In today’s complex business world, companies face a multitude of challenges when it comes to their logistics operations and supply chain management. More specifically, businesses need to get their products to their customers efficiently and cost-effectively. This is where third-party logistics (3PL) comes in. But what exactly is 3PL logistics, and how can it benefit your company? Let’s explore what 3PL is, the services provided, and the core benefits of working with a 3PL company.
What is 3PL?
The term 3PL stands for third-party logistics, which means that a company outsources its logistics and supply chain management functions to a third-party provider. This provider can offer a variety of services, including warehousing, transportation, and order fulfillment, all to help streamline a company’s supply chain.
3PL shipping refers to the transportation of goods from a manufacturer or supplier to a brick-and-mortar retailer or the end consumer, while 3PL warehousing involves the storage, handling, and distribution of products. By outsourcing these functions to a dedicated 3PL company, businesses can focus on their core competencies and improve their overall efficiency.
What are the Key Services Provided by 3PL Services?
A 3PL provider typically offers a range of services to help businesses streamline their supply chain operations. Some of the most important services include:
Inventory Management
Inventory management is a crucial aspect of any successful business operation, especially when it comes to third-party logistics companies. These companies play a vital role in the supply chain by managing the storage, transportation, and distribution of products for other businesses.
To effectively manage inventory, 3PL companies must have a deep understanding of their clients’ needs and special requirements. This involves implementing strategic inventory management practices such as accurate forecasting, proper storage and labeling, and efficient tracking and tracing systems. By utilizing these methods, 3PL companies can maintain optimal inventory levels, reduce operational costs, and meet customer demands in a timely and cost-effective manner.
Picking and Packing
So-called “picking and packing” services involve selecting the right products from a warehouse and packing them for shipment to another location or the customer. The process of picking and packing is a complex one that requires experienced professionals, reliable warehouse technology, and well-defined processes to ensure efficiency, accuracy, and speed.
At its core, picking and packing is essential to the supply chain process. It enables products to be dispatched quickly and efficiently while ensuring that they reach their destination in good condition. By outsourcing this function to a 3PL company, businesses can leave the logistics experts to manage the complexities of the supply chain.
Read more about the optimization of pick and pack operations in commercial warehouses.
Shipping
Third-party logistics companies specialize in providing transportation and warehousing services for businesses, covering the entire shipment cycle from storage to delivery. These companies cater to commercial customers mostly, ranging from large conglomerates to smaller companies.
Some companies offer various shipping methods, including air, sea, and land, to accommodate different customer needs and preferences. With their extensive network and resources, 3PL companies can ensure timely and safe delivery of goods to their intended destinations.
Freight Forwarding Services
Freight forwarding is a crucial aspect of international shipping, where the 3PL company handles the coordination of the shipment and the documentation requirements. They use their established contacts to ensure your goods get where they’re going without any delays, providing you with real-time tracking and monitoring to give you peace of mind.
Value-Added Services
Value-Add Services (VAS) are extra services provided by 3PL companies, primarily aimed at enhancing the customer experience and making their business lives easier. These services range from slight customization of products before shipment, kitting and assembly, labeling, and packaging. Value-added service providers ensure that your products are tailored to your specific needs, which adds value to your business.
Dropshipping
Dropshipping is a supply chain management method in which the retailer does not keep stock in their inventory. Instead, they transfer customer orders and shipment information to the manufacturer, wholesaler, or another retailer, who then ships the product directly to the customer. This eliminates the need for the retailer to handle the products they sell. For 3PL companies, offering dropshipping services means they can partner with retailers and help them streamline and optimize their supply chain operations. By leveraging their expertise in logistics, 3PL companies can provide an end-to-end solution for dropshipping
What are the Core Benefits of Working With a 3PL Company?
Working with a 3PL provider offers numerous benefits for businesses. One of the most significant advantages is cost savings. By outsourcing their logistics functions, companies can reduce their operational costs and improve their bottom line.
In addition, 3PL providers have access to cutting-edge technology and expertise in supply chain management, which can help companies optimize their operations and improve their overall efficiency without those companies needing to invest in expensive, mission-critical equipment themselves. Third-party logistics providers with extensive physical shipping and storage hubs also provide more flexibility and scalability by operating in multiple geographic markets at once—which is critical for businesses that need to adapt quickly to changes in demand or market conditions.
How can E-commerce Companies Use 3PL?
The rise of e-commerce and globalization have transformed the way products are bought and sold, making integration with online marketplaces crucial for many businesses. 3PL providers have responded to this trend by offering e-commerce fulfillment services that allow businesses to store, pick, pack, and ship their products directly to customers who buy online. This integration allows companies to expand their reach, serve customers more efficiently, and streamline their supply chain operations.
Since 2017, there has been a 1.7% increase year-over-year in the number of 3PL companies operating in the U.S. accounting for a market value of over $342 billion in 2021—with a gain of over $111 billion from the previous year alone. Figures like this indicate 3PL logistics services are an increasingly popular choice for companies looking to expand their reach in the digital marketplace setting, where consumer expectations necessitate fast delivery solutions across vast physical distances.
Where Should I Use a 3PL in Supply Chain Management?
The types of services that a 3PL company provides can vary widely, but they are most commonly used for major tasks like warehousing and transportation. For instance, if a business has limited warehouse space or lacks the necessary expertise to efficiently store and handle a large volume of products, they may use a 3PL for warehousing. Similarly, if a business needs to ship products regularly but doesn’t have its own transportation network, a 3PL may be a good choice for transportation services.
Over 90% of Fortune 500 companies reported using a 3PL service in 2023—significantly higher than in 2014, when only 46% used a 3PL. As globalization continues to drive changes in the consumer marketplace, 3PL services are uniquely suited to helping companies grow without the need for establishing their own shipping and storage infrastructure, which is a costly prospect as hyper-competitive real-estate trends continue their almost decade-long trajectory.
In conclusion, third-party logistics (3PL) is an essential part of many successful businesses’ supply chain management strategies. By partnering with a third-party logistics provider like Novo Logistics, businesses of all sizes can streamline their shipping and storage processes, boost efficiency, and ultimately expand their reach. With a nationwide infrastructure of logistics hubs and a fleet of vehicles operated by experienced professionals, Novo provides businesses with reliable and accurate shipping services that save time and cut costs. Reach out to our team to learn more about how we can help your business achieve its goals! Contact us today and experience the benefits of working with a top-tier, value-added service provider like Novo.
