How 3PLs (Third Party Logistics Providers) help companies build efficiencies, cut costs and scale with your business growth.
More than 90% of Fortune 500 companies are using 3PL’s, and there is a good reason for why, it’s because 3PL providers streamline supply chain operations and reduce your costs. You may think you are saving by trying to do it yourself, but in the big picture, you’re not. 3PLs help your e-commerce and retail business scale.
What is A 3PL?
A 3PL lets companies outsource their supply chain, logistics, and order fulfillment processes. These operations typically include warehousing, inventory management, distribution, and shipping orders to customers.
Your 3PL will also serve as a data provider, helping you analyze various trends and inventory requirements, so you can better forecast future orders. 3PLs manage many of your supply chain operations, including:
Receiving inventory
Third-party logistics providers manage your organization’s warehousing and inventory management. They’ll receive the inventory at their warehouse locations from your suppliers.
Most leading 3PLs offer distributed inventory services, so if you split your inventory across different locations, they’ll receive the stock at each site.
Picking
When customers place an order, your 3PL’s picking team will locate the required items from the warehouse. Experienced picking teams typically use barcode or RFID scanners to verify items, reducing the chances of wrong orders. Up to the minute pulse on your inventory
Packing
After locating the required items, your 3PL’s logistics team will securely pack the items. They’ll ensure fragile goods are protected and that boxes have the correct dimensions.
Shipping orders
After the order is packed, your 3PL will have it shipped to the customer’s location via a carrier. 3PL providers work closely with major carriers like UPS, USPS, FedEx, DHL and more… to ship your orders safely, securely, and on time.
Processing returns
Need to process some returns? Your 3PL will take care of reverse logistics too, which is especially useful during the holiday season (when returns are higher).
How 3PLs help scale your business
Now that we’ve established how 3PLs take fulfillment operations off your hands – let’s discuss why outsourcing is cost-effective in the long run.
Five areas of benefit apply to most businesses, especially on the e-commerce side of things. Look at these segments to see if they’re where you spend a lot of time or money and if you’d like to reduce those investments.
1) Long-term cost savings through optimization
Some businesses shy away from 3PLs because of the upfront costs, but ultimately, you’ll save on expenses. 3PL providers improve your bottom line by:
- Optimizing pick and pack processes, reducing wrong order requests, and increasing your customer’s experience (which helps with retention and repeat purchases).
- Providing the option to distribute your inventory, reducing logistics costs, and accelerating delivery times.
- Giving you access to discounts with carriers (leading 3PL providers usually negotiate bulk discount deals with carriers).
- Optimizing your supply chain efficiency, reducing errors and wasted time.
2) Supply chain expertise
As your business grows, supply chain operations become more demanding and complex. 3PL providers’ expert fulfillment teams are equipped to handle increasing fulfillment, warehousing, and shipping needs.
3PL partners excel at streamlining processes and delivering quick results, protecting you from potential delays and losses.
3) Inventory management
E-commerce inventory management is more complex than its brick-and-mortar counterpart because you’re operating on two different channels. The inventory is physical, but the store is digital, inviting inventory management challenges.
3PL providers use warehouse and inventory management software to sync your store, eCommerce site, and inventory data, streamlining supply chain operations. The software provides real-time insights into your inventory, preventing overselling and stock shortages.
3PLs have experienced teams skilled at reducing errors and inaccuracies and improving operational efficiency.
4) Business-to-business (B2B) or business-to-retailer (B2R) fulfillment
B2B (or B2R) e-commerce fulfillment is a significant revenue stream for many e-commerce brands, but meeting B2R fulfillment requirements can be challenging.
In B2B fulfillment, businesses typically order in bulk and expect fast delivery. Additionally, order accuracy is essential. You can’t afford to make picking or packing mistakes.
You’ll also have to tackle some technical challenges like:
- Fulfilling bulk orders at remote locations that require sea or air freight
- Meeting compliance requirements, like customs, tax rules, SKU codes, invoicing structures, etc.
- Overcoming international trade barriers, including tariffs, subsidies, and tax requirement
Because of these time-consuming complexities, many businesses outsource their B2B fulfillment to experienced 3PL providers.
3PLs can help you cut costs, improve supply chain efficiency, minimize delays and inaccuracies, and protect you from penalty fees. They also have strong relationships with major carriers, thus enjoying bulk discounts and priority support.
5) Flexibility and scalability
Working with a 3PL lets e-commerce businesses scale seamlessly in response to demand fluctuations, growth, and market conditions. Examples of 3PL flexibility are the peak holiday season and high volume days for home shopping retailers or high promotional blitz in the holiday season. Here, your e-commerce store will likely experience rapid spikes in demand. To meet fulfillment expectations, you’ll need to scale up your operations. Unless you’re working with a 3PL, this endeavor will entail hiring more staff.
Conversely, if you’re working with a 3PL, the logistics provider scales their operations up or down depending on your needs. So, during the holiday or high promotional season, they’ll allocate more fulfillment experts to manage your orders, and afterward, they’ll scale the operations down again. As a result, you only pay for what you need.
In the end,
Third-party logistics providers help e-commerce brands streamline their supply chain operations and grow sustainably.
They’ll optimize your fulfillment process, reduce errors, cut unnecessary expenses, manage reverse logistics, and take care of technical work like documentation and tax requirements.
If your business is growing fast and fulfillment operations are becoming more challenging, it might be time to partner with a 3PL service. The best fulfillment companies have robust technology, a team of experts, and a track record of helping businesses grow.
If you are thinking of moving over to a 3PL, the team at On Air Direct is here to help. Give us a call to see what we can do for you.
