What are third-party logistics (3PLs)?
A third-party logistics (or 3PL) is the outsourcing of ecommerce logistics processes to a third party firm, such as inventory management, warehousing, and fulfillment. With the tools and infrastructure to automate retail order fulfillment, 3PL providers allow ecommerce retailers to do more.
We may never know who originally coined the phrase “third-party delivery,” but in the 1970s and 1980s, businesses began outsourcing inbound and outbound handling to third parties.
With the advent and development of ecommerce in the ’90s and 2000’s, the word has grown widespread, and it has expanded their services. Third-party logistics is the supply chain integration of warehousing operations and transportation services.
3PL vs. 4PL: What’s the difference?
The term 4PL is sometimes used when researching 3PLs. A 4PL adds a layer of separation between ecommerce companies and the 3PLs who carry their goods by managing and organizing 3PL services for a client. This is known as “double brokering.”
3PL services, manufacturing, inventory procurement, and more are all available through 3PLs.
What are the benefits of working with a 3PL?
There are several advantages to hiring a third party logistics to handle fulfillment. While each third party logistics firm has its own set of skills, all 3PLs provide inventory management, packaging, and shipping options that help businesses maximize profit.
1. Save time and money
You’ll save money by not having to buy or rent the warehouse space, logistics operations, labor, and technology required for in-house fulfillment if you hire a 3PL.
Fulfilling orders yourself gets more and more expensive as your company expands. These expenses include warehousing space, forklifts and other equipment, warehouse management software (WMS), recruiting and labor costs, workers compensation insurance, and liability insurance.
You save time and resources by outsourcing fulfillment duties to a 3PL. Working with a third party logistics instead of packing boxes, waiting in line at the post office, or setting up fulfillment infrastructure allows you to focus on more essential tasks such as product development and marketing.
2. Leverage industry expertise
As an ecommerce expert, you probably don’t have the time to master all of the intricacies of shipping and logistics. That’s where a 3PL comes in: your 3PL will be informed and up-to-date with current industry trends and challenges, so you won’t have to worry about it.
The 3PL may also have the technological assets and partner network – including marketing agencies, custom packaging providers, and more – to constantly enhance supply chain efficiency and make supply chain improvements so that ecommerce success is achieved.
3. Expand your reach
If you limit your business’s potential by limiting its geographic scope, you’re being short-sighted. Working with a 3PL may help you expand your presence across borders.
Because it firms have a large network of fulfillment centers, in-house fulfillment may be lacking. It with fulfillment centers in major US cities throughout the country can assist you reduce the cost of shipping and transit time for purchases.
When you have orders to send out from a single location, it may lead to higher delivery costs for items that travel across several shipping zones.