When a company lacks the resources to manage all of its operations internally, it often turns to third-party providers to boost productivity. This is especially common for businesses that don’t have the manpower, space, or capacity to oversee critical functions like labor, warehousing, and inventory management.
As supply chains become more complex and customer expectations rise, more businesses are turning to third-party logistics partners to streamline operations.
What Is Third-Party Logistics (3PL)?
A third-party logistics (3PL) company provides businesses with logistics services. Often referred to as fulfillment warehouses or fulfillment centers, 3PL providers like Smart Warehousing offers a variety of services such as:
- Warehousing
- Order Fulfillment
- Ecommerce Fulfillment
- Retail Fulfillment
- Cold Chain Logistics
- Inventory Replenishment
- Transportation
- Technology
- Integration
When you work with a 3PL company, you are outsourcing your logistics processes, eliminating the need to have an in-house logistics department or procedure. Third-party logistics companies can handle all or just parts of the logistics process for their clients.
What Is Fourth-Party Logistics (4PL)?
A fourth-party logistics (4PL) company) does not manage the physical logistics of a business. Instead, they are hired to control and manage all supply chain processes for businesses using a third-party logistics company. This partner will help with every step in the supply chain, including assessing, designing, building, running, and measuring solutions for their clients. A 4PL will oversee the warehouses, shipping companies, freight, and agents.
Basics of Third-Party Logistics
Most third-party logistics companies own or lease warehouse space that they use for clients’ needs. Your business essentially rents pallet positions in the 3PL’s warehouse, where they manage your inventory, pack your orders, and handle shipping on your behalf.
3PL companies also contract (or in some rare cases, own) transportation solutions that they provide their clients with for freight and shipping purposes. Third-party logistics companies may work with a variety of carriers to ensure that your orders are delivered to your customers.
With a 3PL, operations are designed to maximize efficiency. Their warehouses can provide scalable, efficient fulfillment services, saving your company from needing to invest the time and resources to manage fulfillment in-house.
In addition to efficiency, a third-party logistics company can also help you reduce shipping costs and expedite delivery times, since they are working with many clients and can get bulk discounts for these services through their carriers.
The 3PL Process
Outsourcing your warehousing and fulfillment to a 3PL means your product will be stored and fulfilled out of their facilities. When your inventory arrives on their inbound dock, the 3PL warehousing process begins.
Integration
Your business likely sells products across multiple channels. This means that your fulfillment warehouse will need to understand and integrate multiple sales platforms or create a custom integration to handle your needs. They should also offer a dashboard that allows you to view orders and track their progress in real-time. For businesses leveraging dropshipping, integration ensures that when a customer places an order, it’s automatically sent along to the supplier, who then ships the product directly to the customer.
Freight Shipping and Receiving
Both full truckload (FTL) and less than truckload (LTL) freight arranged by a 3PL can help you save money on freight costs, especially if you ship large orders to commercial or wholesale customers. These freight services help you ship products between warehouses or get them to a distribution point that is closer to your end customers.
Another value of a 3PL is that they can help guide you along the freight process, helping you find better deals and customer service for your shipping needs.
Inventory Management
A third-party logistics partner can often help improve inventory management, which is a pain point for many companies. By working with a well-designed warehouse management software (WMS), your inventory can be fully managed from all aspects, including restocking levels, supply chain management, and balancing seasonal inventory levels.
Picking, Packing, and Shipping
The core of order fulfillment lies in picking, packing, and shipping goods. Each time a customer places an order online, it goes through to your fulfillment warehouse. At the warehouse, someone picks the items for the order. After the items are located on warehouse shelves, they are brought to a packer, who chooses the right box, packages the order, and applies the shipping label. The shipper then makes sure the order goes out to the right carrier and is on its way to your customers’ doorstep.
Some 3PL providers offer same-day shipping services, which include picking, packing, and shipping orders placed before a designated cutoff time set by the 3PL. This quick turnaround not only meets customer expectations, but also enhances satisfaction by ensuring faster delivery.
Key Benefits of Partnering with a Third-Party Logistics Company
The benefits of third-party logistics include:
- Cost Savings: A full-service 3PL like Smart Warehousing can reduce costs by eliminating the need to invest in your own warehouse space, equipment, technology, and labor. Businesses can also get access to a 3PL’s transportation network where they may receive better shipping rates.
- Advanced Technology: Most 3PLs leverage a warehouse management system (WMS) which provides businesses with a record of their inventory as well as transaction updates. At Smart Warehousing, we provide businesses with our own Smart Warehousing Information Management System (SWIMS) that gives control over inventory insights, order statuses, tracking information, transportation data, and reporting. In addition to SWIMS, we also created Smart Visibility. Smart Visibility is a powerful platform that provides real-time tracking and complete transparency across the supply chain, giving businesses deeper insights into their inventory patterns.
- Scalability & Flexibility: A 3PL enables businesses to scale with ease, adapting quickly to market shifts, seasonal spikes, or unexpected increases in demand. Businesses can rely on their 3PL’s warehouses to flex up or down as needed. This flexibility allows businesses to capitalize on growth opportunities such as expanding into new markets or launching new products. Whatever the needs may be, a 3PL provides the agility to stay competitive.
- Faster Order Fulfillment: Partnering with a 3PL allows businesses to accelerate the entire order fulfillment process. With streamlined systems and workflows, a 3PL can pick, pack, and ship orders faster than most in-house operations. Faster fulfillment can lead to higher customer satisfaction and repeat purchases, which ultimately increases revenue.
Ready to improve your operations with a trusted third-party logistics partner? Connect with our team at Smart Warehousing today to discover how our tailored 3PL solutions can grow your business.
