A third-party logistics provider is any company that handles supply chain operations on your behalf. 3PL providers specialize in warehousing, inventory management, freight forwarding, final mile delivery, and transportation services. Rather than spending time and effort managing the fulfillment process in-house, partnering with a 3PL provider allows you to focus on your core competencies while leaving day-to-day operations in the hands of experts. In this article, we’ll delve into the question “What is 3PL?” and explain how it can streamline logistics operations along your entire supply chain.
Third Party Logistics Services
Third-party logistics companies coordinate and oversee a wide range of activities on your company’s behalf. Some offer a full array of fulfillment services, while others concentrate on only one or two – covering gaps your shipping department isn’t equipped to handle. These might include:
Warehouse Operations
Storing your inventory with an outside company allows you to scale warehouse space and services up or down as needed without committing to long-term leases or investments. Amazon has made two-day shipping the standard for ecommerce in most parts of America. As a result, meeting customer expectations requires businesses to maintain inventories in major markets around the country.
Building and sustaining these facilities requires considerable capital expenditure, which is why many companies entrust their products to a 3PL warehouse instead. By partnering with an existing network, they’re able to satisfy customer demand at a fraction of the cost.
Transportation Management
Maintaining a trucking fleet is expensive. In addition to the purchase price, there are also ongoing expenses such as fuel, staffing, insurance, servicing, and repair. Because most 3PL companies work with multiple clients, they operate with economies of scale, enabling them to offer lower shipping rates.
At the same time, route optimization and tracking software allows them to monitor shipments and reduce the cost per delivery. What’s more, their experience with interstate and international shipping regulations helps you navigate customs and other obstacles that might otherwise slow distribution.
Outsourcing also allows businesses to adjust their transportation capacity according to demand, saving on costs during slow parts of the year. For companies with predictable shipping cycles, Full Truckload (FT) freight services is a cost-effective way to handle high-volume deliveries, while Less Than Truckload (LTL) services are an economical option for companies that ship smaller loads or need to split orders due to demand spikes or supplier timing.
Order Fulfillment
Handling large order volumes requires not only storage space, but also technology, staff, and resources. Contracting order fulfillment out to a team of seasoned professionals is one of the most economical ways to ensure orders are received, processed, and shipped on time. 3PL service providers offer lower warehousing, packaging, and shipping rates than most businesses can achieve on their own. Whether you’re a large or small company, working with a third party provides cost savings at every stage of the logistics process, including:
- Receiving. In-depth knowledge of the logistics industry allows 3PLs to track inventory levels in real-time. In some cases, they can even relay this information to ecommerce platforms, allowing customers to see how many items are left in stock while they’re deciding whether to make a purchase.
- Picking and Packaging. Rather than transfer orders from your office to your shipper, orders are sent directly to your fulfillment center, so they can be processed quickly. In this way, outsourced logistics speeds delivery, which helps ensure customer satisfaction. Warehouse Management Software (WMS) ensures that items are located, prepped, and packaged a few hours after the order is received. Shipped items are immediately removed from the database, for accurate inventory.
- Shipping. 3PL partners optimize dimensional weight, also known as DIM Weight, to help reduce shipping costs without splitting orders unless absolutely necessary. Lightweight packing materials make certain that orders arrive safely while taking up as little space as possible in the truck. At the same time, WMS coordinates shipments, ensuring orders are picked up and delivered promptly.
Kitting
Kitting refers to the process of assembling a group of items, parts, or components into a single package known as a “kit” – a common procedure for manufacturing and ecommerce businesses. Because modern warehouse management systems monitor inventory with such precision, third party logistics companies remove many of the costly logistical complications involved with creating kits with a large and diverse set of items. Many include value-added services, such as custom boxes and branded labeling, to help foster loyalty.
Reverse Logistics
Processing reverse logistics (also known as returns) through a fulfillment center helps you mitigate losses. 3PL companies not only organize shipping, they also assess returns to determine whether they can be restocked, repaired, or refurbished. Once the decision has been made, the company coordinates the process, allowing you to expedite the process without investing in infrastructure or specialized systems. It also enhances the customer experience by demonstrating that you value their time. 3PLs leverage advanced technology to reduce return cycles, ensuring customer needs are met as quickly as possible.
Procurement
Outsourcing procurement provides a single point of contact for obtaining the resources you need to sustain your operation. 3PLs specialize in sourcing, including market trends, supplier capabilities, and pricing strategies, enabling you to take advantage of deals, discounts, and relationships they’ve established within the industry.
This network helps reduce the risk of supply chain disruption by drawing on alternate vendors during a crisis. They also operate with innovative software such as e-procurement platforms, analytics tools, and automation solutions, which streamline the process but may be costly to implement.
Third-Party Logistics vs. Fourth-Party Logistics
There are two types of companies within the logistics industry. Asset-based providers own the equipment and spaces that transport, process, and store your goods. Non-asset-based providers offer the same services, but don’t own the equipment, vehicles, or warehouses. Instead, they act as middlemen, connecting customers, carriers, and storage facilities based on need and availability.
These companies are known as fourth-party logistics companies. Though some do own a few physical assets, they rely on outside firms to supply the majority of their storage and transportation. Their collaborative approach allows them to adapt quickly to market changes, scaling operations according to your needs while securing the best rates and service available.
ExpressTrac Logistics Services
Logistics is the lifeblood of your business. Keep it flowing smoothly with ExpressTrac. We deliver exceptional, cost-effective solutions backed by over 110 years of experience with logistics management including white glove delivery services, strategic planning, and day-to-day operations. Our teams support our clients 24/7, with unmatched resources and problem solving capabilities. Consult our experts to save time, reduce costs, and speed order fulfillment.