Business is thriving and customer orders are surging — but your warehouse can’t keep pace. Shelves are disorganized and inventory management feels like a never-ending puzzle.
If this situation sounds familiar, you’re not the first business to experience it. Many successful companies encounter logistical issues, whether they’re scaling operations or hitting a snag in their existing workflow. Balancing efficiency and cost-effectiveness is overwhelming.
This is where third-party logistics (3PL) providers come into play. They take on operational tasks so you can focus on other parts of the business.
Whether you’re a budding eCommerce store or an established enterprise, here’s how to decide if a 3PL warehouse is the right strategic solution.
What is a 3PL?
A 3PL provider is an outsourced partner that handles a business’s warehousing and inventory logistics. Providers streamline all logistical tasks to ensure efficient order fulfillment, boosting customer satisfaction and driving business growth.
A 3PL becomes an extension of your team when you gain access to the 3PL’s expertise, technology, and resources. This leads to quicker scaling, smoother operations, and lower costs.
Most 3PLs offer a wide range of services, including:
- Warehousing and distribution: They offer 3PL storage for inventory and give it a strategic location for efficient distribution.
- Order fulfillment: 3PL providers pick, pack, and ship orders so customers get their goods on time.
- Inventory management: These companies collect data to track stock levels, forecast demand, and optimize inventory. This information prevents stockouts and excess inventory costs.
- Transportation and freight management: 3PLs negotiate with carriers and optimize transportation routes to reduce costs and transit times.
3PL versus 4PL: Understanding the difference
Think of a 4PL as a heightened version of a 3PL. It does much of the same work, but takes on more responsibility and accountability, often managing strategy and operations.
If you need a partner to handle the day-to-day logistics tasks, a 3PL is the way to go. But if you’re looking for a strategic advisor to optimize the entire supply chain, a 4PL might be a better fit.
Here’s a deeper look at each organization’s role.
3PLs: Hands-on logistics experts
3PLs are the operational experts in the logistics world. They own and manage warehouses, transportation fleets, and other physical assets so you don’t have to. They store products safely and ensure fast and effective shipping and fulfillment.
4PLs: Strategic supply chain orchestrators
4PLs operate at a higher level. They don’t typically own physical assets like warehouses or trucks. Instead, they work with 3PLs, acting as consultants and orchestrators to design and manage the supply chain strategy. Their key responsibilities include:
- Supply chain design and optimization: When you hire a 4PL, it analyzes the existing supply chain, identifies inefficiencies, and develops a comprehensive plan to improve performance and reduce costs.
- Technology integration: A 4PL implements and manages advanced software to streamline operations and gain real-time visibility for constant improvement.
- Partner management: Coordinating multiple 3PLs takes constant attention. 4PLs handle this work for seamless integration and optimal performance.
- Performance measurement and reporting: 4PLs set and track key performance indicators (KPIs) and monitor supply chain health.
Essential 3PL services: The supply chain toolbox
3PLs don’t offer the same hands-off services as 4PLs, so they’re ideal if you prefer more control over the supply chain. You can still streamline operations, reduce costs, and delight customers — just with fewer resources devoted to warehousing tasks.
Let’s take a closer look at some of the most essential services 3PLs offer.
1. Inventory management
3PLs use advanced inventory management systems (IMS) to provide visibility into stock levels, avoiding costly stockouts and overstocks. They also forecast demand and make sure products are available in the right place at the right time.
2. Advanced analytics
Data is the fuel that powers modern supply chains. 3PLs leverage sophisticated analytics tools to provide actionable insights into operations. These insights identify bottlenecks, optimize inventory levels, and make data-driven decisions to improve performance across the company.
3. Distributed inventory
3PLs manage a network of strategically located warehouses, creating a flexible and responsive supply chain. This lets them quickly adapt to fluctuations in demand, ensuring products are always available to customers, no matter where those customers are in the world.
4. Kitting and assembly
3PLs facilitate picking and packing, and that includes kitting individual items or components into single units. Kits encourage more sales by offering convenience and lower prices for items that might not otherwise fly off the shelves. 3PLs use data to identify kitting opportunities and complete the technical work needed to get them ready for sale.
5. Fast shipping
Customers value convenience and speed, and slow shipping could deter them from purchasing your products again. 3PLs partner with various carriers to offer a range of fast shipping options, including expedited and same-day delivery. And speed isn’t the only thing 3PLs offer — they optimize shipping routes and leverage their expertise to streamline the entire delivery process.
6. International fulfillment
For businesses expanding globally, 3PLs have the expertise and network to navigate the intricacies of international shipping, from customs clearance to duties and taxes. This allows for smoother cross-border transactions and minimizes potential disruptions.
The 3PL order fulfillment process: From click to delivery
When a customer places an order, a well-choreographed process ensures their purchase arrives promptly and accurately. Here’s a breakdown of the typical 3PL order fulfillment process.
1. Receiving and inspection
Products arrive at the 3PL warehouse from suppliers and manufacturers, where workers inspect them for quality. This step checks that only products in pristine condition are in stock. For example, a 3PL might assess incoming shipments of wooden toys for any dents or defects before storing them. They’re able to reconcile shipments that have discrepancies with their purchase orders.
2. 3PL warehousing
The 3PL stores the inventory in its warehouse. Advanced warehouse management systems (WMS) track each item’s location, making it easy to locate and retrieve products when orders come in. For instance, a WMS might use barcodes to track product movement and note when stock is running low.
3. Order processing
When a customer places an order, the 3PL’s system receives the information and triggers the fulfillment process. It verifies the order details and allocates the necessary inventory.
4. Picking and packing
Skilled warehouse personnel locate the items in the order and carefully pick them from the shelves, often using technology like barcode scanners and pick-to-light systems to streamline the process. Then they pack items securely, using appropriate packaging materials to protect the goods during transit.
Imagine a 3PL fulfilling an order for a kitchen goods retailer. The picker would retrieve the correct size and number of plates from the warehouse, pack them in a suitable box, and add dunnage to prevent damage during shipping.
5. Shipping and delivery
The 3PL works with various carriers to optimize shipping, finding the best services at the lowest costs based on the destination and delivery speed. For example, a 3PL might choose a ground shipping service for a domestic order with standard delivery while opting for an expedited air service for an international order with express delivery.
6. Tracking and visibility
Some 3PLs and shipping methods let customers track their order statuses in real time. This provides transparency, trust, and peace of mind because they know exactly where the package is and when to expect it.
7. Returns management
In the event of a return, the 3PL handles the entire process — from receiving the returned item to processing refunds or exchanges. This is also known as reverse logistics.
For instance, if a customer returns a pair of shoes to a 3PL, the 3PL would inspect the box and the item itself, issue a refund to the customer for you, and either restock the shoes if they’re in good condition or dispose of or repair them if they’re damaged.
Who benefits most from 3PL services?
Partnering with 3PLs is an attractive option for businesses across the spectrum. While anyone can reap these rewards, certain types of companies are particularly well-suited to partner with a 3PL:
- High-growth businesses: If your business is experiencing rapid growth, a 3PL helps scale logistics operations quickly and efficiently. Meet increasing demand without sacrificing quality or customer service.
- Seasonal businesses: For businesses with fluctuating demand, a 3PL offers the time and resources needed to adapt to peak seasons and slower periods — flexibility you may not have without a 3PL.
- Small to mid-sized businesses (SMBs): 3PLs level the playing field for SMBs, providing you access to enterprise-level logistics that would otherwise be out of reach. This lets you compete with larger players and offer customers fast, reliable shipping options.
Get started with Fishbowl
Are you tired of struggling to manage inventory? Fishbowl’s IMS is here to empower your business.
Fishbowl’s powerful software streamlines warehouse operations, providing effortless inventory tracking, order management, and fulfillment. By automating manual processes and offering real-time visibility into inventory levels, Fishbowl minimizes errors and frees up valuable time and resources.
Don’t let logistics hold your business back. Unlock your full potential with Fishbowl’s comprehensive inventory management solution. Get started today and experience the difference.
