Guide to 3PL Logistics

Introduction

For many entrepreneurs, the excitement of running an e-commerce business lies in connecting diverse consumers with a wide array of products. However, the operational aspects such as inventory management, packaging, shipping, tracking, and more may not hold the same appeal for these business owners.

If this resonates with you, or if your company has expanded beyond managing e-commerce logistics internally, engaging a third-party logistics (3PL) company could prove advantageous. Our guide delves into what a 3PL firm entails, the advantages of utilizing one, and recommendations for small businesses seeking reliable providers.

What is Third-Party Logistics (3PL)?

Third-party logistics, commonly referred to as 3PL, involves outsourcing e-commerce logistics processes to an external company. These processes typically encompass warehousing, inventory management, and order fulfillment. By entrusting your logistics operations to a 3PL provider, online business owners can redirect their focus towards other aspects of business ownership while streamlining their order fulfillment processes.

Distinguishing Between 3PL and 4PL

In exploring 3PL, you may encounter the term “fourth-party logistics” or 4PL. Unlike 3PL companies directly involved in e-commerce logistics, 4PLs do not engage in operational tasks. Instead, they act as intermediaries, coordinating with 3PLs on behalf of your company. This places them as the fourth party in your e-commerce logistics chain, following your company, your customers, and your chosen 3PL provider.

Basic Types of 3PL Companies

3PL companies can be categorized into several types:

• Distribution-based: These firms store your products and fulfill orders upon receiving them.
• Financial-based: Specializing in financial aspects such as freight payment and inventory accounting.
• Forwarder-based: Primarily facilitating the transportation of goods from your warehouse to delivery carriers.
• Information-based: Operating primarily in B2B environments, leveraging online platforms for logistics services.
• Transportation-based: Focusing on transportation from production facilities to warehouses and then to customers.

Benefits of Using 3PL Providers for E-commerce Logistics Engaging a 3PL provider can offer several advantages for your e-commerce business:

• Streamlined and cost-effective operations.
• Facilitated scaling as your business expands.
• Access to specialized industry expertise.
• Reduced shipping costs and broader shipping coverage.
• Increased customer satisfaction through faster delivery.
• Mitigated risks and enhanced legal protection in case of shipping issues.

By leveraging 3PL services, e-commerce businesses can optimize their logistics processes, leading to greater efficiency and customer satisfaction.

What services are provided by 3PL companies?

3PL providers commonly offer the following services:

• Alternate shipping arrangements: Easily set up alternative shipping methods with your 3PL if an order is lost or cannot be delivered quickly enough to meet customer needs. With multiple warehouses nationwide, your 3PL can promptly resend items with expedited shipping at a lower cost than if handled internally.
• Distributed inventory: Utilize distributed inventory management to store stock across various locations rather than a single warehouse. By leveraging multiple 3PL locations, your provider can fulfill orders from the nearest facility, resulting in faster and more cost-effective shipping.
• Expedited shipping: Overcome shipping challenges, such as overnight delivery from a single warehouse, by utilizing distributed inventory from your 3PL. Expedited shipping becomes more feasible when shipping from a nearby 3PL warehouse, allowing for faster delivery times.
• Inventory management: Although 3PL outsourcing removes the responsibility of inventory storage, it’s crucial to stay informed about stock levels. Your 3PL provider can manage your inventory, keeping you updated on stock levels without additional effort on your part.
• Kitting and assembly: Outsource the process of assembling separate inventory items into one product to your 3PL. This saves your company time and money by reducing manual labor.
• Picking and packing: Ensure accurate fulfillment by having your 3PL handle the process of selecting and packaging items from the warehouse. Unlike kitting and assembly, picking and packing involves assembling individual products into shipments, not combining multiple parts into one item.
• Returns management: Establish firm return policies with the assistance of your 3PL provider. They can manage product returns on your behalf, handling logistics such as initiating returns, generating shipping labels, and updating inventory with returned items.

Which 3PL providers are suitable for small businesses?

While numerous 3PL providers cater primarily to Fortune 500 companies, some also extend services tailored to small businesses. The initial three options listed below fall within this category, while the latter two are more evidently aligned with SMBs. Regardless, contacting the provider for a customized quote is necessary before proceeding with account setup.

C.H. Robinson

C.H. Robinson functions as a freight and supply chain entity overseeing logistics for a vast clientele, including notable brands like Coca-Cola and Target. While its truckload and less-than-truckload (LTL) services suit small and medium-sized enterprises (SMBs), its broader offerings may better align with larger corporations. Refer to C.H. Robinson’s comprehensive service catalog for further insights.

DB Schenker

Similar to C.H. Robinson, DB Schenker caters to Fortune 500 enterprises but extends part- and full-load services beneficial to SMBs. The company boasts exclusive technology purportedly offering enhanced, real-time tracking compared to its competitors. Explore DB Schenker’s land transport services for additional details.

Kuehne+Nagel

Kuehne+Nagel provides LTL services enabling e-commerce ventures to offer accurate shipping rates to customers, track and document shipments, streamline stock acquisition, and transition to digital inventory management. Refer to Kuehne+Nagel’s brochure for deeper insights.

ShipBob

ShipBob offers a technology-driven fulfillment network facilitating swift, cost-effective shipping for e-commerce ventures. The company pledges significant savings in terms of:

• Up to a 13 percent reduction in bottom-line costs
• Up to a 97 percent increase in average order value
• Up to an 18 percent decrease in cart abandonment rates
• Up to 120 fewer labor hours

Quotes are tailored to specific requirements encompassing receiving, storage, picking and packing, as well as standard packing and shipping services.

Warehouse Anywhere

Warehouse Anywhere, boasting over 10,000 warehouses, offers delivery services, online and mobile warehouse functionalities, and inventory management tools supporting multiple users, real-time inventory tracking, and comprehensive warehouse leasing controls.

Warehouse Anywhere recommends its Core+ pricing plan for storage asset management, while Pro and Enterprise tiers cater to inventory and storage asset management needs. Lightspeed is tailored for e-commerce operations. However, contacting Warehouse Anywhere directly for a personalized quote is advisable.

Streamlining Operations with 3PL

3PL companies aren’t just beneficial for large corporations; they also serve as valuable assets for small business owners, empowering them to optimize their e-commerce endeavors. By entrusting the most intricate logistics to 3PL providers, entrepreneurs can focus on customer-centric tasks, ensuring efficient product delivery while nurturing meaningful connections with their clientele.