A guide to Third Party Logistics
Published By: LogiPe on September 15, 2022
What is 3PL?
3PL meaning: 3PL stands for Third Party Logistics.
3PL firms handle the outsourcing of logistics operations of other companies. The steps involved cover many parts of order fulfilment, including warehousing, order confirmation, and shipping. Businesses which prefer to outsource their logistics turn to 3PL service providers, such companies benefit from delegating their logistics work to competent firms.
Caption: Third-party logistics solutions streamline the job of order fulfilment.
Source:Image by katemangostaron Freepik
The growth of 3PL
The rate of adoption of 3PL has been rising among businesses over the last few years and is forecasted to grow even more. Various factors have led to this increase in demand for 3PL.
Companies nowadays seek to focus on their core competencies the most. They benefit by outsourcing services at which they are less efficient. 3PL service providers help them by handling the entire order fulfilment process efficiently.
The rise of e-commerce, especially in the post-pandemic era, has driven the demand for 3PL solutions. More customers have exact delivery requirements, which the company's in-house logistics arm might not be equipped to meet. They choose to turn to 3PL service providers to solve this need of satisfying customers.
Related to e-commerce are fluctuations in supply and demand, which have made companies seek 3PL solutions. Such solutions can reduce a company's concerns about varying supply and demand.
South Asia, including India, has experienced a surge in e-commerce, which naturally has driven the need for 3PL up. We see their usage increasing and diversifying over the next few years.
The benefits of 3PL
We have seen companies’ growing need to use third-party logistics services in today's economy. Here we discuss some benefits of using a 3PL service provider.
Companies employing a third-party logistics service provider do not have to invest separately in the infrastructure needed for order fulfilment. As a result, the companies can invest better in fields which benefit their growth directly. 3PL service providers bring a range of skills in negotiation, warehousing and transport to the table. In addition to that, they have prior connections in the market, helping them minimise unnecessary expenses. All these factors lead to increased savings for the company choosing 3PL services.
As we have seen, 3PL service providers have a dedicated skillset that lets them provide competence in order fulfilment. Their in-depth knowledge of industry best practices and prior experience in dealing with logistics gives them an edge. The service providers are adept at dealing with requisite paperwork, compliance and other regulations. 3PL service providers are also skilled in dealing with possible risks while on dispatch. A company's in-house logistics service will not have the same level of expertise, and hence it is preferred to delegate to a 3PL service provider.
Focus on core competencies
Any company benefits from prioritising its core competencies. Doing so enables it to build its reputation and brand image while achieving high standards in its field. Logistics, however, is not necessarily a company's core competency. In such a situation, they can outsource the role of order fulfilment to a competent third-party logistics service provider, letting the company focus on their specialisation.
The cycles of demand and supply are often varying. A company facing uncertainty in these aspects will have difficulty committing resources to an in-house logistics solution. Additionally, a company in its initial stages will naturally be wary of diverting many resources to the possibility of scaling up. 3PL reduces the pressure on the company by providing an external, flexible method of dealing with order fulfilment. The 3PL service provider allows the company to scale up and down as demand dictates.
Choosing a 3PL allows the company to expand into new markets with minimal friction. The third-party logistics service provider will be more familiar with the nuances of the new market. The company will not have to invest separately in research into the said market.
Providing efficient order fulfilment is a crucial feature of 3PL service providers. They are best equipped to handle customer needs, including fast delivery, order tracking and flexible timings. A company hiring a 3PL service provider improves its brand image when the 3PL service provider executes order fulfilment well.
Further, 3PL services offer a more comprehensive range of payment options and delivery choices than a company can provide by itself. The increased variety helps usher in a more extensive customer base and earn larger rewards.
Order fulfilment process
The entire order fulfilment process can be divided into multiple parts, which we examine below.
Receiving and inventory management
The business hiring the 3PL has to ensure that goods are provided in adequate quantities to the latter. These goods are stored securely in the warehouses of the 3PL service provider, ready for dispatch. Keeping track of every unit is an essential part of inventory management. If required, the items are redistributed to other locations to simplify transit.
The next stage is picking. When an order is placed and confirmed at the business' end, usually on an online store, the details are sent to the 3PL service provider. There, the item is carefully picked, and the details are updated on the online store's stock.
Packing and weighing
Once the item is picked, it is packed with care to ensure its safety. The 3PL provides that the goods are also appropriately weighed before dispatch.
Once the warehouse details are sorted, the 3PL arranges for the dispatch. The 3PL usually partners with a freight carrier for discounts. The 3PL also ensures delivery specifics such as time and speed are taken care of.
The 3PL service shares the location and status of the dispatched order with the e-commerce firm and the customer. This way, there is real-time information and updates regarding the situation.
The customer may need to return the product ordered. Handling returns efficiently is an equally important facet for any business. Third-party logistics services ensure the return happens smoothly and the inventory is appropriately updated.
3PL services can increase the scope and range of a business significantly. They help outsource order fulfilment operations and improve a company's brand value. As customer needs evolve and grow, it makes economic sense for a business to invest in a competent 3PL service provider.
We, at LogiPe, can help streamline the flow of payments to your logistics firm. This can help increase efficiency and manage expenses much better. Visit our site to learn how we can assist you in the process of being a well-run logistics firm!