What is a 3PL System? Third-Party Logistics Definition and Process

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: 

  1. 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.
  2. 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.
  3. 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.
  4. 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.
  5. 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.
  6. 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.  

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