Running a business involves countless tasks that can quickly become overwhelming and nearly impossible to handle on your own. If you feel that you’ve reached your limits and capacity, you may want to consider working with a third-party logistics provider.
We realize that this may be new to you, so here’s everything you need to know about 3PL and how a 3PLshipper helps grow your business.
What Is a Third-Party Logistics Company (3PL)?
A third-party logistics provider or a 3PL is a company that handles logistics processes for online businesses. Logistics processes that 3PL providers handle include things like inventory management, warehousing, and order fulfillment. Outsourcing these tasks allows online businesses to focus on other, more important areas of operation.
Third-party logistics companies are ready and willing to help eCommerce newcomers and veterans alike grow their businesses by offering a whole host of logistics operations to meet their changing needs.
Here’s a rundown on six logistics processes undertaken by 3PLs to give you a better idea of what these companies actually do:
1. Receiving
For a 3PL to handle your logistics, they first need access to your assets. This often means that you need to have your existing inventory shipped to a 3PL warehouse and have new inventory shipped to the same location down the line.
While this seems like a relatively easy and straightforward process, large volumes of inventory are quite difficult to receive and organize.
2. Warehousing
Once products are received, the 3PL stores them in warehouses. Each item is equipped with its own SKU and storage location so that it is easily picked when an order comes through.
3PLs are flexible with their storage requirements as they work with many different clients with changing needs.
3. Picking
Once an order is received, the 3PL begins the fulfillment process thanks to trained warehouse employees who can pick the correct items in the correct quantities from the storage shelves.
The best 3PL companies can integrate their system with yours so that they automatically receive your new orders instead of manually upload them — wasting valuable time in the process.
4. Packing
After the items for the order are picked from the shelves, they are packed for shipping to the customer. Some 3PL companies offer their own packaging materials, while others require that you source them yourself.
Like all shipping companies, 3PLs work with different packaging materials like all shipping companies, including boxes, bubble mailers, and poly bags. The best 3PL companies offer custom packaging materials, including branded boxes and custom inserts.
5. Shipping
Finally, it’s time to ship the order—3PLs help by purchasing and printing shipping labels for quick processing.
Some 3PL companies have established partnerships with specific shipping carriers and may be able to secure discounted rates as a result. Other 3PLs work with a variety of different carriers and shop around with different carriers to find the best shipping rates.
6. Returns
A 3PL provider’s work doesn’t after shipping an order — they also handle returns. When a customer returns an item, they ship it directly back to the 3PL warehouse where it is restocked or disposed of, based on your policies and preferences.
3 Valuable Services 3PLs Offer
Let’s continue to nail down what 3PL providers are and what they do by discussing three valuable services offered:
1. Warehouse Storage
It is difficult and costly for growing businesses needing dedicated warehouse space for their inventories. Working with a 3PL helps provide you with the warehouse and storage space you need without costing you an arm and a leg.
This is because many 3PLs offers shared storage spaces wherein they serve multiple clients from a single location. This approach keeps costs down and maximizes efficiency as well.
2. Inventory Distribution
Newer businesses find fulfilling their orders in a timely manner challenging since they are all likely coming from a single location that wasn’t strategically chosen.
When you work with a 3PL, you gain access to multiple different warehouse locations across the country. 3PLs combine physical locations with smart technology so orders are sent to the center to fulfill the order in the shortest time.
3. Order Fulfillment
Finally, the different stages of order fulfillment are tedious and time-consuming when performed on your own. 3PLs have trained and experienced staff in place who can pick and pack your orders in record time.
Additionally, working with a 3PL potentially helps you cut shipping costs since they often have established partnerships with shipping carriers around the country.
What Are the Benefits of Working With a 3PL?
It’s impossible to nail down all the different benefits of working with a 3PL company. Plus, every company is different and would benefit differently from working with a 3PL provider.
That being said, here are five potential benefits of working with a 3PL:
1. Scale Your Business
Working with a 3PL provider helps you scale your business. Oftentimes, small businesses struggle with scaling simply because they don’t have the capacity.
It’s not that they don’t have the ideas or the products to grow and succeed — they simply don’t have the workforce. And while hiring permanent employees to handle these processes and contracting out to a warehouse, 3PL providers act as a one-stop-shop.
2. Save Money
Working with a 3PL provider helps you save money. Of course, you have to pay for their services, but the odds are you’d be paying a lot more to handle everything on your own.
In addition, working with a 3PL provider gives you access to things like shipping discounts, data analytics, and more.
3. Improve Service
Working with a 3PL provider helps you improve the services you offer your customers. 3PL providers can quickly and accurately get customers their orders — boosting satisfaction in the process.
Furthermore, outsourcing some of these time-consuming and tedious tasks to a 3PL provider ensures that you’re able to dedicate more of your time and resources to customer service rather than order fulfillment.
4. Access Technology
Working with a 3PL provider enables you access to revolutionary technology for improving and growing your business.
For example, 3PL companies offer transportation management systems (TMS), real-time order tracking capabilities, route and consolidation optimization tools, and freight audit and payment solutions.
5. Gain Expertise
Finally, working with a 3PL provider helps you gain the expertise you need to become a better business owner. 3PLs are logistics pros that are ready and willing to share their knowledge and best practices to help you make necessary improvements to your business operations.
When you work with 3PL experts, there’s no need for you to get an MBA yourself. Instead, you can depend on your partners to fill in your knowledge gaps.
What Types of Online Stores Should Use Third-Party Logistics Providers?
Running an online store without the help of a 3PL provider is incredibly difficult. At the same time, deciding to outsource to a 3PL provider isn’t easy. After all, you want to make sure you’re making the best possible decisions for your business.
While all stores are different, here are some indications that you could benefit from working with a 3PL provider:
You Can’t Keep Up With Your Order Volume
Most online stores can comfortably manage their orders on their own in the beginning. However, as your store earns more business, it becomes difficult for you to keep up with your order volumes.
If you’re pulling all-nighters to fulfill orders or recruiting family and friends to help you pack boxes, then you could benefit from a 3PL. Outsourcing these tasks helps you to focus on important aspects of your business to drive further growth.
You’re Running Out of Storage Space
Again, most online stores begin in a home or a garage. However, there comes the point when you’re no longer able to store your inventory in your guest room.
Instead of packing your entire house to the brim with inventory, consider utilizing a 3PL for inventory storageand other useful services.
Your Shipping Times Are Too Long
It is difficult for newer and smaller online stores to compete with the lightning-fast shipping speeds offered by eCommerce giants like Amazon. If you’re losing business as a result of not being able to offer competitive two-day shipping timeframes, consider working with a 3PL provider.
Working with a 3PL provider decreases shipping times by utilizing different warehouses across the country. Working with a 3PL provider also decreases shipping times and costs since they often negotiate deals with shipping carriers.
How to Choose the Best 3PL Company
When choosing a 3PL company to work with, consider your needs first. For instance, are you looking for a company to help with the entire process from start to finish so that you can take a hands-off approach?
Or are you only looking for help with certain tasks so that you can maintain control over certain parts of the process?
Come up with a list of services that you’re looking for so that you can compare the services offered by different companies as you move forward with your research.
Where to Look?
Once you have your needs figured out, move forward with finding the best 3PL company to meet those needs. But where can you find reputable and qualified companies?
If you have any colleagues who have their own businesses, reach out to them to see if they work with 3PL companies and if they would recommend any of them.
If you don’t have anyone to ask for recommendations personally, you can always turn to the internet. The internet is a great place to look for potential 3PL partners as you can check reviews, services, pricing information, and more.
Conduct a quick internet search for 3PL companies and see what comes up. Explore the websites of your potential contenders for relevant information.
What to Look for?
If you like what you see on their website, the next step is learning more about the company by reaching out to them directly for a quote.
Your first interaction with a 3PL company tells you a lot. If they are helpful and responsive, that’s definitely a good sign. On the other hand, if they are vague or unresponsive, that is a red flag.
The best 3PL company has multiple methods of communication for potential and existing customers — including live chat, email, and phone support.
What to Ask?
During your initial conversation with a prospective 3PL partner, you ask the right questions to make sure that you get the information needed to make an informed decision. Make sure to learn more about their services and pricing to fill in the gaps from the information you gathered online.
You also need to ask about technology. Technology has a huge effect on a 3PL partnership. Prioritize technology that easily integrates with your existing systems, online stores, etc., for a seamless process. You should also prioritize technology that provides you with valuable data and insights related to your processes.
Another thing you need to ask relates to fulfillment center locations. Make sure to ask how many centers they have and where they are located. Generally speaking, you should look for 3PL partners with an extensive network of fulfillment centers that provide full coverage across the entire country. Even if your operations aren’t that extensive yet, having the capability to expand your operations in the future quickly is extremely important.
You need to ask potential 3PL partners what differentiates them from the rest of the competition. The information learned from this question hopefully helps you make your final decision.
Top 3PL and eCommerce Shipping Companies
It can be difficult to sort through and choose a 3PL company since there are so many different options to choose.
Here are some of the top 3PL and eCommerce shipping companies that you should consider:
1. ShipBob
ShipBob is one of the top 3PL companies out there that primarily caters to small and medium-sized businesses. With more than ten warehouses distributed across the United States, they are able to get orders out quickly and on the road for speedy shipping times. Working with ShipBob gives you access to shipping discounts with multiple carriers.
ShipBob offers responsive customer service through chat and phone support. However, their software is incredibly user-friendly and intuitive — so you shouldn’t have any issues. They are transparent with their pricing and include services like receiving, storage, pick and pack, standard packaging, and shipping.
2. Fulfillment by Amazon (FBA)
Fulfillment by Amazon, also known as FBA, is a service offered by Amazon that takes the form of a 3PL company. And while Amazon itself isn’t a 3PL company, its network and infrastructure have made it a valuable 3PL partner through its fulfillment services. Working with FBA gives you access to over 70 fulfillment locations all across the United States with easy-to-use software.
Amazon is also working on establishing its own shipping service based on contract drivers rather than using traditional carriers like FedEx or UPS.
This plan reduces shipping costs and makes it economical for businesses to take advantage of FBA services. As a result, FBA is a beneficial 3PL partner for brands looking to utilize Amazon’s platform for a majority of their sales rather than using their own website.
3. FedEx
FedEx is one of the country’s largest shipping carriers and boasts one of the largest and most diverse warehouse networks with locations spread throughout the country. Specifically, FedEx offers reverse logistics, packaging, warehousing, storage, and order fulfillment. Another benefit of working with FedEx is that you earn valuable shipping discounts.
While FedEx is a great company for large businesses with extensive operations, it’s also beneficial for fast-growing small businesses. This is because the support and expertise that FedEx provides are invaluable for growing businesses.
When you work with FedEx Fulfillment, you are assigned a dedicated professional representative to help you understand the entire process and answer any questions you may have.
4. UPS
UPS is another one of the largest shipping carriers in the country that offers 3PL services through UPS Supply Chain Solutions. They offer supply chain expertise, end-to-end services, and value-added solutions designed to help businesses of all sizes grow and expand their operations.
Not only do they work with ground freight, but they also work with air and ocean freight — making this an ideal option for global brands. Furthermore, they offer customs brokerage services and insurance to provide you with peace of mind throughout the shipping process.
5. Red Stag
Red Stag is a specialty eCommerce fulfillment provider. They specialize in shipping larger and heavier packages over 20 pounds. They also specialize in shipping packages that require assembly before shipping. Red Stag provides coverage to the entire United States with warehouses located centrally to both coasts.
Red Stag provides fast and accurate order fulfillment with same-day fulfillment services, on-time shipping guarantees, and discounted shipping rates. They can provide such incredible services thanks to 24/7 video security footage during all stages of fulfillment.
As a result, Red Stag is ideal for companies that ship larger and heavier products who want quick and safe shipping and fulfillment guarantees.
6. Red Hawk
Red Hawk works with small businesses across the United States, Mexico, and Canada to provide freight, warehousing, shipping, and distribution services. They are willing to work with less than load (LTL) shipments, cross-border shipments, flatbed shipments, and more. They also offer sort-store-repack services, freight storage, and distribution.
Red Hawk caters to small businesses thanks to affordable rates based on the number of goods. They also offer good class-based discounts and volume freight on large accounts.
How Does 3PL Pricing Work?
Several different factors are involved in determining the pricing of 3PL services — it’s usually not just a flat fee.
As a result, you often need to reach out to 3PL companies directly for an exact quote based on the services needed. Here’s some information to help guide you through these conversations:
Onboarding:
Establishing a partnership with a 3PL doesn’t just happen overnight. Instead, it takes three to six months to establish and initiate your partnership with the proper technology.
Some 3PL companies charge onboarding fees based on their efforts during this initial phase of the partnership.
Inventory Receiving:
Another part of the onboarding process involves getting your products to the 3PL warehouse. This is not an easy process, and some 3PL providers charge you per pallet, per unit, or per hour.
Depending on your inventory, these costs add up quickly. If you have a substantial inventory, you may want to consider working with a 3PL company that charges a flat rate for inventory receiving.
Inventory Storage:
Once your items arrive at the 3PL center, you are charged for storage. Storage fees vary depending on the warehouse, and some 3PL providers charge you per item, per bin, per shelf, or per pallet for storage.
Order Picking and Packing:
Some of the biggest tasks that 3PL companies undertake are picking and packing. As a result, they charge accordingly per item.
However, some companies pick and pack within a total order fulfillment package or offer discounted rates for smaller orders.
Packaging:
If you’re looking to really streamline your order fulfillment process, then consider working with a 3PL that also provides packaging materials rather than sourcing them from elsewhere and shipping them to the 3PL.
Some 3PLs charge you for packaging materials, while others include them within a larger package. You should look for 3PLs offering custom packaging options so that you boost brand awareness and impress your customers.
Kitting:
If your products require unique accommodations or assembly prior to shipping, you are charged a kitting fee.
Make sure to get information about any potential kitting fees when discussing your needs with potential 3PLpartners.
Shipping:
Working with a 3PL is a great way to do it if you’re looking to reduce your shipping costs. This is because 3PLs work with shipping carriers to offer discounted rates.
Working with 3PL companies that have established partnerships with national and reputable shipping carriersis extremely beneficial and cost-effective.
Consider working with a company that offers a total fulfillment package. All costs for direct-to-consumer orders are covered within this package, and you will only pay extra for receiving, storing, and shipping. However, such a package can be expensive and might offer more services than you’re actually looking for.
In this case, you consider choosing a pick and pack package wherein you pay per item rather than pay a higher flat fee. Generally speaking, expect to pay anywhere between $0.15 and $5.00 for each pick depending on different variables — so make sure to get a quote from any potential 3PL partners so that you can make the most beneficial decision for your business.
Conclusion
The best 3PL providers work with the best transportation providers and ensure that your orders arrive safely and promptly. If you’re looking for help with freight transportation involving everything from consumer packaged goods to food and beverage, then reach out to RPM.
RPM can help you meet your logistics needs thanks to our network of more than 30,000 vetted and monitored carriers. Reach out today to see how we can help.
Sources:
Guide to 3PL Logistics | Business News Daily
Strategic Reasons for Using a 3PL | Industry Week
17 Best 3PL Companies for Handling Your Logistics in 2021 | eCommerce CEO
