Feb 16, 2023 | Article
Logistics forms the backbone of global trade and commerce, playing a pivotal role in product storage, transportation, packaging, labelling, and distribution. The logistics industry has evolved over time, introducing various types of logistics providers to cater to customers and retail partners’ needs. These include 1PL, 2PL, 3PL, and 4PL. Each one differs in their level of control, service provided, and degree of involvement in the supply chain management process, and their role in managing supply chains can vary significantly.
The Importance of Logistics Technology
Technology plays a pivotal role in improving the efficiency of logistics operations. For example, Warehouse Management Systems (WMS) allow businesses to keep track of inventory levels and order fulfilment processes in real time. On the other hand, Transportation Management Systems (TMS) optimise the movement of goods by selecting the most efficient routes, thereby reducing transportation costs and delivery times for shipping orders. Additionally, emerging technologies like Artificial Intelligence (AI), Internet of Things (IoT), and blockchain are reshaping the logistics landscape by offering solutions to complex logistical challenges such as predictive analysis, real-time tracking, and secure data management.
What is 1PL (First-Party Logistics)?
1PL, or first-party logistics, represents companies or manufacturers that have their own resources to manage and control their goods. These companies handle all aspects of their logistics process, including inventory management, warehousing, transportation, and distribution. The use of 1PL often indicates that the company has a high level of expertise and control over its logistics, but it can also mean that the company bears all the costs associated with these processes.
What is 2PL (Second-Party Logistics)?
2PL, or second-party logistics providers, are typically transport-focused companies that own vehicles, ships, or airlines. They are often referred to as middlemen in the logistics chain, providing transportation services for goods from one point to another. The 2PLs are responsible for the movement of products but typically do not handle other aspects of logistics such as warehousing, fulfilment services or inventory management. An example of a 2PL could be a freight shipping company.
What is 3PL (Third-Party Logistics)?
3PLs, or third-party logistics providers, offer a broader range of logistics solutions compared to 1PLs and 2PLs. They not only take care of transportation but also handle warehousing, packaging, and inventory management. A 3PL or third party logistics service provider is typically an external company hired to oversee and manage a company’s logistics needs. Businesses often hire 3PLs when they want to outsource logistics services to cut costs, improve service levels, or handle logistics complexities better. The benefits of using a 3PL can include cost savings and access to greater insights into the logistics process. Learn more about a 3PL system here.
What is 4PL (Fourth-Party Logistics)?
4PL, or fourth-party logistics providers, represent the next level of logistics outsourcing. A 4PL provider typically oversees the entire supply chain, from warehousing to inventory management to transportation. Unlike 3PLs, 4PLs do not own warehouses or vehicles. Instead, they manage and coordinate the resources, technology, infrastructure, and even other logistics service providers like 2PLs and 3PLs. 4PLs offer a higher level of control and integration into the client’s business, providing comprehensive supply chain solutions. They act as a single interface between all parties in the supply chain, adding value by streamlining the process. This means they can provide a more holistic view of a client’s supply chain.
What is 5PL (Fifth-Party Logistics)?
Though not as common as the other types, 5PLs have emerged in recent years, focusing on providing supply chain solutions for e-commerce businesses. They leverage technology and data to optimise supply chain management and logistics processes for ecommerce businesses. For example, a 5PL might use data analysis to optimise the order fulfilment process for an e-commerce business.
Choosing the Right Logistics Partner
Choosing between 1PL, 2PL, 3PL, and 4PL depends on the size, needs, and resources of your business. Each type offers different levels of control, cost, and expertise in managing logistics themselves. Partnering with the right logistics provider can lead to cost savings, improved customer service, and better overall supply chain management. Therefore, understanding the differences between these types of logistics providers is crucial to making an informed decision. The number of options available can be overwhelming, but with careful consideration, businesses can find the right fit for their needs.
Role of Reverse Logistics
Reverse logistics is another essential aspect of supply chain management. It includes activities related to product returns, maintenance, recycling, and disposal. Businesses often overlook the importance of an effective reverse logistics project management strategy. However, a well-managed reverse logistics process can lead to cost savings, enhanced customer satisfaction, and improved sustainability. For instance, by recycling or refurbishing returned products, companies can minimise waste and reduce manufacturing costs. Similarly, efficient handling of product returns can significantly improve customer satisfaction and loyalty.
Performance Metrics in Logistics
To evaluate the efficiency and effectiveness of logistics operations, businesses use various performance metrics. Key metrics include delivery speed, order accuracy, and cost-effectiveness. Delivery speed measures the time it takes for a product to move from the warehouse to the customer’s doorstep. Order accuracy, on the other hand, gauges the correctness of order fulfilment – whether the right product reaches the right customer at the right time. Cost-effectiveness is determined by comparing the cost of logistics operations to the value they add to the business. Regular monitoring of these metrics helps businesses identify areas of improvement, thereby less shipping costs and enhancing their overall logistics performance.
Case Studies of Successful Logistics Management
Exploring case studies of successful logistics management provides valuable insights into practical applications of logistics principles. These real-world examples often highlight how businesses can effectively utilise different types of logistics providers to optimise their supply chains. For instance, a case study might discuss how a company achieved cost savings and improved customer service by transitioning from a 1PL model to a 3PL model. Another case study might demonstrate how a business leveraged the logistics expertise of a 4PL provider to streamline its entire supply chain, thereby gaining a competitive edge in the market.
These topics further our understanding of the complex world of logistics and supply chain management. By delving deeper into these areas, businesses can make more informed decisions, leading to improved logistics operations and ultimately, less shipping lines and better customer satisfaction.
Case Studies that Demonstrate the Differences between 1PL, 2PL, 3PL, 4PL, and 5PL
- 1PL (First-Party Logistics): A Local Manufacturing Firm
A local manufacturing company decided to manage its own logistics to retain full control over its supply chain. It had a robust infrastructure consisting of a manufacturing unit, warehouses for storage, and a fleet of delivery vehicles. The company managed all aspects of its supply chain, including raw material procurement, production, warehousing, and transportation of finished goods to retailers. While this gave the company total control, it also meant they had to invest heavily in infrastructure and deal with the complexities of managing a complete supply chain.
- 2PL (Second-Party Logistics): A Freight Shipping Company
An international freight shipping company acted as a 2PL for a car manufacturing company. The car company produced vehicles in its factories and then handed them off to the freight shipping company. This company, with its fleet of cargo ships, transported the vehicles to different countries across the globe. The shipping company provided only the transportation service and did not get involved in any other part of the supply chain.
- 3PL (Third-Party Logistics): E-commerce Store and a Fulfilment Centre
An online fashion store partnered with a 3PL fulfilment centre to manage its supply chain. The 3PL managed the store’s inventory, order fulfilment, and returns. All products were stored in the 3PL’s warehouses. When an order was placed on the store’s website, the 3PL picked, packed, and shipped the order to the customer. This allowed the e-commerce store to focus on their core competencies, such as designing fashion and managing their online presence, while the 3PL took care of the logistical details.
- 4PL (Fourth-Party Logistics): Global Tech Corporation and a 4PL Provider
A global tech corporation had a vast and complex supply chain with various 3PLs and 2PLs providing services in different regions. To streamline its logistics and have a unified view of the entire supply chain, the corporation partnered with a 4PL provider. The 4PL did not own any infrastructure but provided strategic oversight over the entire supply chain. It coordinated with all other logistics providers and made strategic decisions to optimise supply chain efficiency.
- 5PL (Fifth-Party Logistics): E-commerce Giant and a 5PL Provider
A global e-commerce giant worked with a 5PL provider to optimise its supply chain. The 5PL used data analytics and advanced technology to make decisions about the best carriers, routes, and warehouses to use. The 5PL coordinated with all other logistics providers in the supply chain and used its tech-driven insights to reduce costs and increase efficiency. This relationship allowed the e-commerce company to benefit from the latest technology without having to implement it themselves.
These case studies offer a glimpse into how each type of logistics provider operates, and how businesses can use them depending on their needs and capabilities.
Conclusion
The logistics industry is a complex network of service providers. By understanding the different roles and capabilities of logistics companies, 1PLs, 2PLs, 3PLs, 4PLs, and even 5PLs, businesses can choose the best partner to optimise their supply chain and logistics processes, ultimately driving growth and customer satisfaction. The market for these services is vast, and with the right partner, businesses can improve their sales and delivery performance. We hope this English guide with practical examples provides you with a step by step understanding of the different types of logistics providers, and how each type can benefit different types of clients.
Feb 16, 2023 | Blog
With rising concern among the public and government for the environment and a push toward sustainability, it’s logical that businesses will be held responsible for their environmental impact. These days, many companies adopt sustainable business processes to meet customer expectations and fulfill their corporate responsibility.
Third-party logistics (3PL) is no exception. Whether you realize it or not, third-party logistics has a large carbon footprint with a direct negative impact on the world around us. Paper and plastic are often wasted when packing items, and fuel is used to transport items from warehouses to customers.
How can 3PL companies fulfill their responsibility to the environment without sacrificing logistics effectiveness? Read on to find out.
What Is a Sustainable Supply Chain?
A sustainable supply chain is a supply chain that applies ethical and sustainability practices. Having a sustainable supply chain means every link in the chain must have as little carbon footprint as possible.
Additionally, eco-friendly supply chains must be transparent. You can’t just say that your 3PL company implements green supply chain management – you also need to prove it through action.
Here are four sustainability initiatives 3PL companies can pursue:
Reducing Your Carbon Footprint
A carbon footprint includes all the greenhouse gasses like carbon dioxide and methane that an activity produces. The larger the carbon footprint, the more environmental pollution your supply chain activities make. The supply chain produces a lot of carbon because many of its activities involve transporting products from one place to another.
A 3PL company can reduce its carbon footprint by adopting environmentally friendly business practices and green initiatives. This means reducing waste, recycling resources, choosing eco-friendly suppliers and other sustainable practices.
Green Packaging
Product packaging is a large source of waste because most people throw them away as soon as they get the item. One of the best ways to implement green packaging in a 3PL business is to use biodegradable and compostable materials, meaning they’ll break down quickly once thrown away.
Many companies spend resources on making elaborate packaging that’ll be tossed quickly by the end customer. To counter this, you can implement discreet shipping and packaging, which entails simple and unadorned packages bearing only essential information about their contents and recipients.
Choosing Sustainable Transportation
Your goods transportation method matters because different transportation methods consume different amounts of fuel.
Third-party logistics companies can reduce their freight emissions by choosing transport methods like trains, ships and biofuel-powered cars. Fortunately, recent developments in alternative fuels, fuel efficiency and electric vehicle technology make sustainable transportation more affordable.
They can also minimize their carbon emission rate by reducing the distance between fulfillment centers and the customers.
Optimizing Energy Use in Warehouses
Warehouses use a lot of energy and tend to have a large carbon footprint, so it’s something third-party logistics companies must address. They can optimize their energy consumption in warehouses by switching to LED lamps, using lights only when needed and generating their own power through solar energy.
Why 3PL Sustainability Matters
3PL sustainability matters because it’s your responsibility as a company to watch your carbon footprint and improve sustainability. That also means implementing environmentally friendly practices.
It’s not just for 3PL companies, either. While there are differences between 2PL, 3PL and 4PL companies, all logistics service providers should implement supply chain sustainability measures to minimize their carbon footprint.
In the end, being sustainable and reducing your carbon footprint ends up benefiting all of us. We’re all living on the same planet, and it’s our responsibility to leave a world that our children and grandchildren can live in by preserving natural resources and saving energy.
Gen Z is Looking for Change
Gen Z makes up around 20% of the American population. This large demographic is mostly environmentally aware, meaning they often prefer to buy products from sustainable brands. In fact, three-quarters of them are more than willing to overlook brand names and change their buying habits in favor of sustainability.
If you and your business partners want to increase customer loyalty from Gen Z, you need to demonstrate your methods are sustainable and can make a positive impact on the environment. Choose environmentally friendly transportation and work with eco-conscious partners to boost your chances of attracting their attention and fostering customer loyalty.
What Sustainability Means for 3PLs
The increasing customer pressure for sustainability means 3PL companies need to adopt environmentally friendly practices if they hope to attract business from sustainable business organizations.
This might prove to be a challenge since you may need to revamp whole business processes to reduce your carbon footprint. Moreover, logistics operators need to implement environmental initiatives in competitive market conditions without sacrificing operational or financial performance.
Fortunately, 3PL companies aren’t alone in this endeavor. You can work with environmental advisors, industrial experts and 3PL consultants to ensure the new business processes have smaller carbon footprints while still retaining logistics effectiveness.
Key Takeaways
Sustainability is a major concern for companies, and 3PLs should follow suit. Some sustainable development initiatives 3PL companies can implement include:
- Implementing green packaging
- Choosing sustainable transportation methods
- Optimizing energy use in warehouses
However, environmental sustainability isn’t just a social performance to attract business. Implementing sustainability initiatives is important because companies have to be responsible for their greenhouse gas emissions. Minimizing your environmental footprint through sustainable initiatives means keeping the planet livable – not just for us but also for our descendants.
Sustainable 3PL FAQs
What is Sustainable Supply Chain and Logistics?
Sustainable supply chain and logistics is an eco-friendly principle where companies minimize the environmental impact of their logistics activities. This means reducing their carbon footprint by implementing sustainable practices like green packaging and eco-friendly transportation.
What are the Four Types of 3PL?
The four types of 3PL are:
- Standard 3PL providers: These companies provide the basic 3PL services to handle a client’s order processing and warehouse management operations.
- 3PL service developers: These companies help clients build their company’s IT infrastructure and management to handle inventory operations.
- 3PL customer adapters: These companies take over almost all of the client’s logistics functions, including negotiating shipping rates.
- 3PL customer developers: These companies take control of the client’s entire supply chain operations, essentially becoming the company’s outsourced logistics department.
What are Third-Party Logistics and What are the Examples?
Third-party logistics are services where companies handle a business organization’s entire order-processing operations. Third-party logistics service providers receive items from manufacturers, store them at warehouses, ship them out to customers and handle returns from customers.
Some examples of third-party logistics operators include ShipHero, FedEx Fulfillment, Red Stag Fulfillment and many others.
Feb 16, 2023 | Blog
A 3PL (third-party logistics) environment is a comprehensive model that includes everything from activities, manpower, technology, transportation services, and software within a 3PL company. This environment plays a vital role in the supply chain, offering solutions for packaging, shipping rates, and handling goods.Â
Understanding the 3PL environment is essential for business owners, suppliers, retailers, and shippers to ensure flexibility, visibility, and efficient management of shipments and materials. The size of the operation and the brand’s reputation can also influence the choice of a 3PL or third party logistics provider. The efforts put into selecting the right 3PL provider can have a significant impact on success. The growth of the 3PL industry has been remarkable, with an increasing amount of focus on various areas of logistics.
What do 3PL Companies do?
Third-party logistics companies provide various solutions, including storage, order fulfillment, transportation, and even handling customer returns. They offer a variety of services, from trucking to procurement, and can cater to different types of businesses, from small retailers to Fortune 500 companies.Â
Their capabilities range from receiving to shipping, and they often utilize advanced technologies, such as warehouse management systems (WMS), to ensure quality and speed. They also handle sales channels, own warehouse setup, tracking, and internet-based solutions. They may even have hundreds of partnerships with various carriers, freight forwarders, and suppliers. The manufacturing and shipping process is streamlined to ensure efficiency.
Should You Consider Outsourcing Order Fulfillment to a Third-Party Logistics Provider?
Business owners who lack the manpower, budget, or facility to handle warehousing operations should consider outsourcing logistics functions to a 3PL. This step can provide advantages in terms of cost-effective solutions, risk management, and alignment with sustainability trends.Â
3PLs offer eco-friendly logistics processes, ensuring alignment with increasing consumer demand for responsible practices. The choice may also depend on the ground transportation needs, the complexity of assembly, labor costs and the potential for partnership with carriers like USPS and UPS. The brick-and-mortar stores may also influence the decision, depending on their locations and needs. Labor considerations and the price point of services are also essential things to consider.
What are the Benefits of Working with a Third-Party Logistics Provider?
Working with an efficient 3PL system offers a multitude of advantages:
- Leverage Industry Expertise: Access to expertise in areas like reverse logistics, labeling, and assembly.
- Save Time and Money: Avoid investment in warehouse space, employees, equipment, and facilities.
- Expand Your Reach: Utilize the 3PL’s network to reach new markets, including B2C and international customers.
- Enhance Supply Chain Visibility: Utilize systems like TMS (Transportation Management System) for tracking and managing loads.
- Sales and Competition Management: Utilize the 3PL’s insights to manage sales, order volume, and stay ahead of competition.
- Focus on Core Business: By outsourcing logistics, companies can focus on their core business areas, improving overall efficiency.
What’s the Difference Between 3PL and 4PL?
While 3PLs focus on order fulfillment, 4PLs manage the entire supply chain, including strategy, complexity, and partnership with other entities like government and enterprise. In addition to 3PL and 4PL, there are other modes like 2PL and 5PL, each offering different levels of services and responsibilities.Â
Understanding these differences helps in selecting the right logistics solutions for your business, considering factors like disadvantages, contracts, and the range of services. The reasons for choosing one over the other may vary based on industries served and specific needs.
The 3PL Order Fulfillment Process
The 3PL order fulfillment process involves several steps:
- 3PL Warehousing: Utilizing facilities for storage, including warehouse storage for handling pallets and labeling.
- Receiving: Accepting inventory items, including goods from suppliers and manufacturers.
- Picking: Selecting items, or “picks,” based on customer orders, utilizing staff and technology.
- Packing: Utilizing various packaging materials and ensuring quality control.
- Shipping: Collaborating with carriers like USPS and UPS to ensure competitive shipping rates.
- Returns: Managing reverse logistics, including shipping costs handling mistakes and returns.
- Tracking and Transport: Managing the transport of loads, tracking shipments, and coordinating with shippers.
Most Valuable 3PL Service Offerings to Look For
3PL companies offer a wide range of services, including:
- Inventory Management: Balancing stock levels and utilizing technologies like WMS.
- Distributed Inventory: Spreading items across multiple locations for speed, cost savings and flexibility.
- Returns Management: Handling customer returns efficiently.
- Kitting and Customization: Offering variety in product bundling and customization.
- Advanced Data Analytics: Providing insights for strategy development.
- International Fulfillment: Enabling global reach and fulfillment center competitive price points.
- Investment and Enterprise Solutions: Offering tailored solutions for investment strategies and enterprise-level operations.
- Market Expansion: Access to thousands of markets globally, maximizing profits.
The 3PL environment encompasses a wide range of aspects, from transportation to technology, offering solutions for various industries. It provides a performance measuring framework for successful, efficient, and cost-effective logistics and supply chain management professionals. Whether considering 1PL, 3PL, or 5PL, understanding the role, advantages, and disadvantages of each is crucial for success. Consideration of buyers’ needs, potential loss issues, and the idea of scalability is also vital. The successful integration of all these aspects ensures an efficient and profitable operation.
Technology Integration in 3PL: Revolutionizing Logistics Efficiency
In the dynamic landscape of Third-Party Logistics (3PL), technology integration is a game-changer. Advanced technologies like Artificial Intelligence (AI), Internet of Things (IoT), and data analytics are reshaping the third party logistics company and industry, enhancing efficiency, accuracy, and customer satisfaction.
AI Algorithms Powering Predictive Analytics and Optimization
AI algorithms are powering predictive analytics, optimizing routing and inventory management. Smart sensors in IoT devices provide real-time shipment visibility, ensuring timely interventions and reducing delays. Data analytics glean insights from vast datasets, allowing 3PLs to identify trends, optimize routes, and improve decision-making.
Urban Logistics Challenges: Navigating the Last Mile
The final stretch of delivery, known as the last mile, poses unique challenges in urban environments. Rapid population growth, congestion, and environmental concerns require innovative solutions for timely and sustainable deliveries.
Micro-Fulfillment Centers: Urban Warehouses for Swift Deliveries
Micro-fulfillment centers, strategically placed in urban areas, streamline last-mile logistics operations. Urban warehouses serve as hubs for rapid order processing, enabling same-day and even hour-specific deliveries. Additionally, autonomous vehicles and drones are emerging as alternatives to traditional delivery methods, promising reduced congestion and quicker deliveries.
Sustainable Packaging and Eco-Friendly Practices: Greening the Supply Chain
The 3PL industry is embracing sustainable practices to less environmental impact and align its business strategy with consumer demand for eco-friendly solutions. The spotlight is on packaging, a critical aspect of supply chain sustainability. Biodegradable materials, reduced packaging sizes, and reusable options are gaining prominence.
Eco-Friendly Transportation and Energy-Efficient Warehousing
Eco-friendly transportation is also a focus, with electric and hybrid vehicles minimizing emissions. 3PLs are implementing energy-efficient warehousing solutions, harnessing solar power, and optimizing energy consumption to reduce their carbon footprint.
Customer-Centric Logistics: The Era of Personalized Experiences
In the era of customer-centricity, 3PL logistics providers are adapting to meet individual preferences. From personalized packaging value added services to real-time tracking and customizable delivery time slots, 3PLs are enhancing customer experiences.
Seamless Returns and Hassle-Free Exchanges
Return processes for 3pl providers are also evolving to align with customer convenience. Hassle-free returns and exchanges are vital for customer retention. By focusing on every touchpoint of the customer journey, 3PLs are contributing to brand loyalty and positive reviews.
Disruption and Resilience in Logistics: Adapting to Uncertain Times
Recent disruptions, like the COVID-19 pandemic, highlighted the importance of resilience in the logistics industry. 3PLs are adopting digital transformation strategies and agile supply chain operations models to ensure business growth and continuity even in times of crisis.
Agile Supply Chain Models and Diversification Strategies
Cloud-based platforms enable remote warehouse management software too, while AI-powered demand forecasting aids in agile decision-making. Diversification of suppliers and transport routes minimizes vulnerability to sudden disruptions.
Evolving Role of AI in Demand Forecasting: Precision in Planning
AI is redefining demand forecasting, allowing 3PLs to predict trends with remarkable accuracy. Since the last decade, the industry has been undergoing a digital transformation with cutting-edge 3PL software and AI integration is the natural next step. By analyzing historical data, market trends, and external factors, AI algorithms create predictive models that aid in inventory management and order fulfillment.
Optimized Inventory Levels and Competitive Shipping Rates
The result is reduced stockouts, optimized inventory to improve customer service levels, and efficient resource allocation. Accurate demand forecasting empowers 3PLs to offer competitive shipping rates and maintain high service levels.
Collaborative Logistics Ecosystems: The Power of Partnerships
Collaborative logistics ecosystems are emerging as a solution to optimize supply chains. Businesses, suppliers fulfillment logistics, 3PLs, and other stakeholders collaborate closely to streamline processes, reduce inefficiencies, and improve visibility.
Shared Data and Better Decision-Making
By sharing data and insights, collaborative ecosystems enable better decision-making and coordination. Manufacturers gain insights into consumer demand, 3PLs optimize routes, and retailers align inventory with market trends.
3PL Cybersecurity and Data Protection: Safeguarding the Digital Chain
In an increasingly digital world, cybersecurity is paramount. 3PLs are responsible for safeguarding sensitive data, from customer information to supply chain data.
Robust Cybersecurity Measures and Compliance
Robust cybersecurity measures involve encryption, secure data storage, and continuous monitoring for threats. Compliance with data protection regulations ensures the integrity and confidentiality of information.
What is a 3PL Environment – FAQs
What is the Difference Between 3PL & 4PL?
The difference lies in scope and complexity, with 3PL focusing on order fulfillment services and 4PL on entire supply chain integrated freight management services.
What is the Biggest 3PL Company?
The biggest 3PL company, catering to various brands, is Kuehne + Nagel, third party company with significant revenue and global capacity.
Is 3PL the Same as Outsourcing?
Yes, 3PL is a form of outsourcing, allowing businesses to leverage external capabilities, from procurement to transportation solutions, and handle hundreds or even thousands of orders on a daily basis.
Feb 16, 2023 | Blog
There are lots of moving parts in order fulfillment. You need to track the picking, packing, processing and shipping steps to ensure nothing goes wrong and keep customers happy. Unfortunately, monitoring operational processes is often time-consuming and challenging to do by yourself.
This is where third-party logistics (3PL) companies come in. Hiring a 3PL company gives you access to their expertise and 3PL software to assist in order fulfillment – resulting in cost savings. These software tools are also part of what makes 2PL, 3PL and 4PL companies different.
Which 3PL software should you use to improve your logistics operations? Read on for a list of the best 3PL software available today.
What Is Software for 3PL?
Software for 3PL is a tool that helps companies better manage their order fulfillment process and warehouse operations. 3PL software, in the third-party logistics environment, improves shipping times, drives shipping costs down, manages retail distribution, provides real-time inventory visibility and does other order fulfillment tasks to ensure you operate at maximum efficiency.
3PL software can also integrate with the client’s systems, so everything gets updated simultaneously. This eliminates double data entries and inconsistencies between records, which prevents costly mistakes.
Benefits of Third-Party Logistics Software
3PL software helps you better manage the order fulfillment and logistics process through automation and data management. Here are five ways 3PL software benefits your company:
Reduce Operational Costs and Save Time
3PL software automates various manual processes like invoice generation, inventory management, data entry and order tracking. Since computers work faster than humans, you’ll save time. Moreover, you’ll also reduce operational costs and save money because you don’t have to hire additional people to perform these tasks.
Prevent Human Error
Data entry is a repetitive and time-consuming job prone to mistakes, especially if the information is passed around multiple teams before it goes into the database. Third-party logistics providers use 3PL software to automate data entry and other error-prone business processes, reducing potential costly mistakes.
Make Better Decisions
Third-party logistics companies use 3PL software to record data and create reports on things like inventory, staff performance and other essential information. These reports are compiled from real-time data, so managers can make informed decisions based on current circumstances.
Promote Sustainability
3PL software plays a large role in creating sustainable third-party logistics and supply chain processes. One of the features of 3PL software is transportation route optimization, which means the software calculates the most efficient way to get items to customers.
Optimizing transportation routes also means your company will use less carbon-intensive transportation, like transporting items in bulk by rail instead of smaller deliveries with trucks.
How to Maximize the Benefits of Software for 3PL
Working with 3PL companies means investing time and money, which don’t come easily. If you want to maximize the benefits of 3PL software, do these three things:
- Leverage your third-party logistics service provider’s expertise. Listen to their suggestions and follow their advice regarding order fulfillment.
- Communicate with your third-party logistics business partner. Ask as many questions as needed and ensure they know about potential issues before they balloon into a bigger problem.
- Set metrics and focus on improving them. Discuss what metrics you aim to improve through the working relationship, and let the third-party logistics business partner boost those numbers instead of spending time making reports.
How to Get Started with Software for 3PL
You can get started with software for 3PL by working with a third-party logistics provider. Third-party logistics businesses usually bring their own 3PL inventory and fulfillment software to your company. If your third-party fulfillment business partner doesn’t have a preferred software, talk with its representative about which software to implement.
What Features Should You Look For in Software for 3PL?
Different 3PL software offers different features, but some essential things should be in all 3PL software tools. Here are several must-have 3PL-centric features in a third-party logistics software solution:
- User-friendly interface
- Cloud-based storage and functionality
- Real-time order and shipment tracking
- Strong integrations with online retail and accounting solutions
- Transport route optimization
- Multi-account support
- Automated invoicing and reporting
Your 3PL software should also be scalable and able to keep up with fast-growing businesses to ensure it can still support your company as it grows. Excellent and helpful customer service is also a big plus point since you may need them if the software solution encounters an error.
How Much Does Software for 3PL Cost?
Software for 3PL costs differently depending on the provider. Most third-party fulfillment companies fold the software costs with their service fees, so you need to ask each company about their prices.
Best Software for 3PL
Numerous 3PL providers and software are available today, each with different service offerings and benefits. Here are five of the best 3PL software solution providers available in the logistics industry:
ShipHero is a third-party logistics and order fulfillment solution provider that integrates with your online storefronts and gets products to customers faster at flat-rate fees. It operates eight distribution centers across North America to ensure maximum reach and minimum carbon footprint from air deliveries.
Its 3PL software provides a complete suite of features, including order processing, inventory management, reporting and so much more. Ultimately, it helps your company process more orders faster, boosting customer satisfaction and cutting down on logistics costs.
Trimble is transportation management software created to boost efficiency and reduce costly administrative mistakes. This software offers a real-time shipping tracker, ensuring you know where your products are and when they’ll arrive at the customer’s doorstep.
Trimble also offers a flexible third-party logistic solution, meaning you can request changes in the software to support your business operations. For instance, it allows you to install Trimble on either the SQL or IBM i platform to fit your business needs.
Fishbowl is an enterprise solution that provides real-time visibility into your warehousing operations. It’s great for managing inventory across multiple warehouses and fulfillment centers since Fishbowl lets you track stock across your company in real-time, no matter where the items are.
Fishbowl also integrates with popular eCommerce and accounting software like Shopify and QuickBooks Enterprise, so you don’t have to input information twice.
This WMS from Camelot Software supports cloud-based and on-premise deployment, meaning you have more flexibility in deploying your third-party fulfillment software. Excalibur serves various warehouse types, such as regular warehouses, refrigerated storage and even hazardous material warehouses.
Another great feature of Excalibur is its job scheduler tool, which creates work schedules and sends them to managers. This saves them time on having to create schedules themselves.
Syntelic is a trucking and logistics software tool boasting customizable interfaces according to your business requirements. It primarily caters to trucking companies with its robust route planning, load planning and real-time shipment update features, but it’s also useful for 3PL companies thanks to its customizability.
What Software for 3PL Does Your Business Need?
What 3PL software your business needs depends on your requirements. While most 3PL software deals with order fulfillment, you may need specialized software for other aspects of the business, such as if you want to improve your company’s transportation efforts.
Your best bet is to research all the third-party fulfillment software options available, then narrow them down to a couple of possible candidates. From there, talk with company representatives and learn whether the software caters to your needs.
Key Takeaways
3PL software goes hand-in-hand with third-party logistics companies because it assists them in managing your order fulfillment and warehousing process. Some 3PL companies bring their own software, but others may let you choose 3PL software yourself.
When choosing 3PL software, take the time to learn what your company needs and ensure that the software tool’s features fit your business.
Software for 3PL FAQs
What software do warehouses use?
Warehouses use software called a warehouse management system (WMS). A warehouse management system is software that gives companies visibility into their inventory and manages order fulfillment operations, ensuring products arrive at the customers’ door on time.
What is SAP for Logistics?
SAP for Logistics is software from enterprise resource planning provider SAP. It gathers all your logistics data from multiple databases and places it into a centralized repository, which helps eliminate discrepancies and inconsistencies.
What is a 3PL platform?
A 3PL platform or software is a program that helps 3PL companies do their jobs. It usually offers route optimization, data management and performance reporting, among other features.
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!Â
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:Â
- 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.Â
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.Â
- 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.Â
- 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.Â
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.Â
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!Â
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.
