In the current market, it becomes crucial to know about 3PL fulfillment to enhance your business performance. This third party logistics model is more and more utilized especially in the e-commerce sector and assists in managing the inventory and the order processing. Given the predicted growth of the global 3PL market, it is time to consider how this solution can be useful for your business.

Perhaps you are asking yourself whether it would be advisable for your retail business to engage a 3PL provider. Some of the factors that can help in decision making include the benefits that come with it, the risks that are associated with it, and the aspects of the fulfillment process. In this article, you will get to know about the prime factors of 3PL fulfillment and how to choose the best 3PL for your business.

What Does 3PL Fulfillment Involve?

3PL fulfillment means transfer of order fulfillment functions to a third party service provider. This process enables you to escape the necessity of controlling all the fulfillment process. Your 3PL partner takes care of essential functions such as:

• Warehousing
• Inventory management
• Picking and packing
• Shipping
• Reverse logistics

This approach streamlines operations and enhances efficiency.

3PL eCommerce Fulfillment Process: How Does It Work?

1. Integrating with 3PL Services

Once you have selected a fulfillment 3PL provider that you can trust, the next thing you need to do is to provide them with some key information regarding your inventory and orders so that the partner knows how much stock is available and when the products can be shipped.

You can allow 3PL partners to access your inventory and order management system or integrate the order information using APIs to their management systems.

It is crucial both parties are aware of all stock changes to avoid confusion and promote smooth inventory fulfillment.

2. Sending Inventory to 3PL Warehouses

The next step entails the shipment of your inventory into the 3PL facilities to start the order fulfilment process. Take into consideration freight charges especially if you are dealing with bulk orders.

The economical shipping methods are Full Truck Load (FTL) and Less Than Truck Load (LTL). For large shipments, which are bulky, such as furniture, or a motorcycle, it is recommended to use residential LTL freight.

Most of the 3PL providers will help you identify the best freight solutions that will meet your needs.

3. Inventory Management and Warehousing

3PL companies possess the capability of developing proper and safe space for your products. They manage every storage area effectively by using the best retail management software and planning.

This means that you are likely to incur lower costs and have higher profits due to the efficient inventory management systems they have put in place.

4. Order Retrieval

When a customer places an order, the 3PL staff are notified and are supposed to pick the products for the order. This can be done in batch, zone or wave, depending on the details of the order to be fulfilled.

Your preferred 3PL provider will apply the most suitable method depending on the characteristics of your products and your preferences to guarantee the best results.

The order statuses will be regularly updated in their management systems to enable you to monitor the progress of an order and make any changes if required..

5. Product Packaging

Packaging entails enclosing your items and putting them in their shipping containers, which contain other important information such as the brand name, the order number, the delivery details, and the shipping label. Effective packaging is very useful in the identification and solving of any problem that may arise regarding lost consignments.

By delegating this function to your 3PL, you are presented with a great opportunity, which is to free up time that would otherwise be channeled towards the identification of the best possible packing materials and the right sizes of boxes. Make sure that the status of your order is consistent with your system and the 3PL in order to avoid order delivery discrepancies.

6. Measuring Weight

After the packaging of items, the 3PL will weigh packages to improve the order fulfillment process. This entails evaluating not only the weight of the product but also any accessories that may accompany it such as pallets or wraps.

Measurements include the dimensions for shipment: length, width, and height.

Shipping costs and compliance with carrier requirements are best determined with the correct weight measurements. Such measurement also assist in effectively tracking of return by ensuring that any item returned is well reflected in the inventory management systems.

7. Shipping Processes

Once your orders are ready, the 3PL determines the best carrier and shipping methods based on the package weight, delivery location, desired delivery time and cost efficiencies.

As for most reputable 3PLs, they work with a number of carriers meaning that both you and your customers will have a number of shipping options.

Real-time tracking by your 3PL provider means that both you and your customers can view the shipment’s status from the time it is picked up in the warehouse until it is delivered.

8. Managing Returns and Refunds

In case customers bring back products and ask for their money back, those items are shipped back to the 3PL warehouse. At the 3PL, the team will check the products and process refunds based on your company’s guidelines.

They will inform you of any refunds that need your intervention or approval to complete the process according to your instructions.

What are the advantages of hiring a 3PL?

1. Cost-Effective Warehousing Solutions

It is possible to cut on the warehousing costs by engaging a third party logistics provider. When your business is growing, it becomes crucial to find a space for supplementary storage, which in turn affects the expenses. By working with a 3PL, you only pay for the space that your products occupy in the facility of the 3PL provider and not for the entire facility if you owned it.

For context, 3PL providers typically charge based on various metrics:

Cost Metric3PL PricingPer pallet$18.30Per cubic foot$0.45 - $0.55Per bin$3.20Per square foot$1.15

Also, 3PLs usually facilitate the sharing of lease obligations among retailers, including payment for rents and utilities. This sharing model is more cost-effective than the total costs of having a warehouse within the company premises.

2. Affordable Shipping Rates

When it comes to transportation, 3PL providers are well positioned to negotiate the rates. They deal with multiple shipment at the same time and this means that they are able to negotiate for better rates from the carriers due to the large shipment volume that they offer. This implies that your business can cut the total shipping cost without necessarily having to meet the minimum order volume that qualifies for direct discounts.

When you outsource logistics, you take advantage of the combined power of different eCommerce operations to help you manage shipping costs better.

3. Specialized Expertise for Fulfillment

Working with a 3PL requires entrusting a group of experts in logistics and order fulfillment. These experts effectively oversee warehousing and shipping so that your experience is smooth without having to always overcomplicate things. This specialization does not only reduce your labor cost but also helps you to manage your tasks and enable you to attend to other important aspects of your business.

The knowledge and training these teams possess result in optimized performance, which enhances overall service delivery.

4. Enhanced Order Fulfillment Efficiency

Working with a third party logistics provider can benefit the company and help in decreasing the inaccuracies when fulfilling orders. All of these providers spend money on some of the best technologies and inventory management systems to enhance their operations. Technological advancement and improved software reduces the chances of manual mistakes and increases tracking accuracy.

In this way, you have fewer return rates and happier customers, key aspects of achieving and preserving profits and reviews. This efficiency can be a competitive advantage in the growing world of eCommerce.

5. Opportunities for Business Growth

Working with a 3PL means that you will have the ability to expand your eCommerce business. When you start facing certain operational demands in your business, outsourcing your fulfillment helps you to concentrate on building the other aspects of your business. Instead of being consumed with logistics, you can focus on other important aspects of growth.

A 3PL can help you to manage your growth more effectively, thereby preparing your business for future challenges without necessarily disrupting your services.

What are the drawbacks of 3PL eCommerce fulfillment?

1. Expenses Associated with 3PL Order Fulfillment

It is crucial to note that engaging a third-party logistics provider for order fulfillment has its costs. Before entering into this partnership, you have to be sure that the advantages of this partnership will be worth the money you are going to spend.

Here are several key expenses to keep in mind:

• Setup Fees: Some 3PL providers may charge for the initial integration of your system, which includes creating accounts and accessing their services.
• Inventory Transfer Fees: You will be responsible for shipping your products to the 3PL warehouse. The costs can vary based on your provider’s pricing structure, which can include charges by unit, carton, or pallet.
• Picking and Packing Fees: The 3PL will handle order fulfillment by selecting and packaging items. This service typically incurs costs on a per-order basis.
• Storage Fees: 3PLs commonly bill for the space your products occupy in their warehouse. Charges may apply based on the duration of storage and the type of space used, such as pallet or shelf storage.
• Kitting Fees: If you offer bundles or promotions that require assembling multiple items into sets, additional kitting charges may apply.
• Shipping Costs: No matter which provider you choose, you will still need to cover shipping fees. It is crucial to compare these costs against those you would incur with direct carrier arrangements.

Understanding these expenses will help you assess whether partnering with a 3PL aligns with your budget and business goals.

2. Reduced Control Over Order Fulfillment

Outsourcing some of these functions to a third-party logistics provider (3PL) may entail loss of control over important functions such as inventory management, warehousing, and logistics. This lack of control is a concern, as it can lead to such issues as data breaches or system integration issues that negatively impact operations.

Custom integration may improve the data transfer and tracking and at the same time, create a loophole for hacking. Since you will not be monitoring all of the aspects of the process, it is crucial to select a 3PL that uses secure technologies and has measures for managing possible problems.

To avoid risks, set certain access permissions for anyone who will be working with your data in any way. Moreover, you can leverage the use of the Progressive Web Application (PWA) for order fulfillment to enhance easy access to the system without necessarily having to interact with other back-end systems frequently.

Finding the right balance between outsourcing and control is a delicate act and can be complicated when dealing with your 3PL. recognizing these potential pitfalls may help you better plan for your eCommerce business.

How to Select a Third-Party Logistics Provider for Your Business

1. Assess Your Business Size and Requirements

First of all, try to assess your needs concerning logistics and warehousing. The same applies to various business functions that are critical for your business; ask yourself if it is necessary to outsource them. If your company is growing rapidly and the costs of outsourcing are affordable for your business, then you should consider the possibility of using a third-party logistics provider (3PL). If not, it is better to organize it within the company.

Look for specific indicators that suggest your retail business may benefit from a 3PL provider for order fulfillment:

• Your company is experiencing rapid growth, making it difficult to manage daily operations effectively.
• The order fulfillment process is becoming sluggish and prone to mistakes.
• You are facing a shortage of manpower to meet operational demands.
• Hiring more employees complicates your organizational structure.
• A significant portion of your profits is consumed by shipping expenses.
• You are overwhelmed by the volume of data and inventory management.

If you have decided that using a 3PL could help your business, you need to identify your needs for the 3PL. This information will assist you in the search to find the right 3PL providers for your business needs.

2. Evaluate Their Capabilities and Openness

As you investigate potential 3PL providers, several key aspects should come into question:

• Scope of Services: Will they handle your entire logistics process or just certain segments?
• Pricing Structure: What are their fees for the offered services?
• Customization Options: Can they tailor their services, including warehousing, inventory control, and dropshipping to fit your requirements?
• Technology Usage: What systems and technologies do they employ to manage order fulfillment effectively?
• Real-Time Updates: Can you receive immediate order status updates via an integrated platform?
• Customer Support: Do they provide helpful and timely assistance?
• Industry Experience: Which eCommerce businesses have they collaborated with?

These questions will assist you to determine their competence, experience, prices and flexibility. The major emphasis is still on the fact that they aim at meeting your business needs and your financial capability.

Trust is a crucial factor for the development of a healthy partnership with a 3PL provider. It can help you avoid overpaying and prevent possible consequences of data breaches..

To find a dependable 3PL, consider the following strategies:

• Define Your Requirements and Budget: Know what you need and what you can afford.
• Conduct Thorough Research: Investigate various 3PL services to see how they align with your requirements.some text
  • Certifications and Reviews: Check for credentials and customer testimonials that demonstrate compliance with insurance and safety standards.
  • Insurance and Claims Process: Inquire about their policies regarding insurance and freight claims. Competent 3PL providers should present a clear process.
  • Technology Evaluation: Test their software and systems. Since you will be sharing your fulfillment data, it’s vital that they use advanced technologies to ensure accurate management and delivery of orders.
• Engage with a Shortlist: After identifying a number of potential 3PL partners, reach out for in-depth discussions about their services, pricing, and any additional considerations.

What are the common types of 3PL companies?

1. Basic 3PL providers

Basic 3PL service providers maintain primary functions of logistics such as warehousing and shipment. This option saves you money and allows you to have a grasp of your order fulfillment without requiring many resources.

2. 3PL service enhancers

3PL service enhancers enhance the value of your supply chain and logistics by using advanced technologies and information technology. Along with warehousing and transportation services, they offer security services, real-time tracking of packages, ensuring compliance to the set guidelines, selecting packages and cross docking services.

3. 3PL operation managers

If you are preoccupied with logistics tasks that would have otherwise been used in the strategic development of your business, a 3PL operation manager can assist. These providers oversee the logistics process and deal with carrier negotiations, as well as rate management for the shipments you make.

4. 3PL logistics partners

3PL logistics partners perform all the logistics activities hence they are your logistics arm. As a result of the huge workload and responsibility, their services are quite costly; however, it frees you from those mundane tasks and you can concentrate on managing your business.

Services Offered by a 3PL

A third-party logistics (3PL) provider can add value to your supply chain by offering services that will help you to increase efficiency and customer satisfaction.

Inventory Management

‍By using a 3PL, you get access to sophisticated inventory management tools which are linked to your systems. Stock and order status updates in real-time will allow the company to avoid stock out and make correct decisions on time.

2-Day Shipping

‍Short delivery time is crucial when it comes to retaining customers. Using 2-day shipping services, your customers can get their orders faster. 3PL providers take advantage of their relationships with the shipping companies to provide affordable shipping services.

Same-Day Delivery

‍If a business wants to satisfy the customer’s need within the shortest time possible, same day delivery may be offered. This service needs a proper coordination of the fulfillment process and certain conditions to follow, including the schedule of orders and the geographical limitations, to guarantee that the deliveries will be done effectively.

Distributed Inventory

‍It is possible to decrease the delivery time and the overall shipping expenses by using the distributed inventory services. This enables you to have product stock in numerous warehouse locations and then ship from the nearest one to the customer.

Centralized Inventory

‍If you opt for a centralized inventory management system, it means that all the products are kept in one place. This makes the inventory process easier, but it might result in increased shipping charges for customers in remote areas of the country served by the central warehouse.

Advanced Data Analytics

‍Some 3PLs are even able to give you detailed data to help you understand your order fulfillment process. They may also be able to provide guidance on logistics planning, software choices, and inventory control depending on the contract.

International Fulfillment

‍It is easier to grow your business when you have a partner who is connected with the rest of the world through a 3PL partnership. Their international fulfilment services help in the shipping process of selling goods across borders by making complicated processes easier.

Closing Thoughts

It is important to note that there are numerous benefits of using third party logistics (3PL) especially in the e-commerce industry. Whereas fulfillment often boils down to picking and packing, 3PL is a more extensive service that can help improve your operations.

When making your decision on this aspect you should also look at the various costs and risks of outsourcing. The decision to engage with 3PL should be in line with your business objectives.

For customized solutions related to order fulfillment, managing various sales channels, or warehousing, our experts are available for a complimentary consultation. Contact us to explore how we can support your retail operations effectively.

FAQs

What distinguishes 3PL from 4PL?

Third-party logistics (3PL) is a subset of the eCommerce store operations and is mainly concerned with the fulfillment process. On the other hand, 4PL or the fourth party logistics service includes the full solution of your supply chain management. Here are the key differences:

• Core Dutiessome text
  • 3PL primarily handles order fulfillment tasks.
  • 4PL oversees every facet of the supply chain, including transport logistics and supplier management.
• Communicationsome text
  • With a 3PL provider, you maintain direct communication with your customers and partners.
  • In a 4PL scenario, you only need to interface with your 4PL partner regarding any issues that arise.

Does fulfillment constitute a 3PL service?

It depends on the interpretation of fulfillment. Some processes of fulfillment include receiving, picking and shipping customer orders, which are services that can be provided by a 3PL company. A 3PL company is not only confined to order fulfillment but can also handle inventory and order fulfillment.

Although it is often used interchangeably with a fulfillment center, 3PL encompasses a wider range of services, thus managing inventory across different systems, as opposed to merely processing order fulfilment.

How does 3PL differ from fulfillment?

Fulfilment can be defined as the overall control of the activities that are needed to supply products to the customer and this can be done either internally or externally. This involves orders, shipping and also storing of the products.

In 3PL, you work with an independent party who has the necessary knowledge and equipment to coordinate such activities. Some responsibilities may still remain with the retailer but others may be outsourced to the 3PL if necessary.

What is the typical cost for a 3PL fulfillment center?

There are different cost implications when it comes to a 3PL fulfillment center depending on your requirements and that of your provider. A common rate for order fulfillment is approximately $0.20 per pick.

Other potential costs associated with 3PL services include:

• Labor for handling inventory, order picking, and packing.
• Management of inventory and warehousing.
• Packaging expenses, either standard or custom.
• Fees related to restocking or disposing of returns.
• Technology maintenance fees for automation and information management systems.

Which industries commonly utilize 3PL services?

The demand for 3PL services has surged due to the rise of online shopping and quick delivery expectations. The following sectors are among those that use 3PL the most:

• Manufacturing
• Pharmacy
• Construction
• Retail
• eCommerce
• Food and Restaurants
• Cosmetics
• Technology
• Automotive