What is Third-Party Logistics?
Third-party logistics, also known as 3PL, is a system where an organisation (a third party) provides logistics services to companies in need of inventory management and distribution. The company (client) with no logistics department usually employs the help of the 3PL company. In turn, the 3PL performs parts or all logistics related activities for the client.
Some of the activities carried out by the third-party logistics are:
- Inventory storage
- Inventory management
- Freight forwarding
- Shipping and distribution
- Customs clearance/declaration
- Packaging and warehousing
- And more (depending on arrangement)
To enhance the activities of 3PL companies, Fourth Party Logistics (4PL) was introduced. The 4PL company controls and manages all supply chain processes of the client.
What is a 3PL Warehouse?
A third-party logistics warehouse, or 3PL for short, is an outsourced business that takes care of a company’s supply chain and logistics operations. Simply put, 3PLs are used for the outsourcing of third-party warehouse and distribution needs for their customer’s inventory and fulfilment.
3PL warehouses manage 3PL stock, hold, and ship the inventory of multiple businesses or other businesses in addition to their own inventory. If they fulfil and store orders for both their own business as well as their clients, they are what’s known as a hybrid 3PL.
Many 3PLs have fulfilment specialties or sub-types denoting a specific vertical or industry. These include, but are not limited to:
- B2B
- Ecommerce
- Retail
- Apparel
- Raw Materials
- Bulk Goods
- Nutraceuticals
- Wines & Spirits
What Are the Responsibilities of a 3PL?
Third-party logistics warehouses take on important supply chain operations to help their customers focus on growing their own businesses. This means everything along the supply chain and includes logistics operations like:
- Scheduling and executing out the receiving of inventory to the warehouse
- Sorting, managing, and accounting for all inventory
- Maintaining inventory in proper conditions
- Negotiating discounted shipping rates
- Picking, packing, and shipping products Kiting and assembling products if necessary
- Managing recurring subscription boxes
What are the benefits of using a 3PL provider?
Using a 3PL provider offers lots of advantages. The biggest is that by handing over these logistics, you can focus on other aspects of your business such as sales, marketing and product development. Outsourcing 3PL leaves you with more time and resources. Here are a few other advantages:
- Cost reduction. 3PLs have more leverage with freight companies than individual shippers do. Working with carriers on behalf of multiple customers, 3PLs can negotiate pricing based on volume and order frequency. Using a 3PL to manage all or part of your supply chain also gives you the freedom to invest in other key areas to grow and develop your business.
- Scale up or down as needed: Most businesses experience fluctuations in demand throughout the year. Using a 3PL allows you to manage peaks and troughs more effectively without having to commit to capital when you don’t need to.
- Provide a better customer experience: Customers expect next-day or same-day shipping as standard. Using a third-party logistics provider allows you to offer fast shipping no matter where the order is being sent, thanks to having access to the 3PL’s wide distribution network.
- Test new markets: With an international 3PL, you have the flexibility to test the waters in new markets without having to commit to any major investments like your own warehousing space or staff.
- Mitigate risk: Shipping delays can and do happen for a number of reasons. When unforeseen circumstances pop up, a 3PL is responsible for making alternate arrangements to fulfil your orders as quickly as possible. You’ll also be protected in the event of damage or loss of goods.
- Gain instant expertise and knowledge in the field. Especially if you’re just starting out, who better to take care of your logistics than a company that specialises in them? Fulfilment, warehousing and shipping come with major challenges of their own, so handing it off to the experts can really make a difference in the way you function – and it leaves you to focus on increasing your overall value to your customers.
- Get a handle on international logistics. If you’re selling internationally, 3PLs can take care of documentation, customs, duties and other issues that come up at the borders that can delay your shipments and result in high costs if not done thoroughly. Plus, you save time trying to work out complicated rules pertaining to different countries.
- Generate cost savings. When it comes to warehousing, not having to maintain your own space and staff can be a big cost-saving measure. Also, companies that provide good inventory forecasting can help optimise your inventory levels and save money on inventory holding costs.
Why use our 3PL warehouses?
Logistics are what we’ve been doing all day every day for over two decades. Even if you have the resources to take care of your logistics yourself, ProPack offers supply chain expertise with great positioning within the supply chain itself, thanks to our multiple warehouses. More advantages?
- Sharing Responsibility – ProPack shares responsibility for managing global supply chains, keeping customers and stores properly stocked, and delivering the perfect order every time to take some of the weight off your shoulders.
- Reengineering Distribution Networks – Logistics outsourcing can be a quick way to reengineer distribution networks to meet global market demands and gain a competitive edge. Our software, P3PL, tracks the history of each SKU number, when and where every piece ships, when new stock arrives, and how many arrive so you stay in the know.
So, you already know that warehousing involves storing products, but you might be asking what exactly do these other service terms mean. (We know. There’s a lot of verbiage in our industry.) Get ready for more definitions.
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