fulfilment services

3PL Explained

January 29, 2021 -

If you’re a business owner working in ecommerce and retail, you’ll know that order fulfilment is an integral part of your operations. As your business grows, trying to fulfil customer orders in-house becomes increasingly harder. This means that it might be time to consider outsourcing this part of the supply chain process to a third-party logistics (3PL) company who are experienced with handling fulfilment services.

So what exactly is 3PL and how does it work? Gaining a better understanding of this should be an important part of your strategy to support your business in order to grow and scale your company. Read on to find out a bit more about 3PL and how it could benefit your business.

What is third-party logistics?

Engaging with a 3PL company involves the act of handing off order fulfilment processes to a third-party. This usually happens when a business is spending too much time focusing on packing and shipping orders rather than focusing on other areas of their business and strategy, as well as potentially running out of storage space for inventory.

Often working with multiple merchants and managing many fulfilment centres, 3PL logistics companies have the capacity, resources and expertise to assist many businesses with their entire order fulfilment process.

All tasks that are taken care of by a 3PL’s team include: receiving, picking, packing and labelling as well as processing returns, quality control and other specialised projects.

How does a third-party fulfilment model work?

Here’s a simplified way to look at a 3PL full process in some easy steps:

  1. Your products are manufactured or purchased before being shipped to your chosen 3PL warehouse.
  2. Your store’s inventory (hosted on platforms like Shopify, WooCommerce and BigCommerce) is synced with the inventory at your fulfilment partner.
  3. Your customer selects their items before placing their order.
  4. Once they have received the order, your fulfilment partner picks, packs and ships your order directly to the consumer.

What are the advantages and disadvantages of a third-party fulfilment model?

As with everything, there are pros and cons to using this type of order fulfilment model. Making the right choice will be determined by a number of factors, including what sort of products you sell, the volume of orders you need fulfilled and how much of the process you’re willing to take care of in-house. We’ll run through the advantages and disadvantages of the third-party fulfilment process for you to decide whether this will be the best model for your business.

Advantages

  • Shipping discounts are often higher because 3PL companies can negotiate good rates and deals because of the sheer volume of shipments they handle every day.
  • Your business doesn’t need to worry about real estate or paying for warehouse space.
  • This also then impacts stock levels as you don’t need to stress about having too much inventory. It means you can purchase items in bulk in order to improve profit margins.
  • You get the opportunity to work with professionals that are reliable and trusted whilst streamlining the order fulfilment process.
  • Greater efficiency and savings on cost are substantial.

Disadvantages 

  • It might take you some time to find a 3PL company who you trust.
  • Your business ends up losing skills and infrastructure that you may want to develop in the future.
  • The quality of your products can be compromised. This could have a knock-on effect that impacts the customer and might change how they view your product or brand.

We hope this has helped give you a better understanding of third-party logistics and potentially inspired you to look into how a 3PL fulfilment model could help with order fulfilment processes for your business. With so many 3PL providers to choose from today, make sure you take the time to shop around and see what options are available before you take the plunge.