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The success of every business, large or small, is driven by customer satisfaction and an efficient logistics and supply chain system is key to nurture customer growth. While a robust delivery system may be the core of many business operations, many a times managing the supply chain gets difficult and expensive due to which the reputation of the company gets damaged. This is where a third-party logistics or 3PL services come into play wherein companies outsource their fulfillment and logistics requirements to a third-party logistics company.
Since the pandemic, online sales and demand for faster delivery at competitive prices have increased the surge of third-party services like never before. The market for 3PLs providers has grown exponentially with more than 86% Fortune 500 companies using these services. Evolving technologies like the Internet of Things (IoT), radio frequency identification (RFID) and Global Positioning System (GPS) have further helped to improve 3PL services.
On that note, let us take a closer look at third-party logistics meaning, and the role they play in eCommerce and the overall logistics-supply chain framework.
What is 3PL?
3PL stands for is third-party logistics, and it refers to services that offer supply chain and logistics operations such as warehousing, packaging, transportation, and order fulfillment to businesses. In other words, many organisations instead of using their own fulfilment services, outsource them to 3PL service providers. Depending on scale, a 3PL service could be a single provider covering only transportation or can be a systemwide package of services encompassing the entire 3PL supply chain management.
Additionally, 3PL warehouses handle inventory of multiple businesses in addition of their own. Such providers are called hybrid 3PL. It may be noted that private warehouses, usually owned by manufacturers or retailers, catering to the fulfilment of their own products are not considered as 3PLs. Again, 3PL companies also provide other value-added services like inventory management, procurement, postponement packaging and others.
Most 3PLs have fulfillment specialties pertaining to a specific industry. Some common sectors include:
- Raw materials
- Bulk goods
What is the fundamental idea behind 3PL?
The main thrust in 3PL is management of your inbound and outbound transportation as well as warehousing.
In most cases, these service providers lease or own warehouses and collaborate with other carriers for cargo and shipping. When you avail third-party logistics, you would be outsourcing your order fulfillment. While you would not be owning the warehouse, you would be renting shelf space for your goods where it will be placed in inventory and maintained. When an order is received, your products will be picked from shelves, packed securely, and shipped through various carriers to reach your clients.
Third party logistics in supply chain management, therefore, helps to maximise speed and efficiency of your supply chain management. It enables you to cope the increased volume as you expand your business without having to hire additional staff. Most importantly, a 3PL can help you to reduce shipping costs and delivery timelines.
Reasons to hire a 3PL service
• Regulatory navigation
• Industry expertise
What are the responsibilities of a 3PL?
3PL services contribute substantially to the supply chain management of any business operations. Some of the important responsibilities taken up by 3PL include:
- Schedule and receive inventory at the warehouse
- Sort and manage inventory
- Maintenance of inventory in proper conditions
- Negotiate for best shipping rates
- Pick, pack, and ship products as well as assemble if necessary
- Manage repeated subscription boxes
What are the elements of the 3PL process?
While there are a range of services that a third-party logistics provide, here are a few common elements of the 3PL process.
- FTL and LTL freight shipping: In shipping, Full Truck Load (FTL) is used for large shipments that utilizes the entire truck for transportation. In FLT your shipment is the only freight moving to the destination. On the other hand, in Partial Truck Load (PTL) several smaller shipments from different businesses fill one truckload. Both FLT and LTL are important in logistics and give you the option to choose how to transport freight between the warehouse to your delivery center as per your requirement. There are several outsourced third-party logistics companies in the market who can guide you through this process and arrange for FTL or LTL loads.
For instance, with nexLogistics MSMEs and emerging businesses can find reliable logistics partners to transport goods at affordable prices across 19,000+ PIN codes across India.
- eCommerce platform integration: In order to facilitate omnichannel selling, 3PL service providers uses technology to enable integration of multiple sales platforms. This in turn will help you to view and track the status of your orders in real time online through a common dashboard.
- Inventory management: 3PL companies also has expertise in inventory management and helps you manage your stock and offer advice on restocking levels, supply chain management, and standard seasonal inventory levels.
- Picking, packing, and shipping: This forms the core of eCommerce fulfillment. In this process, once the customer places an order through any of the sales channel, it reaches the fulfillment warehouse where the concerned person identifies the order, packs it in suitable boxes and duly labels it. The order then gets picked up by the career for delivery.
- Same-day shipping: Another option that 3PL offers is same-day shipping where the order is picked, packed and shipped within the same day when the order is placed. While same day deliveries enable faster delivery of goods to customers, there is usually a cut off time to place the order.
- Reverse logistics: Return pickup from customers or reverse logistics is another facility offered by 3PL services. This involves checking returned items for damage and returning the undamaged items back to shelf for purchase again.
What are the benefits of third-party logistics?
Third party logistics, or 3PL as a service can provide your business with several benefits. It takes care of the entire supply chain journey and allows you to focus on other aspects of your business. Listed below are some of the benefits of 3PL:
- Cost reduction: Since 3PL companies work with careers for multiple clients and ship in bulk, they are able to leverage better shipping rates than you can do at an individual level. Again, when you utilise a 3PL service for your logistical issues, it gives you the flexibility to focus on other crucial areas of the business.
- Create better customer experience: With more and more logistics companies promoting same day deliveries, customers these days demand faster deliveries. A 3PL delivery allows you to cater to this demand and offer faster delivery through its efficient and established distribution network.
- Risk mitigation: Logistics delays due to unforeseen circumstances are not uncommon. However, if you have outsourced your logistics to a 3PL service provider, it is their responsibility to find alternatives and solutions. Moreover, 3PL services are also insured against damage or loss of your goods.
- Receive expert advice: Managing logistic operations can be complicated for emerging businesses. Therefore, outsourcing this work to a 3PL expert would provide you with the essential expertise that these providers possess, and you can concentrate on other deliverables.
- Easier reverse logistics: Another area where third -party logistics can benefit you is in reverse logistics where they provide customer service as well as a seamless return experience. This not just facilitate better customer experience but also helps you to put back your products back into the inventory.
Benefits that 3PL offers to MSMEs
• Flexibility to pay for what you use
• Advanced reporting and analytics
• Availability for value added service
• Single point logistics solution
Closing thoughts: How to find the right 3PL service?
When you decide to go for a third-party logistics partner to work with, it is essential to find the right fit. Identify one that has the capacity to fulfill all your requirements.
You will also need to check on prices, value-added services (e.g., 3PL warehouses), reviews and ratings, technology used, and other details before finalising a 3PL provider for your business.
It is also recommended to collaborate with 2-3 different third-party logistics partners. This will give you the option to have backups and identify partners who offer efficient services.
Alternatively, you can explore logistics services on Tata nexarc’ nexLogistics. You can find doorstep pick-up and delivery services offered by trusted partners for your logistics needs.