What are third-party logistics (3PLs)?
Third-party logistics is the outsourcing of ecommerce logistics activities to a third party firm, such as inventory management, warehousing, and fulfillment. With the tools and infrastructure to automate retail order fulfillment, 3PL solutions from providers allow ecommerce companies to do more.
We’re not sure who originally coined the phrase “third-party logistics,” but in the 1970s and ’80s, firms began outsourcing inbound and outbound delivery services to third parties.
The term 3PL has grown widespread with the advent and growth of ecommerce in the 1990s and 2000s, and third-party logistics have expanded their services. Third-party logistics, as we know it today, began when firms integrated their supply chain and transportation services.
The 3PL order fulfillment process
What occurs in a 3PL fulfillment center may appear to be a black box, whether you’re considering working with a 3PL firm or are new to outsourcing shipping.
A 3PL fulfillment process doesn’t have to be a mystery, and it shouldn’t be!
So, what exactly happens at a 3PL’s ecommerce warehouse when a consumer clicks “Submit order” on your online store? Let’s take a look at the whole process from beginning to end.
A 3PL cannot fulfill orders without stock in place. Acceptance of incoming inventory and subsequent storage are referred to as a 3PL warehouse’s “receiving” of goods.
Each 3PL has its own inventory receiving and storage procedures.
For example, at Launch Fulfillment, we demand clients to fill out a Warehouse Receiving Order (WRO) so that we may know which items we’ll be receiving and how many units. This helps us stay organized and on schedule with receiving, allowing us to begin fulfilling your orders faster and more effectively.
Once we’ve received your inventory, we store your items in our fulfillment centers. Each SKU has a separate storage location—on a shelf, in a bin, or on a pallet—dedicated just to it.
Different 3PLs may have varying storage capacity; not all 3PL warehouse space is created equal. It’s critical to choose a 3PL with enough storage capacity to handle your current inventory; as your product line and order quantity expand, so must your 3PL storage capacity.
When a consumer places an order, the 3PL fulfillment process begins. (You’ve probably heard the term “pick-and-pack fulfillment” before — this is the first part of it.)
Some 3PLs want you to upload orders manually to their system. This might necessitate the use of spreadsheets that contain order information, shipping information for customers, and so on. This method of managing orders may be time-consuming and complicated.
Other 3PLs use cutting-edge technology that is integrated with your ecommerce platform or marketplace directly. These 3PL fulfillment software integration link orders, shipments, inventory tracking and levels, and more into one location to reduce the fulfillment operation for faster automated shipping.
Customers’ online purchases will be sent to your 3PL immediately after they’re made, thanks to this functionality.
Once an order is placed, it is given to the warehouse picking team. To collect the ordered products from their locations, the picker is given a picking list of the items, quantities, and storage areas at the facility.
When all items in an order have been picked, it’s time to securely pack them for shipping. The packing supplies used will be determined by your third party logistics capabilities, brand preferences, and the products being sent.
The most popular packing supplies are:
- Unbranded boxes
- Bubble mailers
- Poly bags
- Packing tape
- Paper-based dunnage
As a general rule, third party logistics will charge for packing materials as a separate line item, but others may include them as part of their fulfillment management services.
The 3PL will select the best packing materials to protect your items while also reducing the most practical dimensional weight. They’ll also optimize shipments so you don’t have to duplicate packages.
Dimensional weight is a shipping pricing method that accounts for package dimensions to compute shipping costs. Using the appropriate packing supplies may help you avoid costly delays.
If you want your business to be seen through your shipping, work with a 3PL that allows you to utilize bespoke packaging, such as custom boxes and inserts. Receiving a shipment is frequently the first in-person encounter a consumer has with your company, so branded packaging may make a strong first impression.
After you’ve completed the checkout, a freight forwarder will print and affix your shipping label to each package. The next step is to ship your purchase. Most 3PLs will buy and print shipping labels for you on behalf of their customers. Some 3PLs have preferred carrier partners while others compare rates from a variety of carriers to help clients.
3PL warehouses receive orders from carriers like DHL, USPS, and UPS to be delivered. Each order is assigned a carrier and delivery time based on the 3PL’s relationships and rules, as well as the ship choices available to the client and chosen by the end client.
3PLs with the integrated technology described above will automatically send tracking information to merchants’ websites once the order has been shipped.
Many 3PLs also provide return processing services. If a client returns an order by shipping it back to your 3PL and it will process the return and restock or trash the item depending on their terms and your preferences.
You can have your 3PL print return shipping labels for your clients. This saves you time since you won’t have to handle returns at home and consumers will be able to easily follow the progress of their return order.