Delivering your product into your customers’ hands involves many steps. Storage, order fulfillment, packaging, shipping, and much more are all included.
Managing all these things can get complicated. That’s why e-commerce businesses and retailers sometimes outsource these operations to a third-party logistics company-also abbreviated as 3PL companies.
What is 3PL (Third Party Logistics)?
3PL stands for Third Party Logistics. This refers to companies that provide logistics services such as warehousing, transportation, and distribution. They often act as middlemen between manufacturers or retailers and their customers.
In today’s global economy, businesses rely heavily on third-party logistics (3PL) businesses to fulfil orders efficiently and effectively. Because partnering with a 3PL allows a merchant to focus on other areas of their business.
These 3PL businesses offer a wide range of services, from storage and shipping to inventory management and fulfilment.
How do 3PL businesses work?
A 3PL may manage a single part or a multitude of different supply chain processes. 3PL minimizes the workload by managing everything from warehousing to logistics management and everything in between.
Third-Party Logistics operates as follows:
- After receiving the inventory at its warehouse, 3PL started organizing each SKU.
- When a customer places an order on an e-commerce site, it is either manually forwarded or automatically pushed to the 3PL.
- A warehouse team member receives a picking list to gather the items that have been ordered.
- The items are packed in boxes along with the order information and receipt.
- The 3PL either prints the shipping label on its own or works with one of its shipping carrier partners.
- The shipment is picked up by the shipping carrier and delivered to your customer from the 3PL’s distribution center.
Types of Third-party Logistics:
Third-party logistics have become a primary component in the supply chain of many brands. You accept the orders. They are fulfilled for you by your third-party logistics provider (3PL). It’s that easy, and if the transition between receiving orders and fulfilling them is flawless, clients don’t give it a second thought.
The services offered by third-party logistics businesses have expanded along with the growth of logistics over time, particularly with the introduction of the eCommerce business model. There are four popular types of third-party logistics providers available today; the one you select will depend on the particular requirements of your particular business.
Standard 3PL providers:
eCommerce retailers that only require the most basic logistics would work with a standard 3PL company. These businesses just provide basic services like storage and transportation of products. Since their services start and end there, it’s generally a fairly affordable choice.
Service developer 3PL:
In addition to standard storage and shipping, the 3PL service developers offer additional IT infrastructure and management.
They offer their clients value-added services related to safety and reliability such as security, shipping tracking, and compliance management. This means they can further ensure the delivery of packages is safe and on time.
Customer adapter 3PL:
This kind of 3PL business takes care of almost all of the client’s logistical needs, managing the shipping process from start to finish and even managing rates and negotiating with carriers.
Customer developer 3PL:
The companies in this type of 3PL are the fewest but generally the largest. That’s because 3PL customer developers—who are essentially their clients’ logistics departments—completely take over a company’s logistics operations at their client’s request.
Due to the considerable work, resources, and responsibility involved in “running the show” for the client, using a 3PL customer developer is highly expensive.
Why do companies choose to work with 3PL logistics?
As we discussed above outsourcing 3PL logistics companies can pay attention to the other aspects of their business. From saving time and money to offering the best and most efficient experience for their customers, outsourcing third-party logistics can make a lot of sense.
Below are some of the most common reasons why companies choose to work with 3PL businesses:
- Cost and time reduction:
Third-party logistics businesses are experts in logistics and thus have a larger scale network than a regular company’s supply chain.
Because 3PLs work with many manufacturers and retailers, they can get large discounts on things like supplies, equipment, and even shipping costs. To keep prices low, they are also experts at streamlining and optimizing the supply chain.
3PL frees up your key employees to focus on manufacturing, strategic planning, and operational procedures that better support business growth.
This is the reason why working with a 3PL comes with a cost, it often leads to more cost savings and time savings than handling the logistics yourself.
- Supply chain efficiency:
3PL businesses are experts at processing orders quickly and effectively, which means customers will receive their products faster. That’s essential for enhancing the customer experience and boosting customer satisfaction.
3PL makes it easy to expand the business into emerging markets and new areas, including emerging countries. Working with a 3PL allows a business to benefit from new supply chains, enhance customer service, and tap into new markets.
A 3PL business can scale a company’s space, labor, and transportation needs, depending on the exact services required. Producers, suppliers, and other manufacturers can expand into new markets more successfully and uniquely with much less hassle.
A 3PL is designed to streamline the logistics operations in which you may lack expertise and open doors for enhanced business growth.
Third-party logistics also offer businesses the flexibility to utilize supply and distribution according to their business requirements.
As a result, businesses may expand as demand increases and there are no redundant investments or underutilized resources when sales are weak. Therefore third-party logistics continuously enhance your logistics operations, which ultimately results in savings and increased effectiveness for your logistical projects.
How 3PL businesses are growing using the right technology:
Nowadays 3PL businesses are growing by improving their warehousing operations, ensuring faster pickups, enhancing shipping operations, and improving customer service by using the right technology.
- Delivery management software:
Nowadays, 3PL businesses are using delivery management software(DMS) to plan, manage, optimize, and automate their delivery operations.
They are investing in reliable DMS to enhance their delivery operations and meet customer expectations.
- Automated task allocation:
Modern 3PL businesses use software that automatically schedules a delivery task based on the type of delivery in advance to save time.
Additionally, it automatically allocates delivery tasks to executives based on their delivery KPIs.
- Route optimization:
In today’s era, no one wants to spend hours planning routes. Therefore, route optimization is a solution that can help build the most efficient routes in minutes rather than hours.
As a result, 3PL businesses should be able to optimize their routes based on multiple variable factors such as weather, traffic, empty miles, fuel consumption, and delivery productivity.
- Real-time tracking:
Real-time tracking makes it easier for 3PL businesses to give accurate ETAs to customers and give information on the fleet’s productivity.
It gives minute-to-minute updates on how the driver is performing on the delivery task. And keeps you up-to-date with the driver’s live location and accurate ETAs.
- Cloud-based solution:
Integrating an IT solution might be challenging, but cloud-based delivery management software can make it much easier.
You don’t need to purchase physical infrastructure or technical assistance if you choose a cloud-based solution.
- Improve customer satisfaction:
One of the best methods to make sure you provide excellent customer service, even from the backend, is to work with the best third-party logistics software. With the most advanced technology, your 3PL can track your shipment from point of origin to the point of the destination while keeping you informed of any problems or delays along the route.
Customers value operational transparency that lets them know when and how their goods will be delivered.
How Locate2u can help
Locate2u is a solution that can help you to streamline your Logistics operations. It automates your delivery process, straight from the ordering platform to driver assignment.
By managing an all-time delivery database in cloud storage, it gives you statistical reports over different parameters like distance, delays, and customer feedback.
It keeps delivery drivers updated with optimized routes in real-time based on the existing scenarios. That way, you don’t have to spend hours planning the most efficient routes for your drivers.
This way, you can spend more time on other areas of your business to boost your overall productivity!