping method specified on the order. The 3PL provider may also provide tracking information to the customer so they can track their order during transit.
Same-Day Shipping
To achieve same-day shipping, a 3PL company requires a combination of strategic warehouse locations, fast and efficient order processing, real-time inventory management, expedited shipping options, and effective communication with the customer. Having strategically located warehouses that are close to major population centers allows the 3PL provider to quickly and efficiently ship items to customers within a certain radius. To achieve same-day shipping, the 3PL provider typically offers expedited shipping options such as overnight delivery or express shipping.
Reverse Logistics
When a customer initiates a return, the 3PL provider will typically receive the returned product and inspect it to make sure it’s in good condition. If there’s an issue with the product, the 3PL provider will contact the customer to resolve it. Once the return is approved, the 3PL provider will then process the return by updating the inventory, and if necessary, restocking the product.
Key Takeaways
Convinced yet? We know now that 3PLs stand out from other logistical solutions because they offer tailored solutions, specialized expertise, scalability, sophisticated technology, access to resources and handle reverse logistics processes. Plus they work closely with their clients to understand their specific logistics needs and develop customized solutions that align with their business goals. Which means you have more time to become the next big thing!
What Is a 3PL System FAQs
What is the Role of 3PL in a Company?
The main role of a 3PL is to handle the logistics functions that a company does not want to handle or cannot handle in-house. This can include transportation, warehousing, and distribution, as well as other logistics-related services such as inventory management, order fulfillment, and reverse logistics. By outsourcing logistics and distribution to a 3PL provider, a company can focus on its core competencies and business operations. This can help the company to save costs, improve efficiency, and increase its competitiveness in the market.
How Many Types of 3PLs Are There?
There are four types of 3PLs. First-party logistics (1PL) refers to in-house transportation services where a company handles its own logistics and distribution functions without the involvement of any additional parties, such as a florist using their own delivery van to drop off purchases to local buyers. Second-party logistics (2PL) involves the use of outside logistics providers, such as courier services like USPS, FedEx, or UPS, which are not integrated with the company when contracted. Third-party logistics companies create an integrated system that allows for real-time data sharing between the company and the 3PL, resulting in a streamlined, efficient, and reliable long-term solution in complete synchronicity with the business. Fourth-party logistics (4PL) is much like a 3PL, but logistically the company’s relationship with the consumer is often brokered by a middleman.
