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What Is Third Party Logistics

Youre Shipping Over 100 Orders Per Month

3PL – Third Party Logistics Explained

While theres no magic number, if your order volume has increased and you cant keep up, its time to outsource to shippers. Its at the point when youre asking friends and family members to help you pack boxes or youre staying up into the late hours of the night just to meet demand.

This is a problem because youre swamped by low-dollar activities that dont generate revenue, and its holding you back from achieving growth. And as you continue to grow, you will spend more time on fulfillment and less time running your business

Every hour you spend reacting to new orders that come in packing items, printing labels, driving to the post office, waiting in line, and so on youre missing the opportunity to acquire more customers, develop new products, and launch marketing campaigns.

Reduce Your Overhead Costs

Relying on a 3PL means you get the benefits of skilled warehouse staff, as well as warehouse automation technology, without investing cash into developing your own. Robotic machinery to pick and pack orders, for example, means human staff dont need to be on-hand to fulfill orders. The machinery works 24/7, so retailers can benefit from later order cut-offs for immediate shipping. Ocado Retail even overhauled its entire warehouse to be completely automated.

The other area of potential cost savings is carrier rates. Since 3PLs are able to negotiate preferred shipping rates, the cost of shipping is typically lower. And those savings, in turn, can be passed on to consumers by offering them free shipping.

Free Up Capital Thats Tied Up In Warehouse Spaces

If youre investing in your own warehouses and distribution centers, costs arent set to decrease any time soon. Warehousing rents are predicted to increase by 10% over the next 12 months and a shortfall of 140 million square footage of warehouse space expected by 2024 is bound to bump up the price of storage facilities.

In contrast, 3PLs have strongholds over their storage premises, and higher order values from their retail partners gives them grounds to keep their warehouse space. As soon as you let your own warehouse space go, youll have more capital to direct toward return-generating endeavors.

Working with a 3PL allows for distributed inventory, with the ability to scale up or down without being tied to a lease.

Kristina Lopienski, Director of Marketing Communications at ShipBob.

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Dtc And B2b Fulfillment

When we talk of e-commerce, we mainly refer to B2C fulfillment. However, an e-commerce business looking to optimize its multichannel logistics strategy can make things easier by partnering with a 3PL that handles B2B and DTC fulfillment as well. So, whether you are fulfilling online subscription orders, operating a brick-and-mortar store, or selling retail on an online marketplace, a 3PL can serve as your back-end logistics hub, centralizing multichannel inventory management and fulfillment.

Get Access To Expertise And Experience

3PL means

In todays complex global market scenario, it is tough to anticipate and accommodate internal expertise in all the capacities and regions required. A 3PL service provider has knowledge and experience in matters such as transport documentation, import and export, international compliance and economic regulations, for instance. Businesses looking to expand into international markets can benefit from the logistics support and know-how that their partner can provide, thereby reducing costly delays, cutting down the cycle time, and making the entry into a new region smoother.

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The 3pl Order Fulfillment Process

If youre considering working with a 3PL company or are new to outsourcing shipping, what goes on in a 3PL fulfillment center may seem like a black box.

But the 3PL fulfillment process doesnt have to be a mystery, nor should it be!

So what exactly happens at a 3PLs ecommerce warehouse once a customer clicks Submit order on your online store? Lets explore the entire process from start to finish.

How To Choose The Best 3pl Company

Partnering with a 3PL company may seem like a no-brainer by now it can help your business save time and money, freeing up resources to focus instead on product development, marketing, and business growth.

However, when it comes to choosing a 3PL company to handle your online stores order fulfillment, the options can seem endless.

Its important to find a fulfillment company that you trust to handle your inventory, provide a positive customer experience, maintain high customer satisfaction, and ultimately help you grow your business.

I felt like I couldnt grow until I moved to ShipBob. Our old 3PL was slowing us down. Now I am encouraged to sell more with them. My CPA even said to me, thank god you switched to ShipBob.

Courtney Lee, founder of Prymal

Here are three paramount questions to ask a potential third-party fulfillment provider to make sure you find a partner that is a great fit for your business.

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Consider What Services You Need From Your 3pl Partner

Its a good idea to determine what youll be needing a 3PL partner for before working with one. Do you need them for just one service or a comprehensive service? Try to determine what exactly you need a 3PL partner and how it will help your business. Once you figure this out, you can make inquiries based on your needed service. For example, if the main service you need is warehouse management, ensure you work with a 3PL partner that can offer it.

Nering With A 3pl Can Change Your Business For The Better

What is a 3PL? Third Party Logistics Explained

Whether youre partnering with a 3PL for the first time or decreasing the reliance you already have on one, the process is tough. Ecommerce brands cant control the destiny of each of their business partners. But what you can control is the due diligence you conduct before selecting a 3PL.

Be ultra-thorough in your appraisal of potential partners. The right third-party logistics companies can change your business for the betternot just by taking the headache out of storing and delivering orders, but in the speedy delivery times you can promise to customers.

The Shopify Fulfillment Network can help high-volume businesses fulfill quickly and affordably

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How Does 3pl Work

Connecting and setting up your business should be a breeze depending on the logistics service provider. At GEODIS eLogistics, for example, we have a three-step process, which includes:

  • Connect your eCommerce Store: With eLogistics, there are no integration or setup fees. Once connected, we direct our partners to send their inventory to place their products in the most accessible locations.
  • Access to Our Visibility Portal: After receiving your inventory, you get immediate visibility of it in our proprietary visibility portal. Everything you need is right at your fingertips.
  • Fulfillment Bliss: whatever the service, you can follow along. The Visibility Portal allows you to see how we pick, pack, and ship products every step of the way. Peace of mind.
  • There Is An Upfront Investment

    There can be significant upfront costs when setting up with a 3PL provider, like integrating their software with your ecommerce store, SKU upload, and account access. Costs will normally be broken into the following categories:

    • Transportation costs: Shipping products from your factory to your warehouse.
    • Receiving costs: Offloading products from your transportation provider to their warehouse.
    • Warehousing fees: Usually a monthly fee based on the amount of space used and charged per pallet.
    • Pick-and-pack fees: Picking units from shelves or bins and packing them for shipment and discounted for higher volumes.
    • Shipping costs: Delivery of product to your end customer.
    • Account set-up fees: Account creation and software integration.
    • Minimums: Minimum monthly spend is generally required.

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    Why Is 3pl Important & When Should You Use It

    3PL companies can offer comprehensive logistics solutions for your company. You can use 3PL to expand your customer base, venture into new markets, and create positive consumer experiences. 3PL can be used by big and small businesses looking for external support and expertise to run their supply chain more efficiently and gain competitive advantage.

    How Much Does Third Party Logistics Cost

    3PL Definition &  How Third Party Logistics Companies Work

    The exact cost of a third party logistics provide depends on your requirements, the contract between the client and the third-party service provider, and to an extent on the third party service provider selected. It also depends on the industry you operate in, and the specific type of transportation required.

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    What Are The Core Competencies 3pls Provide

    If you are new to the idea of outsourcing and managing a 3PL, it may seem like a daunting and expensive process, but it doesnt have to be, and it certainly shouldnt. It also might feel strange relinquishing control of the fulfillment process to an outside company. But by working with a 3PL, you can leave all the operational details to them, freeing you up to focus more on other aspects of your supply chain and your core business goals.

    The topics below illustrate what a typical 3PL might handle for a seller from a fulfillment perspective, as well as some value added benefits that not every 3PL offers.

    Outsourcing Works Only For High

    Outsourcing is beneficial regardless of whether your business is small or big. Small businesses particularly face seasonal spikes in demand and order volume that can become unmanageable in terms of timely deliveries. Partnering with a 3PL ensures that a business is ready to scale without losing market credibility or increasing fixed costs.

    Debunking some of the myths about 3PL partnerships can go a long way in helping companies achieve their goals of exceptional service, improved customer satisfaction, time and cost savings, and better profit margins.

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    What About 2pl And 5pl

    A 2PL is an asset-based carrier that is responsible for the method of transportation. Examples of 2PLs include shipping lines which operate the ships, airlines that operate the planes and hauling companies that operate vehicles. A 2PL is often referred to as a forwarder because their business mainly consists of a means of transportation. For instance, it could be an airline company that also offers freight services to get things from you to your customer. 5PL is a relatively new term in the logistics industry and reflects the development of full logistic integration through many outsourced providers. 5PL involves a fully integrated logistics solution to encompass the whole supply chain from beginning to end through multiple outsourced service providers. Critical to success in achieving this is the effective integration of IT and computer systems to ensure real-time visibility and control of the entire supply chain no matter how many different suppliers are involved.

    Third Party Logistics Basics

    How to Work With a 3PL (Third Party Logistics)

    Third-party logistics providers manage inbound and outbound transportation for their clients, as well as warehousing. Most 3PL companies own or lease warehouse space, which they provide to their clients. They generally dont own their own fleet of trucks but contract with other carriers for freight and shipping.

    Third-party refers to the fact that youre outsourcing your order fulfillment. You dont own the warehouse. Instead, you rent shelf space for your products in a large warehouse that stores products for multiple companies. Warehouse employees receive your products and place them into inventory. They pick items from shelves to fill orders and pack them securely for shipping. The 3PL works with various carriers to deliver orders to your clients.

    Third-party logistics warehouses are designed to maximize speed and efficiency. As your business grows, they can handle the extra volume and you can expand your capacity without hiring additional staff. A 3PL can work with you on ways to reduce your shipping costs and delivery times. When you use a 3PL company for your eCommerce fulfillment, you get the benefit of experience and focus.

    Lets delve into the specifics of how outsourced fulfillment works with your business.

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    Focus On Your Core Business

    Your primary focus should always be your product, and your business. What if you could actually focus solely on that?

    A 3PL focuses on taking your product and taking care of fulfillment. The best choices are typically turnkey solutions that are also single source suppliers.

    While your focus might be management, developing new products, marketing, or growing your brand in general a 3PLs focus is to develop better and faster assembly lines to give you the best solution, reliable results, and consistent quality.

    Imagine spending your time only on your business. Improving sales, marketshare, efficiencies, and knowing that you had a partner who was helping you achieve all of that extremely efficiently.

    Lack Of Inventory Storage Space

    If you are running out of inventory storage space, it is time that you outsource fulfillment to a 3PL warehouse. Businesses that manage fulfillment in-house especially face storage space constraints. By outsourcing inventory warehousing and order fulfillment to a third-party logistics provider, businesses can stay organized, handle inventory more efficiently, and expand product lines without worrying about storage space limitations.

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    When You Hand Things Over To A 3pl You Lose Control

    Its true that inventory stored in a 3PLs warehouse wont be immediately accessible to you, which may feel disconcerting at first.

    But working with a 3PL actually allows you to regain control. When the pressure of shipping and fulfillment is taken off your plate and handed over to the experts, mistakes are less likely to occur. A good 3PL should also be able to provide reports and analytics, which lets you manage the process remotely and help you make better business decisions in the future.

    The 1990s: Going Global

    3PL Definition &  How Third Party Logistics Companies Work

    The logistics management industry really started to take off in the 1990s as a result of the demand for these services in emerging economies. Countries like India and China that had opened their economies for global businesses began attracting the interest of companies looking to take advantage of cheap labor and local resources.

    As a result, the demand for companies capable of streamlining complex supply chain processes skyrocketed both domestically and globally. The increase in the number of companies providing third-party logistics services led to some companies specializing in niche markets like frozen food products and construction industries offering vehicles and facilities capable of handling the purchasing of a companys specific needs.

    Third-party logistics companies helped businesses penetrate international and domestic markets that could not have been otherwise economically viable.

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    Where Are Their 3pl Fulfillment Centers Located

    When it comes to considering a 3PLs location, we arent just talking about where their headquarters or offices are. You also need to know how many fulfillment centers the 3PL owns and operates, as well as where each one is located.

    This information will help determine if you can offer the fastest delivery and most affordable 3PL shipping options to your customers. As mentioned above, the number and location of 3PL warehouses can help inform your shipping strategy, including distributed inventory and two-day shipping.

    Can You Manage Orders In

    As your business grows or you experience unexpected seasonal fluctuations, how will you handle the rising costs of staff and facilities? Can you keep your shipping costs low if you ship nationally?

    Partnering with a third-party logistics provider allows you to increase your inventory storage options during times of increased demand and cut back on inventory when sales are lower. This eliminates the necessity of paying and managing an entire warehouse yourself that may sit half-empty at certain times of the year.

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    Why To Use Third Party Logistic Services

    It could be to expand customer base, venture into new markets, or create positive consumer experiences, but more and more businesses big and small are looking for external support and expertise to run their supply chain more efficiently and gain competitive advantage. And thats where a third-party logistics provider comes in.

    Ask About Omnichannel Fulfillment Integration

    What is a 3PL? Intro to Third-Party Logistics

    Make sure that the 3PL you choose can talk to all your eCommerce platforms. Ask about existing integrations and custom APIs.

    These are just a few of the questions you probably want to ask prospective order fulfillment warehouses. To help you gather all the information you need, weve created a fulfillment company questionnaire. The questionnaire includes a comprehensive list of topics to help you cover all the bases.

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    The 1980s: How It All Began

    The deregulation of the trucking industry via the Motor Carrier Act of 1980 resulted in an increase in the number of trucking carriers in the United States. Companies that used to provide warehousing services exclusively started to expand their footprint in the whole supply chain and emerged as freight movers.

    The rise in the number of companies providing both storage and transport services and the advent of information technology created space for third-party logistics companies. These companies essentially took the heavy lifting out of supply chain management from manufacturing businesses.

    The increase in the number of companies using third-party logistics services correlates directly with the rise in the number of trucking carriers. The number of trucking carriers that used to be just 20,000 in 1980 has meteorically ballooned to 1.2 million today.

    Pl Pros Cons Use Cases

    As a business expands and delivers more services and products in new markets to more customers, there comes a time when it must determine whether to outsource its shipping and fulfillment operations.

    To meet customer demand, many of these businesses turn to a third-party logistics provider to do just that.

    But not all 3PLs offer the same services and capabilities. Read on to learn everything you need to know about using third-party logistics providers and the critical business functions they support.

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