What is Third-Party Logistics?
Third-party logistics in ecommerce refers to the outsourcing of your order fulfillment process to a third-party business that specializes in managing logistics for multiple companies. A third-party logistics company can help you manage your inventory, warehousing, order processing, and shipping to customers. Some companies also provide additional services like return processing and customer support for their clients.
Differences between 3PL and 4PL
A 4PL company provides end-to-end supply chain management services, including services offered by a 3PL company. Rather than the standard order fulfillment services provided by 3PLs, 4PLs helps businesses plan, design, and manage their supply chain from start to end. The services offered by fourth-party logistic companies include inventory planning and management, logistics strategy, transport sourcing, materials sourcing, business planning, project management and more.
How does Third-Party Logistics work?
The following are some of the elements of the third-party logistics process:
· eCommerce sales channel integration
The first step is usually the integration of your sales channels with the 3PL platform. This way, both you and the 3PL company can view and track orders in real-time.
· Freight shipping to the 3PL warehouse
Your 3PL can help you move goods from your company to their warehouse.
· Inventory management
Third-party logistics companies do more than just warehousing your goods; they are experts at inventory management. Your 3PL can sync your inventory with your online store, making it possible to view your stock levels in real-time.
· Order fulfillment
When you receive an order, the 3PL company picks the ordered products from their shelf, packs them securely, applies the shipping label, and sends them out to the customer. Third-party logistics companies usually work with several carriers who handle the shipment of products from their warehouses to customers.
· Reverse logistics
Returns are common in eCommerce. Your 3PL company can process returned items from you, accept the item from your customers and assess them to determine whether they are defective or can be placed back on the shelf.
Examples of 3PL
Some popular third-party logistics companies that work with eCommerce brands are DHL Supply Chain North America, UPS Supply Chain Solutions, FedEx Logistics, Burris Logistics, H. Robinson Logistics, XPO logistics and more.
Benefits of Third-Party Logistics
Outsourcing your eCommerce order fulfillment to a 3PL has many benefits, including
1. Lower cost
Working with a 3PL helps you eliminate the need to invest in a warehouse. Also, you save money on labor and logistics operations. Additionally, you will not have to invest in in-house order fulfillment technology.
2 More time for your business’ core functions
Outsourcing order fulfillment will help you save the valuable time you will have otherwise spent building your warehouse, picking items from shelves, packaging them, and shipping them to customers. With the 3PL model, you have more time to focus on marketing your products and developing new ones.
3. Access to industry-leading knowledge
Third-Party Logistics are experts at handling warehousing and order fulfillment. You can leverage their experience and expertise to optimize your supply chain and make your order fulfillment process more efficient.
4. Faster delivery
You can choose a 3PL company with warehouses close to your customers to ensure your goods are delivered quickly.
5. Easier returns processing
A 3PL can help you handle your returns and ensure they are processed seamlessly. This, in turn, makes your customers happier and improves their experience with your brand. This article is written and owned by Sid Bhatt, CCIM