3PL: The Essential Guide to Third-Party Logistics
The entire business world has been turned upside-down due to the COVID-19 pandemic. Massive changes to consumer trends and spending habits have forced many businesses to change business models to sustain revenue. Some overhauled operations, some downsized, and some closed brick-and-mortar locations to try to establish online shops. These large-scale changes to the business process have been a logistical nightmare for many companies. Thankfully, Third-Party Logistics (3PL) partners provide a lifeline for any business experiencing growing pains.
What is Third Party Logistics?
Third-party logistics (or 3PL) refers to outsourcing logistics and fulfillment services, including equipment purchasing and ordering, inventory management, shipping, warehousing, and delivery. 3PL fulfillment specialists serve as an extension to your business. They save companies time and money by providing critical services that eliminate the need for businesses to invest in warehouse space, information technology, and transportation fleets. Thus, 3PL enables you to focus on your core competencies.
What Services Do Third-Party Logistics Solutions Provide?
Purchasing the right equipment, staying on top of new technologies, and making product upgrades is a full-time job. Not every organization can afford the workforce to staff this need and realize full efficiency. 3PL partners procure the right equipment, goods, and services at the most affordable price. Furthermore, unlike original equipment manufacturers (OEM), 3PL partners are often vendor-neutral. This approach helps you get solid advice on a wide range of models.
Warehousing requires costly square footage, staffing, and proper inventory management. Third-party logistics companies offer tens of thousands of square footage of secured warehouse space and inventory management solutions. The best 3PL partners maintain multiple warehouses all across the United States, allowing companies to split inventory across fulfillment centers and ship each order out from the warehouse closest to each customer—ensuring speedy delivery. Inventory management also helps with stock redundancy, an essential strategy for pandemic and non-pandemic times alike.
Picking, Kitting, Packing
Picking, kitting, and packing are crucial aspects of the shipping process that are often overlooked. Once an order is placed, a packing slip is generated with barcodes that help a worker find the right product(s) in the warehouse to fill an order. The worker retrieves—or picks—the product and brings it to a packing station to be kitted and packed. Kitting is the optional addition of custom brochures, manuals, inserts, or other accessories to delight your customers. The worker will pack up the items and packing materials, including the kitting materials at the top of the box. Then, the box is sealed, labelled and shipped to your end customer.
Instead of hiring staff to manage orders and shipments, you can outsource to a 3PL. This partner will coordinate the shipping of your products to end customers and ensure quality care and speed. Some businesses try to manage shipping without the proper tools, resources or headquarter space. Shipping out of the office just doesn’t cut it, which is where a 3PL partner can be invaluable.
What Are the Benefits of Working With a 3PL?
The benefits of working with a 3PL are significant. When your business doesn’t have to be concerned with the little details of picking and packing or the big investment of warehouse space, great things can happen.
Managing inventory involves much more than just warehousing your products. 3PL providers use real-time inventory tracking tools to maintain adequate volume and proactively reorder low-inventory items to prevent stockouts. These tracking tools allow businesses to verify product quantity on-hand, measure units sold per day, and update their website’s “Out of Stock” notices in real-time.
Time and Money Savings
3PL partners help businesses save time and money because they maintain the infrastructure, expertise, and best practices to satisfy every fulfillment process area. Companies that manage these logistics internally must juggle all fulfillment responsibilities individually, a choice that is both costly and time-intensive. These responsibilities include handling orders, receiving, warehouse management, inventory management, picking, kitting, packing, shipping, and billing. Businesses that hire a 3PL provider have the time to focus on generating orders.
Focused Technical Expertise
3PL providers are experts in understanding the many challenges and complexities of fulfillment, warehousing, and shipping. They keep abreast of all the latest trends and emerging technologies within the logistics industry and conscientiously upgrade software, hardware, and equipment to help clients better manage their inventory and streamline their processes. 3PL providers are also up to date on the latest industry trends and complexities and maintain the technical resources and partner networks to improve supply chain optimizations.
Some businesses have seasonal fluctuations in product demand. Businesses that partner with full-scale 3PL providers who offer flexible nation-wide storage solutions earn the added advantage of seasonal scalability. Seasonal scalability allows companies to ramp up their distribution and transportation efforts during busy seasons and reduce it in the off-season months, when a company may require less inventory.
Is 3PL Right for Your Business?
Companies trying to determine if partnering with a third-party logistics company is a good fit should evaluate a few things internally to make the decision:
- Do we have the fulfillment staff needed to do this effectively?
- Can we budget to meet the staffing needs if we don’t?
- Is our current purchasing staff knowledgeable about technology innovation and trends?
- Can we provide our purchasing staff with the right tools and information to analyze our technology needs and recommend the best hardware and services?
If the answer to any of these questions is “no,” a company should highly consider partnering with a 3PL company. While there are many 3PL providers of varying capabilities and expertise, choosing the right 3PL provider will save you time and money.
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