What is 3PL and Why You Need It

In today’s world, more people are doing their shopping online. This was a trend already but when COVID became an issue, the trend increased drastically. People discovered how much easier it was to sit at home and order what they needed or wanted and have it delivered directly to their doors.

Businesses that provide merchandise to consumers know that it is necessary to be able to reach people in all corners of the world. They also know that their competition includes big names like Amazon and Walmart, places that can offer customers such amenities as two-day shipping and reasonable, sometimes even free, shipping. In order to avoid getting lost among these challenges, smaller businesses need something that can help them take their inventory handling a step higher. That is where 3PL comes into the picture.

WHAT IS 3PL?

In the most basic of terms, 3PL (Third-Party Logistics) is a company that takes care of all or part of your shipping and receiving needs. Companies vary greatly in the services they offer clients but it is always some combination of the following:

• Warehousing/storage – The company offers one or more storage facilities placed strategically throughout an area so you have somewhere to keep your merchandise readily available
• Inventory Management – Keeping track of what inventory is on hand, what needs to be re-ordered, what may be expiring, and other demographics depending on the individual company
• Kitting and Assembly – Combining several items in a package for special deals or doing light assembly
• Reverse Logistics (Returns) – Taking care of customer returns
• Order Fulfillment – Connecting directly with your online shopping cart and fulfilling customer orders
• Distribution – Labeling and mailing merchandise
• Pick and Package – Preparing orders for mailing

When looking into partnering with a 3PL, it is important to find out exactly what options are offered. In this way, you have the chance to outsource as much or as little of your supply chain management as you feel comfortable with.

WHO BENEFITS FROM 3PL?

Many people think that outsourcing such a large part of their business is something that is only necessary for large businesses. This isn’t the case. Partnering with a 3PL can benefit small and medium businesses as well.

Consider the space you need to have merchandise available whenever someone orders it. For many small businesses, the early days of business start out from the kitchen table. Merchandise may be stored inside your home or in a garage. This is very inconvenient. It not only limits your usable living space but it also limits the amount of merchandise you can make available. It also limits the kind of deals you can offer your customers, the kind of deals that can help you compete on more even ground with your competition.

Three tests you can consider in order to determine if you can benefit from such a partnership is to ask yourself:

1. Do I ship out more than 100 orders per month?
2. Am I running out of storage space?
3. Do I want to offer 2-day or free shipping?

The more “yes” answers you give to these questions, the more you can benefit from such a partnership.

BENEFITS OF USING 3PL

How can utilizing the services of a 3PL benefit both my customers and myself? This is the most frequently asked question we hear from prospective clients. Let’s talk briefly about the top nine benefits that can be felt from such a partnership.

1. Saving Money. Renting or buying a warehouse is a large investment. Having access to one or more allows you to avoid the expense and it saves you the hassle of trying to find and maintain such space. It also eliminates the need to hire staff. Most 3PL companies have the advantage of being able to use bulk shipping rates and can purchase mailing supplies in bulk, further reducing the cost to both you and your customers.
2. Access to expertise. Learning the ins and outs of distribution takes time. By partnering with a well-established third party, you have access to their years of expertise in this field. They do this every day and have learned all the most productive ways and have learned what challenges may be faced and how to deal with them.
3. Flexibility. Your needs change. You may see your business experience such things as seasonal ups and downs. This changes your needs for space and workers. Going it alone, you may find yourself having to lay off workers or facing an empty warehouse that is still costing you as much money when business is slow.
4. Ability to grow. As you see your orders increasing, you can expand your warehouse space with no problem. You gain access to more workers without having to hire anyone and you can offer more benefits to customers. All of this helps your business start to grow. By having a ready partner already on board, you can avoid many of the growing pains that come with the territory.
5. Customer satisfaction. People are becoming more used to getting their purchases quickly. With someone in charge of fulfilling orders, you can offer your customers quick, efficient service, prompt returns, and more. Happy customers are return customers.
6. Current technology. Most 3PL companies have access to the latest software and other technology that increases productivity, accuracy, and efficiency. As a small business owner, you may not have the technical knowledge to use these things. You definitely don’t have the time and most likely don’t have the resources to research these advancements and learn what you need to in order to get the most use of them.
7. Increased productivity. With the added staff at hand to box your orders, get them ready for shipment, take care of inventory, and manage other tasks related to warehousing, you have more opportunity to concentrate on the aspects of your business that you are best at.
8. Regulation compliance. Shipping rules change across state and country borders and they are constantly being updated. It can be nearly impossible for a sole business owner to stay current on all these regulations. Seeing that this is their business, a 3PL can save you the time and frustration, and possible fines, of missing some new legal changes.
9. Access to other services. The right 3PL can offer you such services as temperature-controlled shipping, order consolidation, freight audit, customs brokerage, shipment tracking, and consulting services. All of these are normally add-ons so you can pick and choose which will benefit you.

CONS OF 3PL

As with anything, there are some less than desirable aspects of using a 3PL. Most can be worked around but it is important to consider them in advance.

• Loss of control – For those who want complete control of every aspect of their business, this can be a problem. You need to be able to trust that the company you hire can complete the tasks they are given, hire the right staff to get the work done, and get the product where it needs to be.
• Upfront costs – The initial set-up cost is often larger than expected. You have to take time to see the long-term benefits and how they make this cost worth the investment.
• Communication issues – Some companies don’t allow you the type of communication you want. This is something you need to seek out answers to before signing anything. Choosing a company that allows you more direct contact with the actual warehouse staff can eliminate communication issues.
• Syncing computer systems – This is most often a short-term issue that is easily taken care of. Most companies will have IT staff available to help make this happen.

CHOOSING WHO TO PARTNER WITH

With the many 3PL companies out there, you want to make sure you are partnered with one that best fits your needs. There is no definite one perfect company because every business has its own needs and prioritizes those needs differently. Getting the answers you most want to the following things will help you make the best choice for you.

1. Define your needs and determine exactly how much or little help you need. Take into account how much control you are willing to put in someone else’s hands.
2. Check on the company’s ability to adapt to changes over time. What happens if you need more or less service?
3. Does the company offer customizable plans or does it have a one-size-fits-all philosophy?
4. Take time to ask for and check references. Don’t base your decision on just one but look for a pattern.
5. How long has the company been in operation? Has it managed to last through times of country economic downturns or disasters such as COVID?
6. Ask about the range of services available. What comes with a basic plan and what kind of add-on services are available?
7. What kind of customer service do they offer you? Find out how easy it is to communicate with staff members and how willing they are to answer questions and sit with you to determine how they can best meet your needs.

FINAL THOUGHTS

As a small or medium business owner, it is always part of the process to find ways you can increase your chances of meeting competitors where they stand. There are so many aspects of running a business that having help can ease the stress and make it easier for you to concentrate on aspects of the process that only you can handle. Finding a 3PL that you trust can go a long way in easing stress, saving money, and helping your business grow to its greatest potential.