What is 3PL Order Management? And How Does it Work?

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.

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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:

1. 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.
2. 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.
3. 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.