With the levels of online shopping continuing to increase, retailers are continuing to feel the effect of the rising demand of order fulfilment.
As a solution to this, many online retailers are beginning to outsource their fulfilment to a third-party logistics (3PL) partner. But what exactly is a 3PL, and how do they work, we hear you ask. We’ve looked into the most asked questions relating to 3PLs and provided the answers. Read on to find out more.
What are 3PL logistics?
Simply put, third-party logistics is the process of outsourcing logistic processes to a third-party business to help with E-commerce fulfilment. Doing this eliminates the strain for online retailers, as a 3PL partner will take care of tedious processes such as inventory management, warehousing, and fulfillment. This service allows online retailers to save time, allowing them to focus on other areas of their business and most of the time, is more cost effective too.
How does third party logistics work?
Online retailers rely on their 3PL partner to take control of operational logistics- this is essentially an extra layer to your supply chain, removing the need for you to have a facility to store your products and pay employees to run that facility. Of course, having a 3PL does come with a price, and costs will depend on which services you opt for – normally consisting of a choice and/or combination of storage, picking, packaging and delivery.
As a result of an increase in orders since the start of the pandemic, Rosi Chapman, founder and owner of Transformulas®, a skin care and beauty brand, recently invested in a third-party logistics service. She commented:
“As people have had more time to focus on themselves during the pandemic, we enhanced our focus on our customer experience. We worked hard to ensure that products delivered quickly, and were beautifully presented, whilst also ensuring the highest level of service was provided to our customers.
To support this shift in our strategy, we invested in software which allowed direct automation links from our website to our stock and accounting systems, as well as to our 3PL warehouse team. By investing in technology, digitising our supply chain process and working closely with our 3PL partner, it was a lot easier to manage demands as our online orders grew. Without this software and the support of our 3PL partner, online growth would have been difficult to manage.”
What is fourth party logistics?
Fourth party logistics providers – or otherwise known as a 4PL – are slightly different to the offerings of a 3PL. Rather than helping with just storage, picking, packaging and postage/delivery, a 4PL partner is used to outsource entire logistics operations. This can include support in other areas such as inventory management and planning, business planning, project management and inbound, outbound and reverse logistics management.
What is the difference between third party logistics and fourth party logistics?
The main difference between a 3PL and 4PL partner is the level of involvement they offer. 3PLs are better suited to small-medium sized businesses, whilst medium-large sized businesses will benefit more from a 4PL partner. This is because 4PLs manage and control all activities within the supply chain network, whilst 3PLs focus more on logistics operations.
Third party logistics for small business
As mentioned previously, using a 3PL is a large source of support for small-medium sized businesses when it comes to supply chain management. Using a 3PL offers an extra layer of support and mitigates risks too. For example, when unforeseen circumstances pop up, such as shipping delays, a 3PL is responsible for making alternate arrangements to fulfil your orders as quickly as possible. You’ll also be protected in the event of damage or loss of goods – which is a great piece of mind for smaller businesses.
In addition to partnering with a third-party logistics provider, online retailers should also consider investing in an Order Management System (OMS). An OMS helps to deliver great customer experiences by making fulfilling orders and keeping all online shops updated at all times. From inventory management, automatic stock sync and simple shipping management, an OMS will automate time consuming tasks, freeing up time to focus on other aspects of the business.
Lucy Jeffry, Founder and CEO of Bare Kind, saw a huge increase in her orders during the pandemic, and as a result had to adapt her strategies to keep up with demand. She commented on moving her operations to a 3PL:
“When I launched Bare Kind, I would manually fulfil everything myself. I kept track of all the inventory I sold daily in Excel and used this to predict what I needed to order. This has been challenging over the past year because lead times have been so unpredictable. The delivery times had also increased as my stock was coming from Turkey and the boarders were snarled up due to Brexit.
Now as I move into a fulfilment warehouse, I will have a lot more automation and data at my fingertips and it will help me as demand increases and it becomes too much to do all these processes manually.”
What are the benefits of using a 3PL?
Using a 3PL provider offers lots of advantages. In addition to saving time and money, and reducing strain for online retailers, here are a few other advantages of using a 3PL:
- Scale up or down as needed: Most businesses experience fluctuations in demand throughout the year. Using a 3PL will ensure you have the support you need when you hit a peak – either expected or unexpected.
- Provide an enhanced customer experience: Customers want fast, accurate deliveries. Using a third-party logistics provider means your shipping needs are taken care of. 3PLs often have access to a large network of couriers, so you’re not limited by courier choice.
- Test new markets: If you opt for an international 3PL, you’ll also have the opportunity to try out new markets, without having to commit to any major investments such as warehousing space or staff to run it. 3PLs can also take care of documentation, customs, duties and other issues that come up at the borders which might delay your shipments and result in high costs if not done thoroughly.
How do I find the right 3PL for me?
It’s important to remember that every E-commerce business is unique, and therefore so is the logistical needs of each. Whilst some online retailers might only need support with fulfilment, others may need support across the whole process; from a customer placing the order, right through to the order being shipped. So, make sure you do some research into what services a particular 3PL offers before committing to them.
Nowadays, many 3PL businesses have evolved their offerings by transitioning into tech first entities. Choosing a 3PL which has invested in technology to provide automated processes can have many benefits for online retailers – including enhanced customer experience. In a world where online shoppers choose convenience over brand loyalty, where and how orders are picked and packaged, delivery costs and timings, and ease of returns all matter. In fact, according to Retail Insight Network, 78% of consumers say they value convenience more today than they did before the pandemic.
Mintsoft gives 3PLs real-time visibility and traceability of their client’s inventory. Whether you’re a 3PL, warehouse, or online retailer, you can bring confidence to your business with powerful reporting tools, all of which are accessible anywhere, any time. The system is ready for your new business push, with automated billing and accounting, customisable brand management and centralised client management.
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