Third-Party Logistics (3PL) Guide: Process, Resources, And Benefits

With businesses expanding their reach to global markets, the need for supply chain and logistics services too has increased. 

According to a new report, the global third-party logistics industry is projected to reach a size of $1.3 trillion by 2026.
 
Organizations requiring supply chain logistics services often outsource work to third-party logistics or 3PL providers, allowing the organization to concentrate on its core business. 

What is 3PL?

3PL providers are logistics companies offering comprehensive and even one-stop solutions for enabling enterprises to outsource their supply chain activities, such as packaging, warehousing, inventory, freight forwarding, transportation, order fulfillment, and reverse logistics or returns.

Also Read: What is 4PL or 4th Party Logistics

Basics of 3PL

To overcome logistics challenges, an enterprise can leverage a 3PL's expertise, best practices, technologies, and experience. As a result, enterprises can improve their supply chain functions regarding responsiveness and resilience. In other words, in addition to taking away the pain of managing supply chain activities from the business, the 3PL carries out the fulfillment process efficiently and rapidly. 

Role Of Third-Party Logistics in The Supply Chain

3PL offers logistics management solutions to achieve efficiency by optimizing the supply chain, saving costs, and increasing profit margins. 

An enterprise's complete inbound and outbound logistics cycle, including planning the freight route with the right carrier, scheduling the pickup and delivery of the shipments, inventory management, ensuring regulatory compliance, distribution, auditing reports, and generating invoices, are efficiently managed by a 3PL supply chain business.

How Do Third-Party Logistics Work?

A typical 3PL involves three stages:

1. Warehousing
2. Picking and packing 
3. Shipping

The Four Stages Are Explained Below:

Warehousing

• The 3PL company hired by the buyer (business) schedules pickup, collects products from suppliers, and warehouses them – the buyer may appoint two separate 3PL companies or one to handle the two respective services – transportation and warehousing.
• Once the products are received at the warehouse, they are put away by the warehouse team, and the 3PL's inventory management system is updated. Reports of opening and closing stock, dead stock, and the like are regularly uploaded to the business's management system.
• The 3PL receives the order for fulfillment from the business (could be from its ecommerce site integrated with the 3PL's platform).

Picking & Packing

• The warehouse team picks the items per the order received, packs them, and readies them for shipping by printing out and affixing delivery addresses, receipts, and order labels on the packed boxes. The business/3PL could also outsource the labeling to a logistics partner specializing in it.

Shipping

• The 3PL or another shipping carrier collects the packages from the warehouse. It then delivers them either to a distribution center from where it is delivered to the customer or directly to the end customer.
• The 3PL management system uploads the tracking information with an expected time of delivery (ETD) into the business's order management platform.
• Once the package is delivered, the POD (proof of delivery) is also uploaded.

Third-party Logistics Pricing Process

Benefits of 3PL

The benefits accrued by outsourcing the supply chain management to 3PL service providers are:

• Cost savings by efficiency
• Acquiring 3PL's expertise and experience for extending its reach globally
• Focusing on core strengths, achieving scalability & flexibility as required 
• Enhancing customer satisfaction 
• Gain competitive advantage

Also Read: Advantages and Benefits of 3PL

FAQs:

1.    Why are third-party logistics important?

To overcome logistics challenges, an enterprise can leverage a 3PL's expertise, best practices, technologies, and experience. It ensures a more responsive and resilient supply chain function, resulting in efficiency and cost savings.

2.    When to use 3PL?

An ecommerce store or a drop shipping store could consider using a 3PL

1. When their business expands rapidly
2. When they wish to offer shorter delivery times 
3. When they wish to expand their offerings or expand geographically
4. When they want to leverage their business scale to reduce their shipping costs

3.    What does 3PL mean in logistics?

3PL providers are logistics companies offering comprehensive and even one-stop solutions for enabling enterprises to outsource their supply chain activities, such as packaging, warehousing, inventory, freight forwarding, transportation, order fulfillment, and reverse logistics or returns.