Grow Your Ecommerce Business with 3PL: Third-Party Logistics Benefits

If you’re an ecommerce business owner, order fulfilment is a critical part of your operations. As your business expands, in-house fulfilment may become challenging to manage and often the most time-consuming, which can divert your focus away from other aspects of the business like marketing and building customer relationships.

Third-party logistics (3PL) can be a viable option to outsource your logistics operations. But what exactly is 3PL, and how can it benefit your business? In this article, we will explore the ins and outs of 3PL, and provide insights on how it can help your business grow.

What is 3PL

In simple terms, 3PL refers to the outsourcing of logistics services to a third-party provider. This means that your company doesn’t have to handle logistics operations, including warehousing, shipping, and order fulfilment, in-house. Instead, a 3PL provider takes care of these tasks, leaving you to focus on core business functions, such as marketing, product development, and customer relationships.

One example is Locad. They are a logistics engine that provides cloud-based supply chain solutions for e-commerce brands, allowing them to expand their omnichannel business. Through their services, Locad enables automatic management of tasks such as storage, packing, shipping, and order tracking across the Asia-Pacific region.

3PL vs. 4PL

When exploring 3PL options, you might encounter the term 4PL. A 4PL introduces an extra layer of separation between ecommerce merchants and their 3PL shipping partners: With a 4PL, the responsibility of managing and coordinating 3PL services for a client falls on the 4PL. This practice is also known as “double brokering.”

4PL companies typically provide a more comprehensive supply chain management services, including but not limited to 3PL services, inventory procurement, manufacturing, and more.

What are the services provided by 3PL

3PL services can vary based on the provider, with some specialising in specific niches and others offering a broader range of functions.

Transportation

Transportation services are a fundamental aspect of all 3PLs, as they play a crucial role in moving goods from manufacturers to warehouses and from companies to buyers. While freight forwarders specialise in transporting large shipments across various countries, smaller shippers like NinjaVan and Lalamove are commonly utilised for moving smaller parcels domestically.

Warehousing, Fulfilment, and Distribution

Numerous 3PL warehouses specialise in services such as warehousing, fulfilment, and packaging, combined with delivery management. Sellers often seek this type of 3PL to outsource all their fulfilment and warehousing requirements. In addition to managing these functions, 3PLs also handle transportation, identification of shippers, shipping rates, and optimise shipping strategies.

How does 3PL work

The 3PL fulfilment process can vary depending on the provider and services you’ve engaged. However, the typical 7 step process looks like this:

1. Your inventory is received by the 3PL at its warehouse, where each product is organised.
2. When a customer places an order on your ecommerce site, the order is either manually forwarded to the 3PL or automatically pushed if its software integrates with your online store.
3. A member of the warehouse team then receives a packing list and collects the items that have been ordered.
4. The items are packed in boxes, along with the receipt and order invoice.
5. The 3PL prints the shipping label or leverages one of its shipping carrier partners to do so.
6. The shipping carrier collects the package from your 3PL’s distribution centre and delivers it to your customer.
7. Tracking information is uploaded to the 3PL system and synced with your order management system.

What are the benefits of 3PL

One of the most significant benefits of using 3PL is the ability to streamline your logistics operations. By working with a 3PL provider, you can reduce the time, effort, and resources required to manage logistics, leading to significant cost savings for your business. Additionally, there are numerous other benefits to utilising 3PL services.

• Convenience: Third-party logistics partners help businesses to deliver their orders by offering free packaging, waybill, and pick up services. This can significantly reduce the workload for business owners, as almost half of the tasks required to fulfil an order are taken care of by the logistics partner. 

• Low-Cost Transportation: The cost of logistics can be minimised by delivering a high volume of products, as more volume typically equals lower costs. Third-party logistics partners can achieve this by building exclusive relationships with logistics sectors, which can help to reduce the overall cost of logistics.

• Improve Customer Satisfaction: Third party logistics can help ensure that orders are delivered safely and on-time, which can reflect positively on the level of customer service provided. Ultimately, this can lead to increased customer satisfaction.

• Flexibility and Scalability: Partnering with a 3PL provider offers flexibility and scalability for your business. As a business owner, you have the ability to choose which partner you want to book for your deliveries and when to do so. You can even cater to multiple orders with different logistics partners, depending on the specific delivery needs of each order.

Who uses 3PL services

Retailers, brands, and merchants are increasingly relying on 3PLs to outsource their supply chain needs, such as distribution and warehousing.

In today’s world, various types of businesses, ranging from small ecommerce retailers to Fortune 500 companies that sell a wide range of products, are regularly partnering with 3PLs.

Small ecommerce businesses

During the initial stage of a small ecommerce business, business owners may be able to manage and fulfil orders on their own. However, as the business grows and the volume of orders increases, the time and effort required to pack and ship in-house becomes overwhelming, which can hinder the company’s ability to scale.

Hiring more workers may be a temporary solution, but eventually, the need for more space becomes unavoidable, resulting in incurring more cost such as renting a warehouse.

Small businesses often find themselves in a catch-22 situation, where expansion is necessary for growth, but the associated costs of space and labour cut into their bottom line. This includes spending more dollars on storage and employee salaries for order fulfilment and inventory management.

The solution to this dilemma is to outsource fulfilment to a 3PL, allowing the business to focus on other essential tasks. Not only can 3PL be a cheaper alternative, it can cover the job scope of handling order fulfilments and provide necessary services.

Medium sized businesses

For a rapidly growing company with 50 to 200 employees, 3PL services can provide strategic fulfilment solutions to support its expansion. If a company has outgrown its existing warehouse facility, collaborating with a reliable 3PL can help meet the increasing demand and scale up its operations.

Sometimes, it may be beneficial to divide inventory across multiple fulfilment centres to ensure quicker and more cost-effective delivery to customers, boosting overall customer satisfaction.

Fortune 500 companies

According to 3PL Worldwide, 90% of Fortune 500 companies utilise the services of a 3PL, with transportation management, warehouse management, and/or value-added services being their most frequently used offerings.

It’s also important to note that there are different types and sizes of 3PL companies. A 3PL that caters to small Shopboxo websites is distinct from one that serves a Fortune 500 company. Each 3PL company is tailored to meet the unique needs of its clients, including inventory tracking across various channels.

Large companies tend to outsource their supply chains to control costs and improve efficiency. In fact, the larger the company, the more likely it is to partner with a 3PL provider, as managing everything in-house can be very expensive.

How to choose the right 3PL provider

Choosing the right 3PL provider is crucial for your business. There are many providers to choose from, and selecting the wrong one can lead to costly mistakes. To choose the right 3PL provider, consider the following factors:

Experience: Look for a 3PL provider with a proven track record in your industry.

Technology: Make sure the 3PL provider has the right technology in place to meet your logistics needs.

Customer service: Choose a 3PL provider with excellent customer service and a commitment to meeting your business needs.

Conclusion

3PL is an effective solution for businesses looking to outsource their logistics operations. By partnering with a 3PL provider, you can streamline your logistics, reduce costs, and improve customer satisfaction. However, it’s essential to choose the right 3PL provider for your business to reap the full benefits of this approach.

Our platform offers a delivery management system that seamlessly integrates with delivery partners such as NinjaVan. With Shopboxo, you can easily organise, schedule, and fulfil your deliveries.