What is 3PL? | A Starter Guide to Third-Party Logistics

3PL

As your eCommerce enterprise hits its stride and begins to grow, you may find yourself having less time and resources to complete order fulfilment to a satisfactory standard by yourself. Third-Party Logistics (3PL) can help facilitate your business development.

All successful businesses will, at some point, be required to revise their fulfilment strategies and processes to become more efficient with time, focus and resources: such businesses will often turn to the services of 3PL.

Many eCommerce businesses turn to outsourcing your operational logistics and order fulfilment, via partnering with a third-party logistics provider: commercially allowing the business to expand its operations whilst not raising its outlay too considerably.

The question that remains: What is 3PL?

What Is 3PL?

Third-party logistics (commonly referred to as 3PL) is an externalised eCommerce logistics framework that shifts the supply chain process to a specialist third-party. Services offered under a 3PL partnership typically include warehousing, pick & pack, inventory management and order fulfilment.

3PL providers have expanded their service offerings over the years to facilitate their growth through broadened expertise, reliable infrastructure and advanced reporting tools and capabilities: this has allowed eCommerce businesses to focus on the more important aspects of their business, as the lessened reliance on their own capabilities relating to order fulfilment frees up important resources.

3PL Services and Processes

Like all businesses, 3PL providers will offer different services. However, there are several services common to most 3PL service providers:

Receiving of Stock

When partnering with a 3PL to facilitate your order fulfilment processes, the 3PL will usually receive your stock to store in its own storage warehouse as part of its service to the eCommerce business.

At Breakwells, we offer specialist receiving and warehousing services via our specialist shipping routes and utilising our extensively outfitted storage centre located in Kidderminster, West Midlands.

Warehousing and Inventory Management

Perhaps the most fundamental factor for a smaller eCommerce business seeking sustainable growth is the ability to hold a larger inventory of stock in a remote, centralised location.

Each 3PL provider’s warehouse will have its own internal layouts, inventorying and storage protocols so it is best practice to liaise with each 3PL to assess their warehousing capabilities, concerning their capacity, item size limits and any exclusions.

Picking and Packing

Once customers have placed orders, the 3PL partner’s order fulfilment obligations will begin.

Though all 3PL service providers will differ in how they handle the receipt of order – some require the eCommerce business to manually send orders, others will utilise advanced order relay technology to receive orders automatically – it will be sent to the specialist picking team, which will detail items, quantities and the relevant locations of each stored item that is required.

Once all items have been picked from the inventory, they will begin to be prepped and packed: each 3PL is different in this regard, some will have pickers also pack the items, others will have separate teams for each task.

The packers will determine the most appropriate packing techniques and materials for the item as part of the order fulfilment process. Working in collaboration with you, 3PLs will have an outline of your brand preferences in relation to how you wish them to pack the items for shipping.

As your brand grows, it may be beneficial to make the collaboration with your 3PL of choice more intimate, so that they are willing and able to facilitate your own branded shipping packing, inserts and other little trinkets that may be beneficial in spreading awareness of your brand and delivering a top-tier unboxing experience.

Shipping

As part of their service, 3PL providers will ordinarily handle the print and purchase of shipping labels from their preferred delivery partners.

Should you prefer a certain delivery service company to another, it is best to liaise with your 3PL of choice, unless they fulfil the delivery themselves.

If your 3PL of choice utilises sophisticated order receipt relay technology, they will often also use automated tracking details which are sent to the eCommerce retailer and, ultimately, to the customer.

Reverse Logistics (Order Returns)

Though we wish that order dispatch and delivery was the end of the process – as we are sure customers feel the same way – returned items are an unfortunate-but-integral part of the eCommerce experience and business process. Whether a customer changes their mind about their purchase, there is a fault with a particular item or there is a product recall en masse, many 3PL service providers will also handle incoming returns.

Depending on the reason for return, the 3PL provider will either return the item to your business or completely dispose of it – according to your pre-agreed preferences and instructions.

Many 3PL companies will provide a returns label in the initial delivery package; however, this is usually at your discretion. This streamlines the returns process and ensures the customer is happy, as they can track their return and gain insight on when they will receive their replacement item or refund.

3PL Vs. 4PL

When researching whether third-party logistics will be beneficial to your commercial enterprise, you may come across the following term: fourth-party logistics, or 4PL.

Though not centrally very different, it is important to be aware of the external distinctions so that you can know best which type of arrangement is more beneficial to your business.

The main difference between the two is that 4PL services encompass the entirety of the journey, from manufacturer to customer: from procurement to delivery.

Though a 4PL service may not own its warehouse or vehicles, its focus is on implementing and optimising your entire supply chain, giving you a single point of contact and handling all of your order fulfilment: including retrieval of the goods from the initial manufacturer.

Benefits of Using Third-Party Logistics

  • The burden of order fulfilment is outsourced: meaning you can allocate valuable resources elsewhere
  • Reduced costs: as 3PLs usually have more intimate relationships with shipping companies, your collective package cost can be cheaper than the combined cost of man-hours and brokering shipping costs yourself
  • Saves time: another resource you can allocate elsewhere is time. Not having to pick, pack and ship orders means you have more time to focus on business development and growth
  • Generate cost savings: you can measure your savings in real-time. Not having to fund and maintain a warehouse, individual shipping deals and commercial contents insurance means you have even more resources at hand
  • Real-time scalability: fluid relationships with 3PL service providers means you can scale the size of your reliance on their services as and when you need – useful for industries that benefit seasonally
  • Better, more streamlined customer experience: a holistic approach to order fulfilment means that, on average, there is more transparency in relation to customer experience and satisfaction
  • Instant Field Knowledge: 3PL service teams are experts in their field, meaning partnering with them multiplies the capability of your order fulfilment to an unmeasurable degree
  • Smoother international logistical operations: allowing you to expand your business and test new markets with less risk
  • Access to sophisticated inventory management tech (where applicable): many 3PL companies utilise high-tech, real-time inventory management systems that your business can reap the benefit of, without a sustainable capital outlay for a proprietary measure

Cons of Third-Party Logistics

  • Middle man: too many cooks can spoil the broth. Although expert 3PL providers typically work efficiently, there can be occasions where messages and feedback get lost in the shuffle – particularly for returns or refusal of delivery.
  • You don’t handle your inventory: causing situations where inventory agility can be slowed if there is a delay in relaying information to you that you are low on particular items
  • Benefits medium-to-large scale operations more than start-ups: hiring a 3PL requires a significant investment in the very beginning – though over time this will pay dividends through the costs saved – which can be prohibitive for smaller businesses with slower-moving stock
  • Less control over the delivery process: you are at the mercy of the 3PLs internal process and dispatch times

When to Consider 3PL Services

Though, on the whole, 3PLs will be beneficial to businesses of all sizes, certain measurable factors make their use benefit certain eCommerce companies above others.

When your current order volume and sales forecasts have reached a number where you can, internally, no longer cope with the demand, it may be beneficial to the growth of your business to outsource order fulfilment. Order fulfilment can be resource-hungry in terms of time and effort, but yields no significant reward and focusing on such tasks internally may mean you miss opportunities to increase sales or innovate.

As your enterprise grows it is important to remain aware of the growth of your order book before it reaches critical mass and your once reasonable inventory space becomes too small: affecting your productivity. Liaising with 3PLs before this becomes the case is advisable

How 3PLs Can Help Grow Your Brand

Whilst it is not blatantly ascertainable on the surface, the use of a 3PL can play a significant role in the growth of your brand. Here are a few examples:

  • International selling: existing international links and logistical relationships can aid in spreading awareness of your brand overseas and facilitate steady expansion
  • Multichannel eCommerce: if your goods and wares are saleable to B2C and B2B alike, 3PLs can allow you to supply both with the peace of mind that the capacity is there to do so
  • Groupon: a fantastic selling option when seeking to sell units of a product and increase your market presence. Groupon goods will be fast-moving and your internal order fulfilment capabilities may prohibit your business from making the most of such platforms. Utilising a 3PL may help here

Breakwells – Your 3PL Service Provider

As experts in special delivery, haulage and logistics, we offer expertise in import and export to some of the most remote locations around Great Britain, including The Channel Islands, The Isle of Man and The Isle of Wight, and many other destinations, upon request.

With over 50 years of industry experience, Breakwells are serious about haulage, logistics and order fulfilment.

Offering an entirely bespoke service, we provide a managed approach to each of our clients and scale our efforts according to your specific needs and requests.

With our very own storage warehouse and 24 hour CCTV and security, you can be sure that your goods and wares are secure whilst having the peace of mind that all inventory stock is reported accurately and regularly through a dedicated account manager.

Our site also offers a full-scale reworking of goods, allowing us to rewrap, re-palletise and relabel any goods to your own branding.

Should you require further information or advice on 3PL, price quotation or other services, please feel free to contact us and one of our friendly team will be happy to help.

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