A guide to 3PL logistics & 3PL services for your eCommerce business

A Comprehensive Guide to 3PL Logistics for Your eCommerce Business

3PL Logistics

Your business idea might be revolutionary and catch the attention of customers the moment you launch it. There is also a possibility that you might start getting instant sales and your profits start skyrocketing, regardless of whether you use 3PL services.

Congratulations for making it to the world of eCommerce. You’ve unlocked your potential for unprecedented profits, brand reputation, customer satisfaction and more.

However, there’s more to what meets the eye when you start selling online.

You might have hit it off with your customers in one go. But, there is no guarantee that you’ll always get to sail under the pink skies. One mistake in order fulfillment and your business will face the wrath of customers.

Wondering why? It’s because selling online is a complex puzzle of tidbit elements. These include inventory management, warehousing, packaging, shipping and more. And while your idea might be good, you need more hands to support you. That’s where 3PL services kick in!

3PL or third party logistics services support your business at different levels. You outsource key areas of your business to these providers and let them take care of the rest. With rapidly fluctuating customer demands and market trends, more and more small businesses are opting for 3PL services.

Statistics suggest that 73% of the 3PL users feel 3PLs provide innovative ways to improve the efficiency of logistics. Similarly, 81% of shippers believe that 3PL services have helped them improve the customer experience.

While you might have a lot of questions around 3PL services at this point, there’s nothing to worry! We’ve gone ahead and brought all the information that you need to know here. Read on to find out the A to Z of 3PL services.

What is 3PL or Third Party Logistics?

Third party logistics (3PL) have three parties involved: the e-commerce company, the logistics provider and the shipping carrier. 3PL providers offer services to essentially manage key aspects of a business’s order fulfillment.

In today’s world, there is a major need for 3PL services. This is because a digital economy and globalization are fundamentally changing the way marketing and businesses work. Most e-commerce companies find handling all aspects of their business, from manufacturing and marketing to sales and shipping, overwhelming.

In such cases, a 3PL aggregator takes over aspects like shipping. This gives a company more time to focus on growing their business.  

What are the Different Types of 3PL Providers?

3PL aggregators, allow a company to outsource their logistics operations. These may include services like-

  • Transportation
  • Picking and packing
  • Inventory forecasting
  • Order fulfillment
  • Freight forwarding, etc.

Inventory Management

Managing an inventory goes beyond just keeping things in a storage area. Many 3PLs offer integrative technologies that sync all the items in your inventory with an online store.

This can help you track your inventory at all times. You can also predict the demand for certain products and understand data patterns and trends for future predictions. 

Distributed Inventory

A 3PL provider is able to recommend your company multiple storage locations. This means that the products can be distributed across several centers for faster shipping throughout the country.

Some 3PL companies also offer user-friendly technologies that can automatically route orders to the correct center. This practice helps streamline delivery, thus saving time and effort.

Expedited Delivery/ Two-Day Shipping

Statistics suggest that 75% of the customers demand same-day or next-day delivery of orders. The companies that cater to these demands retain customers and increase their satisfaction.

This is also known as expedited shipping and refers to delivering a product faster than usual. This could be services related to e-commerce such as super fast delivery. The hands-on staff that can handle large orders are offered in many large 3PL companies. 

The right 3PL providers can offer a 2-day shipping guarantee through their own network of shipping partners. These courier partners allow them to negotiate discounted rates for their clients.

Picking and Packing

Other than just offering inventory space, 3PLs offer a staff that can help with the order fulfillment process.

The orders go directly to warehouses where the 3PL’s staff members fulfill the delivery criteria. This also saves the business time and cost. 

Freight Forwarding

A freight forwarding service is in charge of shipping from a supplier to the customer. The 3PL providers don’t own the shipping carriers but rent the spaces in them.

Essentially, the third-party logistics works with different carriers that offer their clients the best combination of price and delivery speed. 

Shipment Tracking

A 3PL handles is also in charge of providing tracking information of the packages. This practice boosts customer satisfaction. It can help businesses retain the integrity and trust of their customers. At the same time they also stay up to date with the latest practices.

Returns

eCommerce returns are inevitable. But, they don’t have to be difficult for the customer. In the age of easy return services, a 3PL provider can take over the whole process from packaging to returns.

A provider with the right technology can provide customers with return labels. This enables smoother tracking and returns.

This practice helps your business save the time and effort.  With so many varied services, 3PL companies streamline the entire logistics for your business.


How Does a 3PL Add Value Your Business?

A 3PL provider generally owns or leases its own storage areas and transportation. These are used to fulfill clients orders from a remote location.

In many cases, however, the 3PL companies can also be integrated into a business’ inventory storage and transportation.

As a business, you can outline the exact services you need from a 3PL provider. These can be both in-house and outsourced. However, you will get a contract that is customized to your business’s unique requirements.

  • 3PLs take away your monotonous and redundant business work. They take care of your logistics operations.
  • In other words, they help you focus on strategy making, without worrying about daily tasks related to logistics.
  • 3PLs bring a culture of hassle-free services to your business. It improves your business efficiency.
  • 3PLs help you provide a distinguished level of customer satisfaction without a lot of investment.
3PL logistics

How Does a 3PL Service Improve Your Order Fulfilment?

A 3PL logistics provider can help you improve your order fulfillment. Right from picking, packing to shipping and providing a customer experience, 3PL logistics can do it all for you.

  • 3PL logistics help you prioritize your order once you receive them on your store. This helps in dispatching urgent orders within time. As a result, the order gets delivered to the customer on time.
  • A good 3PL logistics provider will pick and pack the products for you. In case you avail their warehsousig and packaging services, you have close to none worries.

How to Choose the Right 3PL for Your Business?

Significance Of A Third-Party Logistics Provider

Going for a third-party or 3PL logistics provider can help you enhance efficiency, manage costs, and improve customer service. They receive your products and ensure safe delivery to the right customer, safely. 

One of the primary benefits of opting for 3PL management is the capability to adjust space, labor, and transportation as per the inventory needs.

Businesses with seasonal sessions can easily sail through the transitions between industry ups and downs. They obtain the ability to utilize more space and resources as demand increases.

Choosing The Right Third-Party Logistics Provider

You must realize that not all 3PL companies are equal when it comes down to providing reliable services. While some might promise you high claims about the services they provide, not all of them would adhere to their word once you sign up.

Picking the right logistics service provider is most certainly not an easy job for the companies. Many might consider taking cheap alternatives. However, understand that your company’s reputation depends on your logistics provider’s reliability.

While choosing a third-party logistics provider, consider the following key points before making up your mind .

3PL logistics

Technical Competencies

A good logistics provider needs to be capable enough in specific areas that would be needed to meet your company’s needs. Your firm might differ from the rest in terms of services offered, and not every reputed logistics provider could handle the job for you.

Also, they need to be competent enough to meet both your short-term and future necessities. A decent logistics provider needs to get the job done not only in that specific moment but also for highly seasonal jobs. 

Big names in the logistics sector often have a large list of clients that are active throughout the year. Considering this, such 3PL companies can often be negligent when dealing with your job that is only functional in a particular season.

You should steer clear of 3rd party logistics companies that claim to provide their best services in all fields of expertise when you only need a handful of them. This way, you would not be burning through your capital for services that you don’t require. 

Reliable Customer Support

It must be a priority for the 3rd party logistics provider to deliver proficient customer service, responsiveness, smooth communication, and effective problem-solving solutions.

Surfing the internet or going through the ads would lead you to believe that every logistics company has excellent customer services. You must ask for references and consult companies in similar domains as yours.

Know this that if the customer service has been consistently exceptional, then that logistics provider follows a well-documented process with a highly trained staff, and this trend would continue over the years.

You must consider the Safety Rating of a logistics provider as it would ensure both amazing customer services and great logistics support.

You would rarely find 3PL logistics providers to achieve excellent results in customer service and unsatisfactory results in providing logistics support or vice versa. One can assume that an ideal logistics provider also provides good customer service.

Shipping Insurance

The domain of safety regulations is more prone to change. Often during bumpy transportation or clumsy warehouse storage, the shipped product can get damaged and jeopardize your company’s reputation. 

To make sure that such unfortunate instances don’t occur, you must choose a logistics provider with a consistent safety record. The same can be checked online on trusted providers’ web pages.

With the progression of technology, people prefer platforms that are tech-savvy and modernized.

Company Stability and Pricing

You must always go for a logistics provider with overall company stability. The quality of their services offered can deteriorate if the logistics company is not stable. You must know the history of the provider and the total years served in active operation.

In case of an unprecedented event, unstable or non-reputed providers might not be able to withstand the burden and cost, which would then fall on you.

Opt for a logistics provider whose name and reputation have remained unwavering, so you don’t have to worry about incurring heavy losses.

It becomes crucial that you read through their guidelines and conditions first and choose a logistics provider that charges genuinely for their services and doesn’t offer redundant services and schemes.

Reputation

Whenever you indulge in new business engagement, moments of dispute can arise, and at this point, the provider’s reputation would matter. 

Thus, it is important to investigate your provider’s integrity and honor. A provider that has a bad history with its clients would often show up in your research. 

Ask yourself questions that include –

  1. How do they treat their suppliers?
  2. Are they a positive force in the community?
  3. Do they possess good online reviews?
  4. What themes do they follow in their marketing?
  5. For how long have they been actively functional?

All these answers would help you in understanding how the provider would behave as a supplier as-well-as a partner.

All companies claim to give the best service, but how credible are their claims? One way to find out how trustworthy they are is by checking who they are supported by. However, if a new 3PL company has no reviews yet, call past clients that have worked with the company and check on their performance. 

Industry Expertise

A company may think that a 3PL company is providing thorough service for a great price, but a lack of expertise in the area could lead them to make large promises that they cannot fulfill, leading to problems with customers. It is best to do a thorough verification of the managers and highest authorities that handle the 3PL business to make sure your products are in good hands. 

Future Goals

Think about the future of your company in the next year before you decide on a 3PL provider. Do you think that the provider you choose will be able to give the same service in the future for your maximum profit?

Will the 3PL aggregator grow and develop technologically to keep providing the best service?  It’s important to choose a company that collaborates with the right partners, uses a user-friendly technology platform, and relies on analytics and real-time tracking to ensure timely and safe deliveries.

Any company which does not include all of the above as their future goals might not be equipped to offer you the best services.

3PL’s Culture

Once you give a third party the handling of a large part of your shipping process, you do not know how they will treat the customers once the deal is done.

Understanding how the culture is at their workspace helps you to know if a company can handle the burden of peak seasons, their honesty and integrity of how they handle products, and whether they can deal well with angry customers for example.

Pricing

The most important factor at the end of the day for most e-commerce companies is the cost of 3PL services. A third-party logistics company generally provides a single quote for all of its services, so be sure to ask them to break the costs down for individual services.

Moreover, ask multiple 3PL companies to break down their prices so you can compare and find the one that fits your needs and budget.

This gives you an idea if you are getting the best price and quality of service in the market as well. This means that you can ship anything, small or big for a low price. 

The debate over 3PL and 4PL has been there for a while, as they both get muddled up for similar control flows. Such situations require an in-depth analysis of the entire concept, including its source and reference models, to gain better clarity on both. 


What Does it Mean to Be a 3PL Provider?

Party Logistics (PL) refers to the simple phenomenon of transporting goods, produce or merchandise from one point to the next, en route the seller. 

The 3PL supply chain model starts when a provider is hired to oversee the entire transportation and logistics of the manufacturer’s goods/products right from the source to destination.

The task gets multi-faceted when the provider also needs to take care of packaging, storage, and delivery of goods to the sellers.

Generally, 3PL architecture is one of the most common logistics models followed by any significant logistics company.  The services provided include:

  • Collecting and packaging of products
  • Inventory storage and management
  • Customs and brokerage management
  • Freight progress across all points, including reaching to sellers
  • Looking over contracts, cross-docking facilities
  • Digital solutions for business owners to monitor supplies and demands

Almost all small-to-medium-scale companies rely on the 3PL supply chain model because of its sheer possibility in delivering solutions. However, there are more to the advantages that follow:

It is cost-effective and time-saving for business owners

For a small-to-medium-scale business owner, handling the logistics, warehousing, and transport by oneself would need massive investments of time and money, as well as resources.

3PL companies make it easy on funds and management, as they handle goods from several manufacturing organizations across the world.

They are perfect for overseas or local deliveries

Since the providers can get faster delivery because of their pre-existing warehouses across the globe, business owners prefer 3PL providers.

Pro at handling bulk orders

For any rapidly growing company, 3PL companies manage any volumes of orders with ease.

The responsive, decentralised model reduces any risks

3PL companies work primarily with organizations that control some part of the supply chain network. While they also make the most of the provider’s tremendous operational power.

Such distribution of control makes the business less vulnerable to threats and risks. This is because no external channel has absolute control of all the processes in the industry.

That said, there are still several drawbacks that exist in 3PL supply chain providers. Some of them are:

  • As a business owner, your controls over customer experiences and inventory are relatively limited
  • Since 3PL supply chain works on per order basis, for lower order volumes the expenses can be high
  • Best suited for small-medium scale industries, 3PL providers don’t manage flammable, hazardous, or perishable goods

What Are 4PL Supply Chain Providers?

4PL providers capitalize on 3PL supply methodology. They add a new layer of complete management of the technology involved, resources, the infrastructure of a business. It even takes care of any involved 3PL supply chain to manage and deliver better solutions for the company.

In short, 4PL providers are the umbrella under which 3PL supply chain services and the management of business thrive. 

An existing exemplary 4PL provider is Deloitte that takes care of the entire logistical operations and execution across the supply chain for the manufacturer. Moreover, the differences between 3Pl and 4Pl are evident. Take a look at the infographic below-

3PL logistics

So, Which Is Best for Your Business?

You might be impressed by the advantages and sheer possibility of various supply chain network providers. But, it boils down to your existing business model, size, budget, and infrastructure.

Your business might need to deal with a complex supply chain requiring delivering quality faster to your customers. In such cases, you could use the help from a 4PL provider. 

Now, there could be factors where a business faces challenges due to limitations of 3PL services. 

For example, a business with an existing 3PL struggling to keep up with its warehousing needs. In such cases, a business owner switching to a 4PL, receives additional customer satisfaction and less hassle.

Therefore, you may have to invest time looking for a provider that is better at handling similar scenarios.


Utilizing a 3PL’s Feedback for Business Improvement

Let’s say you are either a small shop/family business, reseller of wholesale products, budding, or enterprise owner. You plan to take your business online. Your primary concern is to set up e-commerce operations and choose a 3PL to make shipping easier for you.

The first step of building a live store on Shopify, Magneto, Woocommerce, or any other such e-commerce platform. This can happen quite easily and quickly. It is the operational challenges that need your most attention after the customer orders start flowing.

You have to fulfill the orders promptly so that there are no delays in delivery. You have to track the order at every stage. This makes sure that it reaches the customers within the promised delivery time. 

3PL companies can help you get feedback on your services and improve them in many ways:

Tech-Enabled Order Tracking

These logistics companies provide you with a user-friendly and mobile-first platform. This platform comes with features like order management and seller dashboard tools etc. It enables you efficiently manage orders, track a shipment, and generate order reports in real-time. No more manual hassles!

Plug the Delivery Gaps Promptly

There are many reasons why orders don’t get delivered on time. Maybe the order is ready for dispatch, but the logistics partner has not yet picked up. The order has been shipped, but the local delivery boy is unable to find the address.

The real-time tracking feature by 3PL companies gives you clear visibility of where and why your orders are stuck. You can quickly call the logistics company and sort out the issue. 

Most importantly, you can call customers to inform them in advance about the likely delay of delivery. This way, you will be able to ‘reset’ customers’ expectations without disappointing them much.

Reduce Return to Origin (RTO) Time

Sometimes, return orders are not even your fault like it happens in case of an incorrect pin code/address. Third-party logistics companies like Shipping101 enable you to address this concern by predicting address correctness using their high-end technology. This ensures timely delivery even if the customer has registered an incorrect pin code.

The logistics company can also make IVR calls to customers informing them about this issue. Such a facility significantly cuts off RTO time, thereby increasing customer satisfaction!

Find the Best Shipping Partners to Reduce Delivery Cost

3PL companies have a partnership with multiple shipping partners across the country. You can choose the best and most affordable one according to your customer’s location. You can pass on the savings in delivery costs to the customer.

This can be done in terms of lower product prices or discounted delivery charges. Low price products or delivery can go a long way in improving customer satisfaction and gaining their loyalty.

Provide COD Facility to Customers

Many customers, especially those who do not have a digital payment facility, like to opt for a COD facility. If your business doesn’t provide it, you’ll directly lose customers. Alternatively, it will adversely impact their satisfaction levels with your service. The third-party logistics companies accept COD on your behalf and thereby, improve customer satisfaction.

Get Customer Reviews

Some logistics companies also incorporate a delivery feedback survey on their platform. It gives an option to quickly rate your services on various parameters. Some of these are satisfactory delivery time, delivery person, flexibility of delivery schedule, timely information regarding the order status/RTO, etc.

The customers’ response to this survey will give you an accurate idea of how they perceive your services. Accordingly, take action to work on necessary improvements.


Why is Timely Delivery Service Important?

Did you know that your order’s delivery speed creates the first impression of your brand in your customers’ minds? When you manage to make a timely delivery, it builds trust and credibility among your customers.

It is an indication of a process-driven business that cares for its customers. This leads to customer satisfaction.

But, Timely Delivery Service is a Big Challenge!

There is no doubt that timely delivery is one of the pillars of your operational processes. However, it is also a significant challenge, especially for small businesses that run on limited resources, at least in the initial years.

You have to first spend dedicated time and effort in finding the right shipping partner for each pin code. Then, you manually track every product from the time you receive an order to dispatch to delivery.

Imagine how more arduous this task will be when you come across issues like incorrect address or pin code, customers not available at the time of delivery, and so on!

There Are More Challenges Beyond Timely Delivery Service

Your job doesn’t end after the product is delivered on-time successfully. There is a possibility that the customer wants to return the product for some reason. This calls your attention to the reverse logistics process. So, you have to restart the entire dispatch to the delivery process – this time from customer to your shop/warehouse. 

Now, whether the customer decides to keep or return your product, creates some experiences for customers. It is also crucial for you to gauge customers’ level of satisfaction. This also includes how they feel about your products and services, irrespective of the nature of their experiences.

Good experiences will help you to understand the parameters of excellent customer satisfaction and extend it to other customers. Bad experiences will help you to remove your bottlenecks.

This again calls for getting customer feedback. You can request the customers to fill up a feedback form via email/text regarding their product delivery experience. Chances are they might not do it. You can even consider making a personal call to the customers.

Still, not many are likely to respond immediately, or even if they do, the conversation may not happen as intended. Also, as the business volume grows, it becomes overwhelming to spend dedicated time and efforts on customer feedback collection.

Is There a Better and Efficient Way to Tackle Delivery Service Challenges?

Yes! You can outsource this service to 3PL or third-party logistics service providers to leverage their operational and technological capabilities. This will help you fulfill your order commitments on time.

You can also use 4PL logistics companies focused on optimizing the entire supply chain, providing consultancy, storage, and distribution services.

These services were initially used by large and medium-sized companies, as they needed to move their goods from one city to another. Today, even small businesses like yours can outsource their logistics requirements at an affordable cost!

These 3PL or 4PL logistics companies take over your shipment, dispatch, and delivery processes. Right from picking up the order from your warehouse to delivering it at the door of your customers, these companies manage everything in-between.

3PL companies not only give you considerable cost-savings in terms of workforce, space, transportation, and technology; they also provide you with business intelligence and insights related to customer feedback and service. It would be a wise business decision to leverage its platform for your e-commerce business and expertise. This can also help you make your customer services seamless. So, no more worries about launching your web store, building your brand, and growing your business!

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