A 3pl or third party logistics offers a full suite of logistical services that you can rely on to support and fulfil certain parts of your business e.g. Transportation, Warehousing and Storage, Order Fulfilment (Picking and Packing), Inventory Forecasting, Freight Forwarding, and Reverse Logistics.
Are you a start-up or a relatively new business? Or grown large enough and looking for an easy way to scale your business to accommodate for more demand and orders? You will want to have a good understanding of what a third party logistics (3pl) company does to see how it can benefit your business.
So what exactly is a 3pl?
A 3pl or third party logistics offers a full suite of logistical services that you can rely on to support and fulfil certain parts of your business e.g. Transportation, Warehousing and Storage, Order Fulfilment (Picking and Packing), Inventory Forecasting, Freight Forwarding, and Reverse Logistics. With such a large range of services, the great thing about 3PLs is that they’ll be able to meet your specific needs and it’s up to you to decide how much you want them to help. 3PLs work with you to provide the perfect solution for your logistical needs that help create value in ways that enhance your operational and financial performance.
The differences among 2pl vs 3pl vs 4pl.
So what’s the difference between a 3PL and a 4PL and 2PL? First let’s take a look at the definitions of each service.
A 2PL or second-party logistics provider offers services to handle the transportation component of the business’s supply chain and is basically responsible for getting the company’s good from point A to point B. An example of a 2PL is Couriers Please, a courier and freight delivery service within Australia. Although 2PLs offer a specialised solution, they are typically do not offer a full logistics solution like 3PLs.
A 4PL service provider essentially takes 3PL a step further by managing the resources, technology, infrastructure and sometimes even external 3PLs to design a supply chain solution for your business. 4PLs usually encompass the services that 3PLs provide but also act as a consultant role to design your business functions for you. An example of a 4PL provider is Deloitte, which offers supply chain consultancy. While a 4PL more focuses on the designs of the design and execution of the business processes, they may collaborate with 3PLs, warehouses and asset-based carriers to provide the services needed in the supply chain solution.
What are the different fulfilment models that I can use for my business?
There are many different models that businesses can use to complete the fulfilment of customer orders. The following three are some of the most common ones found.
In house fulfilment
In house fulfilment occurs when the merchant completes each step of the fulfilment process internally, without the help of a drop shipper or third-party logistics provider. This model is usually common for newer merchants that are just starting to manage their own inventory and pack orders at home. Although in-house fulfilment allows the merchant to have complete control of their logistics processes, it takes up a lot of time that could be otherwise be spent on other business functions such as acquiring more customers and developing new products.
Third party fulfilment
3Rd party fulfilment is when a merchant hands the responsibility of their logistical needs to a 3rd party. Some examples where this may be required is when the merchant runs out of space and needs to hire more people, spends too much time packing boxes, or needs more time for other strategic processes. 3rd party services may be either 2PL, 3PL or 4PLs but they all offer convenience and professionality for the business owner as they have been in the business for many years. However, it is important that you do your own due diligence as in the end, the 3rd party has the ability to raise or lower your customer satisfaction levels.
Drop shipping at a basic level means that merchant never holds the product that the sell from start to finish. Rather, the products are produced, stored and shipped by the manufacturer. When a customer places an order online, the manufacturer dropships the product directly to the customer. However, this means that customers may have to wait to receive orders from all the way from the other side of the world.
Advantages and benefits of using a third party logistics (3pl) provider for ecommerce small business
So what advantages can a 3pl offer you as a small business or start-up?
(1) Save your money
Storage is much cheaper than self-storage companies (such as Kennard’s) and renting warehouses, and you only need to pay for what you use. Using 3pl’s means that your logistical needs are scalable and flexible meaning that you can adjust your service due to your business varies or seasons change.
By optimising your full-service packages (bulk freight, inventory management, order fulfilment, return logistics), you can negotiate a much cheaper prices than as separate your services to different agents as 3pl companies’ partner with many other agents and they usually get better prices than individuals do.
(2) Save time focusing on sales
By outsourcing your logistics, you can be physically free from managing freight bookings, designing delivery routes, organising storage requirements, fulfilling (picking and packing) and ship orders. This time can be spent expanding your business, acquiring more customers, and developing new products.
(3) Delight your customers
Using a 3pl has much faster fulfilment with high accuracy and same day shipping compared to in-house logistics. This allows customers to receive their goods quickly with the help of experienced professionals, leading to a great customer experience.
(4) Offer marketing and product development advices
Some 3pl companies can leverage their experience within the E-commerce field for many years and have varying experience with helping and mentoring small merchants. By using a 3pl, you have access to a point of contact which can help you navigate the challenges of your business by offering advice and inspiration to deal with potential problems.
(5) Easy management and data driven value.
Through 3pl’s integrated systems, E-commerce start-ups can easily manage everything and see the overall picture through analysing the data from 3pls. This allows a huge value-add as business owners can easily manage their stock as well as gain insights about their products and the market.
No matter if you’re a brand new business owner starting your first E-Commerce business, or an experienced business owner that is looking to grow your business, a professional 3pl provider can help you provide a great customer experience while saving your money, time and hassle in your businesses logistics.