Third-party logistic providers (3PLs) are a way of outsourcing your logistics needs to an experienced company. When you use 3PLs, you get more than just warehouse management.
They can offer many services that will help increase efficiency and productivity in your business. You’ll also save time on tasks like marketing, research, and development because the 3PL provider will take on these tasks for you.
This article will cover the 3PL meaning in great and definitive detail. This is so you can rest easy when choosing to integrate it into your business.
The first step to integrating the potent utility of 3PL into your business is by learning what it can do for you. We’ve put together this guide to save you time and help you understand what 3PL is all about. We’re making logistics a cinch, it’s in our name! Here’s what you need to know if you’re considering supply-chain solutions.
Third-Party Logistics: What Is It?
A third-party logistics (or “supply chain management”) provider is a company that provides outsourced logistical services to other businesses. This can include anything from warehousing and distribution to transportation and even marketing and research.
By working with a reputable, experienced third-party logistics provider, you can free up time and resources in your own business to focus on more critical tasks.
3PL vs. 4PL—What’s the Difference?
When people talk about “third-party logistics,” they usually mean a third party that handles warehousing and distribution. However, there is another type of outsourcing for companies: fourth-party logistics (or “reverse logistics”).
4PL, in essence, is 3PL but one step further/removed. 4PL services manage resources, infrastructure, and technology. In addition, they often manage 3PLs to build, design, and create supply chain solutions for other businesses.
When you think of reverse logistics, it might be in terms of product returns or warranty claims—you send items to the manufacturer or distributor, and they handle them from there.
The Benefits of 3PL
There are many benefits of using a third-party logistics provider. Some of these are listed below, but the list is not exhaustive by any means.
Saving Money and Time
An excellent third-party logistics provider will streamline your supply chain processes, making them more efficient. This means less wasted time and money! In addition, many providers offer value-added services like order fulfillment and kitting that can save you even more time.
Furthermore, many third-party logistics providers have years of experience in the field to help you with tasks like marketing and research. This can free up time and resources in your own business to focus on more important things.
Ease of Scalability
An excellent third-party logistics provider will be able to scale their services up or down as needed, ensuring that your needs are always met. This is important for businesses that are growing or changing rapidly.
When you outsource your logistics to a third party, it can often lead to improved efficiency in your business. This is because the third-party provider will have more experience and expertise in the field than you do. They’ll also have specialized knowledge about different aspects of the supply chain, which can help improve overall productivity.
In your day-to-day operations, you have a lot on your plate. You probably don’t have the time to research and explore third-party logistics providers or negotiate with them about their service offerings. You can save yourself precious hours while still getting what you need from a provider by outsourcing this work to an expert.
Because of their experience in warehousing and distribution, third-party logistics providers know how things like transportation costs are calculated.
They also understand which services will be most beneficial for different companies (and that’s why they’re considered experts). This means all shipments run more efficiently.
A third-party logistics provider can help your company reach new markets and even new geographies. As your products are shipped worldwide, an experienced partner will be there to maintain relationships with carriers, so you don’t have to. This will save you time as well—you won’t need to spend hours on the phone trying different carrier options or negotiating rates.
Furthermore, many third-party logistics providers have global networks that can help you get your products to new markets quickly and easily. This is especially beneficial for small businesses that might not have the resources to expand on their own.
The Fulfillment Process of 3PL: Receiving and Processing
Once an order is placed, it needs to be processed and sent to the correct location for fulfillment. This usually starts with receiving the order in your warehouse.
The order must then be checked against stock levels and any special instructions from the customer (such as gift wrapping). The order is then picked and packed for shipping. Finally, it’s shipped to the customer using the most efficient method possible.
Warehousing and Distribution
A third-party logistics provider can help you manage your warehouse and distribution needs. This includes tasks like order fulfillment, inventory management, and shipping. By outsourcing these tasks to a specialist, you can free up time and resources in your own business to focus on more important things.
Third-party logistics providers can also help with transportation needs. They can manage shipments using their trucks or partner with other transportation companies. This allows them to offer a one-stop shop for all of your logistical needs!
Picking and Packing
Once an order is processed and prepared for shipping, it needs to be packed. This includes items like customer service communications (such as invoices) and any other documents that may need to accompany the shipment. Each item must also be labeled with appropriate barcodes to track each package easily.
Furthermore, each order needs to be picked and packed efficiently. This usually means packing items together that are going to the exact location. For example, a customer in California would not receive a shipment of items from New York.
After orders have been processed, picked, and packed, they need to be shipped to the customer. Many different shipping options are available, depending on the product and the destination. A third-party logistics provider can help you make the best choice for your needs.
They can also manage the entire shipping process for you, including tracking packages and dealing with any issues that may arise along the way. This leaves you free to focus on other things!
Returns and Refunds
When customers are not happy with their purchase, they often need to return the product. This process can be difficult and time-consuming if you are not prepared for it.
An excellent third-party logistics provider will help you manage returns and refunds in a streamlined manner. They can create a returns policy specific to your business and products. They can also handle all of the shipping and tracking for returns, making the process as painless as possible for the customer.
In addition, they can help you deal with any warranty claims or other product issues that may arise. This leaves you free to focus on improving your products and services!
The Most Valuable Services Provided by 3PL
The logistics industry is constantly evolving, and the way they deliver products has changed drastically. 3PL fulfillment services have now become more beneficial than ever before, with new features that make it easier for companies of all sizes to ship orders without any hassle or headache on your end!
1. Inventory Management
One of a third-party logistics provider’s essential services is inventory management. This includes tasks like order fulfillment, stocktaking, and shipping. By outsourcing these tasks to a specialist, you can free up time and resources in your own business to focus on more important things.
In addition, they can help you deal with any inventory issues that may arise. They can also recommend increasing stock levels or streamlining your ordering process.
2. Quick Shipping
An excellent third-party logistics provider will help you choose the best shipping option for your needs. They can also manage the entire shipping process for you, including tracking packages and dealing with any issues that may arise along the way. This leaves you free to focus on other things!
This is especially important for small businesses that do not have the time or resources to ship themselves. Using a third-party logistics provider can ensure that your orders are shipped quickly and efficiently.
In addition, they can often negotiate better shipping rates than you would be able to get on your own. This can save you a lot of money in the long run!
3. Distributed Inventory
An excellent third-party logistics provider will also help you manage your inventory. This includes tasks like order fulfillment, stocktaking, and shipping. By outsourcing these tasks to a specialist, you can free up time and resources in your own business to focus on more important things.
In addition, they can often recommend solutions for increasing stock levels or streamlining your ordering process.
This is especially important for businesses expanding into new markets or selling products online. A distributed inventory system can help you keep track of your products and make sure that they are available when customers need them.
By using a third-party logistics provider, you can get the benefits of a larger company without having to deal with the hassle! They will take care of all of the details, so you don’t have to worry about anything.
Who Should Consider Third-Party Logistics?
Practically every e-commerce store could benefit from using a third-party logistics provider. However, some businesses may find it more beneficial than others.
A Large Shipping Volume
If you ship many orders regularly, using a third-party logistics provider will be highly beneficial. Many e-commerce stores use them exclusively because they can help you manage your shipping volume more efficiently and cost-effectively.
In addition, the process is made even easier if you are selling internationally or in multiple markets at once! It makes sure that all shipments arrive quickly and accurately with their tracking numbers so that customers know exactly where their package is every step of the way.
A High Shipping Cost Per Item
On average, small businesses spend about $20 to ship each order they receive from an online store. However, some companies have much higher costs than this for whatever reason – maybe they sell large products that require more expensive shipping, or they live in a remote area that increases their costs.
If you fall into this category and need to ship items for under $20 each, using a third-party logistics provider is the best way to ensure your profitability! They can help you cut down on any unnecessary fees to avoid losing money with every transaction.
In addition, it makes sure that all orders arrive quickly and accurately with their tracking numbers, so customers know exactly where their package is at all times during transit.
A Small Team With No Experience In Shipping Or Logistics
If none of your employees have experience dealing with inventory management, order fulfillment, or shipping tasks, outsourcing these responsibilities will be highly beneficial.
This ensures that all shipments arrive quickly and accurately with their tracking numbers, so customers know exactly where their package is at all times during the transaction.
As a result, you don’t have to worry about making costly mistakes or missing deadlines – your third-party logistics provider will handle everything for you! And of course, they can also provide recommendations on how to streamline shipping processes to save time and money.
You’re Running Out of Space
Many e-commerce stores are also starting to sell their products in physical retail locations. This is because customers like the convenience of purchasing items immediately without having to wait for shipping.
However, this requires that you have enough space in your warehouse or storeroom for all of these extra inventory items! If you’re running out of reach and need a place to keep them all until they are sold, then hiring a third-party logistics provider will solve the problem quickly and easily.
They can provide storage services at highly affordable rates so that your business remains profitable even while expanding into new markets.
In addition, it makes sure that every order arrives accurately with its tracking number, so customers always know exactly where their package is during transit.
So, these are some of the most common reasons why businesses should consider using a third-party logistics provider.
Of course, every company is different, and there may be other benefits specific to your business. But, the bottom line is that using a third-party logistics provider can help you grow your business more efficiently and effectively!
Who Else Can Benefit From Third-Party Logistics?
Almost every business could benefit from using a third-party logistics provider at some point or another. However, certain companies may find it more beneficial than others:
Small Businesses With a Limited Budget
If you’re on a tight budget, using a third-party logistics provider will give you access to their services at highly affordable rates.
Suppose your company is on the smaller side. In that case, none of your employees likely have experience dealing with inventory management, order fulfillment, or shipping tasks like some larger companies do.
If this is the case for you and you need help managing these responsibilities without costly mistakes, then hiring a third-party logistics provider can solve all of your problems!
As mentioned earlier in this blog post, they can provide storage services at meager prices, so even if you’re increasing into new markets but don’t want to spend too much money doing it – outsourcing these processes will be worth every penny.
Companies With a Location in a Remote Area
Finding reliable employees can be highly challenging if you have a location and warehouse in an area that is very difficult to get to – such as on top of a mountain or deep into the woods. In this case, outsourcing these responsibilities will save your company valuable time and money!
A third-party logistics (3PL) provider may be precisely what your business needs for increased growth, efficiency, and productivity.
The benefits are vast and varied depending on the specific needs of each company; however, there are some common trends across industries: small businesses with limited budgets often find it more beneficial than larger ones because they lack trained staff who can effectively deal with inventory management and shipping tasks without any costly mistakes.
For companies with a location in a remote area, it’s often challenging for them to find reliable employees who can reliably handle the processes involved in order fulfillment. This makes sure of the consistent quality, accuracy, and timeliness of all shipments sent to customers.
Companies With a Large Number of Locations
Suppose you have multiple locations or warehouses across different cities or states. In that case, using a 3PL provider will save your company time by allowing orders from one branch to be shipped directly from another branch instead of having each shipment go through an intermediary warehouse first.
In addition, this also allows you to cut costs on shipping because there is no need for individual trucks to drive long distances between warehouses to drop off packages.
No matter your business size or location, a third-party logistics provider can help you save time and money while growing your company more efficiently and effectively!
Suppose you’re curious about the benefits that a 3PL provider could offer your specific business, be sure to contact them for a consultation. They’ll be more than happy to answer any questions you have and explain how they can help your business!
How to Find the Right Third-Party Logistics Company for Your Business
When looking for a third-party logistics company (3PL), it’s essential to remember that not all companies are created equal. Here are some tips on how to find the right 3PL provider for your business:
Look for a Company That Specializes in Your Industry
Not all 3PL providers offer the same services, so it’s essential to find one specializing in your specific industry.
This will make sure that they have extensive knowledge and experience in dealing with the challenges and needs that come along with your line of business.
Check Out Their References
It’s always a good idea to check out a company’s references before making any decisions – this includes talking to other businesses who have used the 3PL provider’s services before.
This will give you a chance to ask about their experience with the company and find out if they were satisfied with the results of working together and what improvements could be made moving forward.
Look for a Company Who Can Offer 24/7/365 Support
In today’s fast-paced world, customers have incredibly high expectations for service, so companies should always look for a third-party logistics provider who can offer around-the-clock support, including weekends and holidays, as well as during all significant national events such as Thanksgiving Day or Christmas Eve.
When there is an emergency or unexpected event that causes shipping delays due to strikes or boycotts, etc., your business needs someone on its side who can quickly address the situation and calm panicked customers.
It’s essential to find a 3PL provider that can be fully transparent with all of their clients about prices, policies, and the services they offer.
This means that one should never involve any hidden costs or fees in working together, nor will you have to sign an NDA (Non-Disclosure Agreement), limiting your rights as a business owner when it comes to asking questions or having input on how specific tasks are carried out.
If possible, try finding someone who provides free quotes before signing up for anything. Hence, you’re able to see precisely what kind of pricing plans are available without paying anything upfront first.
Working directly with your client instead of through several intermediaries builds trust and transparency, which are both essential for a successful business relationship.
How Does 3PL Pricing Work?
Many business owners wonder how the pricing of third-party logistics works and several factors go into it, such as:
Weight vs. Volume
When a shipment is weighed, it’s calculated in weight, while the cubic size is used to determine cost when measuring volume.
This means that if you have something weighty but small, like diamonds or gold bullion, then you’ll likely pay less than someone who has light items that take up more space, like clothing.
However, if your products fall somewhere between these two extremes (like most businesses), then this won’t be an issue since the price will simply vary based on which service plan they offer – either by weight or by cube. Be sure to ask what kind of services the 3PL provider offers, so you’re able to make the best decision for your business.
Some items require special handling due to how fragile they are or if they need to be kept at a specific temperature – this is usually known as “Hazmat,” which stands for hazardous material and can include things like chemicals, batteries, etc.
The price of third-party logistics will vary depending on what kind of services come with these tasks, such as specialized storage units, containers, packaging materials, and labeling systems. In most cases, it’s only worth hiring a company that specializes in Hazmat since their prices will often be lower than those that don’t offer this service (or not by much).
For example, if you were to use a company with standard services for hazardous items, you’d likely be paying more than if they came equipped with specialized units and equipment.
The location of the third-party logistics provider can also determine how much their services cost since some cities are more expensive than others.
Suppose your business is located in an urban area. In that case, you must find someone who has experience working there or understands what kind of challenges may come up when shipping into this particular region (such as increased theft rates).
This makes it easier to select which 3PL plan will work best for your business, along with getting accurate estimates on all future shipments so nothing gets lost or damaged during transit.
While most companies won’t disclose every detail of their pricing to clients, it’s always best to ask as many questions as possible, so you know exactly what kind of services are offered for the price.
Hiring a third-party logistics provider will almost guarantee that your items arrive at their destination on time and undamaged since they’re experts in keeping track of shipments along with using special equipment like shrink wrap machines and GPS systems.
However, accidents can happen during transit, which is why most providers also offer insurance just in case something does go wrong. This will vary depending on who you work with, though, as some companies require higher rates than others.
If your package is worth several thousand dollars or more, make sure there’s an option included within 3PL plans for extra insurance that can cover the total value just in case something happens.
The length of your contract with a third-party logistics provider is also an essential factor to consider, especially if you’re not sure how long you’ll need their services.
Most providers offer monthly, quarterly, and annual rates, which makes it easier to budget for your business – but be sure to ask about early termination fees just in case you decide to leave before the contract is up. This way, you won’t have any surprises when it comes time to renew your agreement.
Overall, finding the right third-party logistics provider for your business can be tricky, but it’s well worth the effort since they can help increase efficiency while reducing costs.
By taking the time to ask the right questions, you’ll be able to select a plan that fits your needs perfectly – allowing a smooth and successful shipping process for years to come.
How to Measure and Assess Your 3PL Performance?
One of the most important aspects of working with a third-party logistics provider is measuring and assessing their performance.
This will help you determine if they’re meeting your expectations and whether they can continue to provide quality services that align with your business goals. Here are a few tips on how to measure and assess your 3PL performance.
The best way to track the success of your third-party logistics provider is by monitoring the number of shipments that are being sent/received each month.
This will give you an idea of how efficient they are when it comes to getting products from Point A to Point B. If you notice that there’s been an increase in damaged goods or late deliveries, it’s time to re-evaluate your agreement with that particular provider.
Another way to measure performance is by soliciting feedback from customers who have received products shipped via a third-party logistics provider.
This can be done in surveys or interviews and will give you a better idea of how satisfied they are with the services provided.
It’s also essential to track any negative comments since this could indicate that something went wrong during transit which needs to be addressed immediately.
One of the best ways to assess whether your third-party logistics provider is worth it is by conducting a cost analysis.
Compare the prices between using their services and doing everything in-house (including hiring and training employees, purchasing equipment, etc.) to see if there’s a significant difference. If the cost is too high or you’re not seeing any improvement in your shipping process, then it might be time to switch providers.
By using these tips as a guide, you’ll be able to measure and assess your third-party logistics provider’s performance effectively – making sure that they continue to meet your expectations and provide quality services that help your business grow.
3PL Done Right
Working with a third-party logistics provider can be tricky, but it’s well worth the effort since they can help increase efficiency while reducing costs. By taking the time to ask the right questions, you’ll be able to select a plan that fits your needs perfectly – ensuring a smooth and successful shipping process for years to come.
To get the most out of your 3PL agreement, be sure to measure and assess their performance regularly so you can identify any areas that need improvement. With these tips in mind, you’re on your way to achieving success with third-party logistics!
Get in touch with us to learn how Cinch 3PL Warehousing can streamline your inventory processes and create permanent efficiencies. We’ve been doing this for over 32 years and we’re leading the industry in the U.S.and globally with our boutique services.