Companies that assist ecommerce enterprises with the various stages of logistics and delivery are known as third-party logistics companies, or 3PLs.
Because many ecommerce enterprises solely handle online sales, business owners must employ companies to handle the other aspects of selling online. A 3PL company comes in handy in situations like these.
What exactly is a 3PL company, how can their services help ecommerce sellers, and who are the best third-party company logistics companies? Continue reading to find out!
What is a 3PL Company?
A third-party logistics company (also known as a 3PL) fulfills your online orders. As an online vendor, you will take the orders and, by utilizing a 3PL company, you will be able to delegate the remainder of the work to others.
Distribution, warehousing, fulfillment, and other parts of online sales will be handled by a third-party logistics company.
By employing a 3PL company, internet sellers may concentrate on selling while leaving all other aspects to others. Find out more about the fulfillment process.
What are the Differences Between 3PL and 4PL Companies?
Now that you know what a 3PL company is, you might be wondering what a 4PL company is.
A 4PL company, on the other hand, performs everything a 3PL company does plus much more! The 4PL companies also manage resources, technology, and infrastructure. They may even manage external 3PLs and assist those companies in achieving their objectives for the benefit of the ecommerce retailer.
What are the Components of Logistics with 3PL Providers?
The components of logistics are numerous and diverse. These range from inventory management to ensure that your products reach your clients fast and efficiently.
It is critical to remember that not all third-party logistics companies are the same. Some will provide every imaginable responsibility for the ecommerce vendor, while others may simply provide a few job obligations.
In general, logistics entails preparing the goods, shipping them, and then performing customer service obligations afterward. But that’s not all.
Below are some of the most important logistics components:
- Warehousing
- Cold storage vs. regular storage
- Supply chain administration
- Transportation
- Material Handling
- Distribution
- Shipping and Receiving
- Consumer service
- Reverse logistics
There are many moving aspects to building a successful online business. You can offload some of your responsibilities and have other companies handle these parts for you with the assistance of a 3PL company.
Another incentive to hire a third-party logistics management company is to gain access to distribution locations you may not have had previously. This could be due to your current location, your inability to ship products to specific nations, or simply the speed with which the transactions are completed.
A 3PL company is also a business that is knowledgeable about this field. They understand what it takes to deliver your products where they need to go as well as handle other areas of the ecommerce selling process such as customer service, reverse logistics, and more.
Benefits of 3PL Fulfillment Companies
Essentially, a 3PL company optimizes supply networks, increasing efficiency and saving time and money. Businesses can get dependable support with managing and distributing items thanks to the experience in supply chain logistics offered by 3PL companies. The technology, infrastructure, and services required for product distribution are also provided by 3PLs. This saves you money by covering all workers and facilities that you would otherwise have to invest in. Also, 3PL companies have experience with international shipping and adaptable technology, allowing for worldwide expansion.
If you are not a logistics specialist but want to succeed in business, you may consider employing a 3PL company. They handle many aspects of the shipping process, from receiving products from suppliers to delivering them to clients. Here are some advantages of working with a third-party logistics company.
#1. Increased speed
3PL companies offer speedier product delivery timeframes than you would on your own. They have the skills and ability to handle and manage huge shipments, so you don’t have to worry about getting all of your products out at once.
Furthermore, because they are specialists in the sector, they can assist you in optimizing your product transportation procedures, allowing you to decrease costs and boost efficiency across the board.
#2. Shipping and Logistics System Connectivity
When you outsource your company’s shipping and logistics, you receive a partner who can link to your current infrastructure. Your logistics can be simply managed by the 3PL provider. Integrating your ERP software, POS system, sales channels, and other important systems for everyday operations is part of your 3PL’s work.
Instead of worrying about infrastructure or software, you can operate your business. A 3PL company can automate activities such as tracking inventory levels at each site and coordinating with carriers to determine where shipments should be shipped. This boosts an organization’s efficiency, which leads to profitability owing to less waste and errors.
#3. Cost Savings
The most important reason to utilize a 3PL company is to reduce costs. By outsourcing with a 3PL company, you can reduce storage expenses, fulfillment costs, and shipping prices more than you would achieve on your own because they utilize the aggregate shipment volume of all clients.
By giving you a single point of contact for all of your shipping needs, working with a 3PL can decrease costs. This can significantly minimize the number of persons engaged in shipping while also saving time. By grouping shipping requirements, a 3PL company can also save on expenses.
Because they don’t have to worry about overhead fees, insurance, or the cost of hiring drivers and dispatchers, a 3PL company may provide lower rates than traditional carriers. They can charge less for shipping services than if you used a regular carrier since they can pass those savings forward to their clients.
#4. Enhanced customer service
When it comes to customer service, you’ll want to work with a company that specializes in this area. A 3PL company is knowledgeable about customer satisfaction and can assist you in improving service. They have good partnerships with other companies.
Regular communication between a 3PL company and its clients. When there are difficulties or inquiries, they can help acquire answers or discover solutions fast since they know who knows each phase of the supply chain process and how to communicate within each step and across many processes if necessary.
What to Look for in a 3PL
The compatibility of your business with its services is the most significant factor when selecting a 3PL company. The technologies employed by the 3PL and their normal scale of operations should be compatible with your organization’s present technology and business volume. This guarantees that all of your requirements are met as smoothly as possible. To ensure that a 3PL company will be a good fit for your business, look at their historical performance and client interactions.
Outsourcing a 3PL company is dangerous, like most business services. A 3PL Company should have the following characteristics:
#1. Clients and Referrals:
A reputable third-party logistics company will have a large number of customers and referrals from other firms. This implies that the company has met the needs of other companies and can provide a comprehensive service for your company as well.
#2. Credentials:
The company should have credentials from reputable companies such as DHL or FedEx. Without these credentials, the company may lack the knowledge or skills to manage your fulfillment demands.
#3. Reputation:
Having a good reputation is vital since it helps assure that the 3PL Company you hire will provide you with great service. Examine internet reviews, speak with people who have already utilized this type of service, and inquire about their experiences to see how others feel about dealing with this company before committing resources to them.
#4. Capabilities
Confirm that the 3PL Company can handle all of your logistics needs, including storage, picking, or packing orders, shipping via air or ground transportation, and processing returns or refunds if necessary.
#5. Pricing
The cost of your fulfillment service should be comparable to that of competitors. Paying too much or too little may cause problems in the future.
#6. Facilities
The location where your items will be stored and shipped should be safe and secure, with easy access for both staff and customers.
#7. Employees
Make certain that every person with whom you will be interacting is of the highest caliber. They should be competent, helpful, and upbeat.
#8. Location
Location can affect how quickly or how long your goods arrive at their destination. For both inbound and outbound shipping, the 3PL company’s location must be ideal.
#9. Insurance
Choosing the right company is critical to success. You want a 3PL company that will look after your products and safeguards you from disasters.
Be sure they have expertise in transporting your product type. If your products are fragile or require particular treatment, for example, check sure the shipper has experience.
#10. Contract Terms
As with any business agreement, longevity is critical. You want someone who will be there when things go wrong or need to be changed.
#11. Errors
Making mistakes can be expensive when working with a 3PL Company. Check to see if your 3PL Company has a track record of resolving problems swiftly and effectively and a near-perfect record of error-free performance.
#12. Shipping Options
Some companies handle shipment, while others leave it to you or demand you to do a portion of it yourself. Make sure your selection is appropriate for your business so that nothing is overlooked.
#13. Performance Metrics & Processes
Metrics and processes for tracking your operations are provided by a competent 3PL service. This contains delivery information, product photos, and tracking information.
3PL shipping companies have the same ups and downs as any other business. To secure the sustainability of your logistics partner, conduct a financial viability analysis. You can verify the company’s credit or request financial information. Your first goal is to guarantee that kids have a secure financial future.
#14. Service Levels
The amount of service you receive from a fulfillment company relies on the size of your deal and the provider. If you have a lot of storage or orders, you’ll probably get good service. For a 3PL service that offers the greatest service and cost, smaller companies may need to explore more strategically.
#15. The volume of orders and storage:
When selecting a fulfillment company, you must examine the size of your business and if it makes sense to deal with one. Some fulfillment companies have volume restrictions, while others have minimum order numbers. They might not want to collaborate with you if you don’t sell many things because it’s not profitable for them.
#16. Product Size
When selecting a 3PL company, product size is another factor. Some companies only deal with minor products. They might not want larger stuff. Some prefer larger stuff. Make certain that the company you’re contemplating can manage both large and little products.
#17. Sales Channels
Choose a 3PL company that can manage your sales channels, whether they provide direct-to-consumer fulfillment or service businesses or employees through a store.
#18. Flexibility and Other Services
Think about your needs and select what extra services you need, as well as how adaptable the 3PL company needs to be. This guarantees that you are working with a company that understands your needs.
Top 7 3PL Companies
Now that you know what to look for in a 3PL shipping solution, remember to select one that fits your business. Extra work and clumsy software do not help you get orders out faster.
Here are some of the best ecommerce shipping companies and third-party logistics providers:
- ShipBob
- FedEx Distribution Network
- Rakuten Logistics
- RedStag
- UPS Supply Chain Solutions
- Shopify Fulfillment
- Shipwire
What Kinds of Businesses Use 3rd Party Logistics Companies?
3PL companies are used by businesses of all kinds, from small mom-and-pop shops to huge corporations. They provide a variety of services and specialize in each phase of the supply chain, assisting businesses with everything from procurement and transportation to warehousing and delivery.
Some firms utilize a 3PL company because they lack the resources or skills to manage all areas of their supply chain. Others employ 3PL companies to outsource duties they don’t need to handle themselves.
How Much Do 3PL Services Cost?
The charges charged by each 3PL company vary. Initial setup, receiving, storage, fulfillment, or “pick and pack,” and shipping are the key 3PL expenditures.
Initial Setup Costs
The average setup charge is roughly $550, but if a provider specializes in assisting smaller enterprises, the lowest initial setup fee would be around $120-$150. This charge includes the cost of setting up an account in the 3PLs system, integrating the customer’s online shopping cart with the warehouse, and establishing the customer’s desired procedures and processes. In essence, what you pay is all you need to get started.
Receiving Fees
Receiving fees can differ depending on the component of the goods being charged for. It encompasses all activities required to unload and prepare products for future delivery. Prices range from $35 to $45 per hour, with additional charges for additional services. Some 3PLs charge per order ($30-$50), per pallet ($4-$15), per item ($0.20-$0.25), per SKU ($2.50-$10.00), or the box ($2.90). Receiving fees for companies that charge per container are $330 for a 20-foot container and $441 for a 40-foot container.
Storage Fees
Pallet storage fees are frequently charged. This fee is depending on the amount of storage space used each month and is impacted by location, volume, and specific requirements. A storage cost for each pallet might range from $8 to $40. Storage can also be charged by cubic foot ($0.45-$0.55), per bin ($4.07 per bin on average per month), and per square foot ($0.75 per square foot on average per month).
Depending on what a 3PL charges for product weight and materials, fulfillment pricing varies. Fees for outsourced warehousing fulfillment providers can reach $5 or more per shipment, with an average of $3.13 for a one-item B2C order and $4.27 for a B2B sale. In general, there is a per-order and per-item fee, as well as any additional material fees. A small box might cost between $0.50 and $1.15. If an additional item, such as a coupon, is required within each order, insert costs of around $0.15 per order can also be issued.
Shipping Costs
Shipping costs are one of the most expensive prices. The cost of shipping is determined by the number of packages. Additional fees may apply if you want to ship through your company account, but companies may offer a 10-20% reduction for common ground shipment. Expedited shipments, on the other hand, can receive reductions of roughly 20-30%, while LTL and truckload shipments might receive discounts of up to 45-50%. With the Discount Off of Published Rates or Cost Plus approach, approximately 93% of 3PLs provide a shipping discount. The Discount Off of Published Rates model provides a particular percentage discount off retail rates, but the Cost Plus approach adds a percentage market up to the shipping cost.
Conclusion
Hiring a 3PL company to assist you to handle your orders is a sensible decision whether you offer electronics, fashion items, or any other ecommerce item.
When you employ a logistics company, you know that your orders will be filled swiftly, sent safely, and delivered to your customer on time.
Additionally, when you provide high-quality delivery and fulfillment to your clients, you increase your chances of converting one-time customers into recurring customers.
Whether you ship within the country or internationally, you may find an economical logistics company to assist you.
You are not required to handle all aspects of ecommerce on your own. Not when there are numerous 3PL companies available to handle complex tasks!
- WHAT IS 3PL: Services, Examples & Companies
- 3PL LOGISTICS: Meaning, Examples & Companies
- FULFILLMENT CENTER: Meaning And Its Benefit To Small Businesses
- LOGISTICS MANAGEMENT SYSTEM (LMS): Benefits and Elements
- WHAT IS LOGISTICS? How Can Businesses Utilize It
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