What is a 3PL? Third Party Logistics Defined & Evaluated



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The business world has evolved over the years to include many specialization areas. Now, manufacturers or suppliers can choose not to worry about fulfilling clients’ orders by outsourcing the ‘inefficient’ part of their business to a third-party logistics company. They could also choose to outsource their product storage needs to other companies, especially as ArdentX offers warehousing services.

The rise of many businesses specializing in the supply chain logistics corridor has not only improved how many businesses operate. It has also improved revenue and reduced overhead costs.

As a business, understanding the role of third-party logistics companies for transportation, warehousing, and distribution needs can be a game changer. This article delves into what a third-party logistics company does and how they serve your business needs.

What 3PLs Do?

Businesses looking to outsource some parts of their logistics, warehousing, and transportation needs often want to know what a 3PL company offers and how it translates to increased revenues. Below are some of the ways a 3PL partner can help.

3PL Transportation Logistics Services

Third-party Logistics companies are either assets or non-assets based. This means they either own trucks or outsource the transportation needs to yet another active player within the supply chain.

With a third-party logistics service provider at the helm, you can rest assured that the company will coordinate with its trucks or carriers to manage incoming and outgoing freight for the shipper.

For clarity, the inbound or incoming shipments could include shipments from domestic manufacturers or suppliers or those from overseas. It could also include containers arriving via air freight or from overseas.

Outbound shipments, on the other hand, involve taking shipments to the customer from the warehouse.

When using a non-asset-based 3PL, it is important to compare prices offered by such companies with an asset–based 3PLs. This can help you to better understand the cost margin while also maximizing your cost-savings on logistics.

3PL Warehouse Logistics Solutions

Most third-party logistics partners provide warehousing services to shippers. This service helps shippers, manufacturers, and other partners save space while also addressing their logistics needs.

With the warehousing solution, 3PL companies are able to offer additional ad-hoc services like inventory management, fulfillment of orders, order picking and packing, as well as product distribution. Essentially, the warehousing aspect covers all segments involved in the supply chain between a shipment’s delivery and the next stage.

Warehousing solution offers many benefits to businesses and shippers looking to reduce their overhead costs while also meeting their customers’ or clients’ demand. With this solution, manufacturers and suppliers can save money on storage space, reduce their workforce, and reduce the commitment to the technology required for inventory management and order fulfillment.

The key services included in the 3PL warehousing logistics services include;

Warehousing and inventory management: This involves receiving and processing goods, managing product storage, and implementing efficient warehouse management solutions. Clients are kept abreast of their stock levels to ensure periodic replenishment.

Order fulfillment: This involves steps and segments like order receipt and processing, product location, picking, and packing, inventory updates, and shipment preparation.

Shipping: 3PLs can also provide shipping services which can sometimes be a part of the company’s general services or outsourced to other businesses. This shipping or freight service may either be full truckload shipping or less than truckload shipping. It could also be local, regional, national, or international shipping.

Reverse logistics: Third-party logistics companies can also handle the reverse logistics involved in returning orders after customer cancellations. Reverse logistics often involves tracing back the ordering process until the good or product is returned to the warehouse and the inventory is updated.

Third-Party Logistics Specialties

Getting the most out of a third-party logistics company involves understanding the extent of their services as well as their specialties. In most cases, 3PLs focus on certain areas, ensuring that their solutions are tailored toward their specific audience. Some of the common specialties include;

  • Service-based 3PLs serving B2B, B2C, cross-docking, subscription fulfillment, etc.
  • Size-based 3PLs serving the needs of small or high-volume requests and shipments
  • Product-based 3PLs serving brands and businesses in the food, apparel, pharmaceuticals, and other industries
  • Location-based 3PLs serving single or multiple locations.

Why Hire a 3PL?

Having understood how third-party logistic companies play into the supply pipeline, one must also understand why they are essential for your specific business type.

While a 3PL is not ideal for all business types, especially smaller businesses with far-in-between orders and fulfillment needs, they are recommended for larger companies with frequent order fulfillment needs.

Such companies can benefit from the simplicity of outsourced logistics, more resources dedicated to fulfilling clients’ orders, stronger negotiating power for improved profit margin, reduced overhead costs on warehousing and inventory management, etc.

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