If you are an ecommerce business owner, you know that order fulfillment is a very important part of your operations. As your company grows and you get more orders, fulfilling customer orders in-house could no longer be feasible. That is where third-party logistics can help! Here we will help you learn and understand everything you need to know about 3PL’s so you can decide if they are right for you.
What are Third-Party Logistics (3PLs)?
Third-party logistics (or 3PL) takes care of the outsourcing of ecommerce logistics processes, including inventory management, warehousing, and fulfillment. 3PL providers make it easier for ecommerce merchants to accomplish more, with the tools to get your retail order fulfillment automated.
No one knows for sure who started the term “third-party logistics,” but companies decided to start leaning toward outsourcing inbound and outbound logistics services to third parties in the 1970s and ‘80s.
With the introduction of ecommerce in the ‘90s and 2000s, the term 3PL became universal, making it possible for 3PLs to expand their services. The supply chain integration of warehousing operations and transportation services has become what we now call third-party logistics.
3PL vs. 4PL
When you are looking into 3PL, you might run into the term 4PL. A 4PL adds another degree of separation between ecommerce businesses and the 3PLs shipping their products. When you hire a 4PL, they manage and arranges 3PL services for their client. Occasionally it is called “double brokering.”
4PL companies often end-to-end supply chain management for a client, including 3PL services, manufacturing, inventory procurement, and more.
The 3PL Order Fulfillment Process
If you are considering working with a 3PL company or are new to outsourcing shipping, you might be a little confused or unsure on what exactly goes on in a 3PL fulfillment center.
The 3PL fulfillment process should not be a mystery and if you are wanting to hire a 3PL company you should know exactly what goes on.
What does happen at a 3PL’s warehouse after a customer clicks “Submit Order” on your online store? Let’s dive in and explore the process from start to finish.
Receiving
Without having inventory on hand, a 3PL can’t ship orders. Receiving in a 3PL warehouse is the acceptance of incoming inventory and then storing that inventory.
The process of receiving as well as capacity of the inventory is unique to each 3PL company.
3PL Warehousing
As soon as the 3PL gets the inventory, they store it in fulfillment centers. You inventory could be stored on a pallet, bin or shelf. You are going to want to make sure that as your business grows, the 3PL that you choose can scale with it. If you need more space for your inventory to fulfill more orders and your 3PL doesn’t have the compacity for that, you might need to change 3PLs and that is a headache.
Now with this, you must remember that a 3PL is different than an on-demand warehousing company that gets you space for your inventory and doesn’t do any of the logistics that these 3PL centers provide.
Picking
As soon as the order is made, the fulfillment process begins. Some 3PLs have you put orders in manually, which usually involves spreadsheets with the order and shipping details. Manually putting this information in is not the most efficient way to go about it. And it can be a huge headache to go through.
There are other 3PLs that have software and technology that automatically sends the order information to your 3PL for them to start fulfilling. This software also helps keep everything about your orders in one spot. It helps you keep track of inventory and stock levels while also allowing you to see everything you need to know about the fulfillment of your customer’s orders.
Once your order information is pushed to your 3PL, it is sent over to the warehouse picking team. A team member receives a picking list with what items to collect and the quantity of those items. It tells them where in the warehouse those items are located to make it easy and quick to gather everything that is needed for the order.
Packing
Once everything for the order is picked, it is moved over to the packing stations to be securely packed and ready for shipping. There are many materials that you can use, depending on the 3PL, how you want to represent your brand, and which items are being shipped.
Some common packing materials are packing tape, unbranded boxes, dunnage, poly bags, and bubble mailers. There are 3PLs that charge more for packing materials and some that include them in their full service.
The 3PL will choose the right packing materials for your orders to make sure the items are protected while also achieving the lowest dimensional weight. The dimensional weight is the shipping price that takes into account the packages dimensions to decide what the shipping rates will be. Having the 3PL’s experienced shippers help decide which packaging to use will make sure to keep those logistics costs low.
Now let’s say you want to have your packaging go along with your brand, make sure to partner with a 3PL that will let you use custom packaging like boxes and inserts to help keep your brand your brand. Most of the time, receiving the package is the first time they are seeing your brand in person, so having custom and branded packaging can make a really good impression with your customers.
Shipping
The order is picked and packed. Its now time to ship the package. Your 3PL will work with the shipping carriers to get your orders shipped. There are some 3PLs who have a preference to which carrier they work with. While others work multiple carriers and compare the shipping costs to see which one will have the lowest cost for your package.
There are carriers that pick up from 3PL warehouses such as DHL, USPS, and UPS. Now what carrier is used and how fast it takes depends on the policies of the partnership between the 3PL and the carrier, as well as the options given to the customer and which options they pick.
Returns
Most 3PLs also process returns. If your customer has a return and sends it to the 3PL, your 3PL can take it and process the return and add it back into your inventory or dispose of it, what ever the policies state for your product.
If you have your 3PL send a return shipping label with the packages, it makes it a lot more convenient for you and for your customers. You don’t have to deal with returns in-house and your customers can track their returns.
Third-Party Logistics Services to Look For
Each 3PL provides a different array of services. Here are some services you might want to look for when looking for the 3PL for you.
2-Day Shipping
One of the biggest reasons someone doesn’t order something is if the shipping is either too expensive or its going to take too long to get to them. If you take this plus the fact that most popular online retailers offer 2-day shipping into consideration, it’s pretty obvious that customers want cheap and fast shipping.
Yes, 3PLs have relationships with shipping carriers that will most likely get you discounted prices on things like 2-day shipping but looking for a 3PL with multiple warehouses in the right areas will definitely help your chances on not losing customers because of shipping issues.
Distributed Inventory
Working with 3PLs that have multiple warehouses is ultimately more beneficial for both you and your customers. Having your inventory split across fulfillment centers helps your customers get their order faster.
Let’s say you’re 3PL has one warehouse in Utah. If your customer is over in South Carolina, the shipping is going to not only going to take longer but also cost a lot more. As was said above, people tend to not continue with the sale when shipping is less than ideal.
But if your 3PL has more than one warehouse, shipping orders will become easier, faster, and cheaper. So, your 3PL has another warehouse in Tennessee, shipping from Tennessee to South Carolina would be a lot faster and cheaper for both you and your customer.
Splitting your inventory between multiple warehouses is called distributed inventory. This can be very beneficial, but it won’t necessarily be cost effective for everyone. If you don’t have a high volume of shipments this will only hurt your business. But as your business grows, you want to make sure that you are connected with a fulfillment center that will be able to grow with you and provide the right services you will need at some point.
Third-Party Logistics Inventory Management
Managing inventory is a lot more than just keeping your products in a warehouse. It includes keeping you and your customers in the loop about your inventory. This includes syncing your inventory numbers with your online store. As well as providing you with real-time updates on what your inventory levels are at each warehouse. Along with that, promptly reordering inventory once it hits a curtain level to prevent stockouts.
While looking for your 3PL, it would be beneficial to look for one that has the technology to push real-time stock numbers to your ecommerce website so your customers can see if a product is out of stock right when it happens.
Third-Party Logistics Customization
One of the most exciting things when you get a package is the unboxing. If you create an amazing unboxing experience, it can help your brand stand out against your competition as well as leave a lasting impression. 3PLs can help with that customization with some of these ways.
Third-Party Logistics Custom Packaging
3PLs like Launch Fulfillment are able to have you select packaging that you would like to use. Custom sizes or designs on your boxes are a possibility. You could use custom boxes or mailer packaging types. Once you’ve decided on your packaging, you can think of things like branded inserts to add more to your packages.
Kitting
Kitting is added pieces to the package to make it more customized. Things like stickers, your own branded dunnage, wrapping items, taping the items shut, and a lot more as well. This adds value to your packages and once again makes the unboxing that much more enjoyable.
Custom Gift Notes
Now let’s say an order is a gift from a customer to their recipient. There is an option to let your customer send a note for the order. It could be for a birthday or from a bride to her bridesmaids or parents who miss their daughter. Let your customer custom the order with a nice note to the recipient of the package.
Returns Management
3PLs can also take care of your customers returns. The entire return management process can me taken care of through your 3PL’s returns software. This makes it easy for your customers to return the products. Once the 3PL receives the items you can decide what you want them to do with it, toss it, restock it, or even put it in a quarantine before restocking.
Benefits of Working With a Third-Party Logistics
Through choosing if a 3PL is right for you, thinking about some of the benefits might help you decide. Most 3PLs supply you with different services they all have the same benefits. They are there to help you and your company grow while managing your fulfillment and inventory.
They help you safe time and money. As your business grows it will become harder and harder to fulfill orders by yourself. Let a 3PL help you fulfill everything so you can take more time to grow your business and less time doing the time-consuming task of fulfilling your orders.
3PLs can help you understand the industry without having to know everything about it. Let your 3PL take care of all of that. They know the shipping carriers and fully understand how to get the best price and the fastest shipping. Your 3PL is here to save you on time and money through things like taking care of the industry knowledge for you.
They will also help you reach more customers. With a 3PL you have the ability to ship from multiple warehouses and make it faster and cheaper for your customers to order your products. The easier it is to order the more orders you will get. If you ship just from in-house, you have the expenses of shipping across multiple shipping zones. Making it more difficult and expensive.
3PLs are here for you. They want to help you through the growth of your business. Launch Fulfillment has all of the benefits and services you would need to make sure your orders are shipping correctly, quickly, and most cost-effective. Be sure to contact us if you are interested and want to know more about us. We are more that willing to answer any of your questions.