The 101 on 3PL Providers: What They Are & How They Work

Every Batman needs his Robin, and every business owner needs a fast and reliable way to get their orders out into the world. A 3PL, or third-party logistics provider, is an indispensable asset in the eCommerce journey, but, to many, the concept of outsourcing is still shrouded in mystery.

Make no mistake — third-party logistics (and logistics in general!) can be confusing, but the whole point of a 3PL is to help you navigate those murky waters while also turbocharging your business’s growth. Sounds like a pretty good deal, right?

If you’ve been looking to take the next step in expanding your operations, here’s everything you need to know. Let’s get started!

What Is a 3PL?

The “simple” answer is that 3PLs outsource the logistics part of running your business. You know, all the fun stuff you do on the daily like packing boxes and making multiple, sometimes frantic, trips to the post office. But here’s the catch: eventually, it gets way more complicated.

While the above routine may work just fine for business owners who are starting out, logistics as a whole refers to the process of getting from point A to point B — and so much can and will happen in between. 

How Does a 3PL Work?

In general, third-party logistics providers can assist with the logistics process by:

  • Integrating with your store’s shopping carts and marketplaces
  • Receiving and warehousing inventory
  • Picking, packing, and shipping orders
  • Kitting and bundling SKUs
  • Adhering to custom packing procedures
  • Coordinating returns and exchanges
  • Filing paperwork for international shipments

Of course, not all 3PLs are created equal. If your business has any specific requirements, make sure to include them as a top priority in your search for the perfect outsourcing partner.

What Are the Benefits of 3PL?

If you wanted to play devil’s advocate, then you could say that, conversely, all of the above could be done at home or in a rented warehouse. Our rebuttal, of course, is to hit you with even more 3PL perks.

Don’t get us wrong — the DYI approach is an important cornerstone. But, if you’re at a point of expansion, 3PLs can give you an extra boost by:

  • Negotiating discounted rates with shipping carriers and packaging vendors
  • Providing powerful order, inventory, and warehouse management software
  • Saving precious time so you can focus on the things you’re truly passionate about, like marketing and product development

All in all, the point behind outsourcing to a 3PL can be described in one word: growth. The more resources you have, the easier it is for your business to succeed.

How to Choose the Right Third-Party Logistics Provider

Like we mentioned earlier, 3PL providers come in all shapes and sizes, so finding the right one can get tricky… but not if you know what you’re looking for!

As you swipe for the ideal 3PL match, consider the following factors:

  • Available services. Maybe you’re a subscription box company, maybe you want all your orders to come with handwritten notes. Whatever the case may be, make sure your 3PL knows about it… and has the ability to handle the job. 
  • Location. This is a big deal for two reasons. One, if most of your customers are in the U.S., then it makes sense to find an American 3PL, even if you don’t live there yourself. Two, a 3PL with multiple locations comes with a huge advantage, which is faster and cheaper shipping for a greater number of customers.
  • Experience and references. They say that past actions determine future outcomes, and that couldn’t be more true. Even if a fulfillment center is a little green, see if they’ve worked with businesses similar to yours as an indicator of what to expect.
  • Technology. Outdated technology is simply not feasible in 2021. Bonus points for a focus on automating inventory and warehouse management!
  • Pricing. This one’s a no-brainer, but we recommend looking beyond the sticker price, as it’ll only tell you part of the story. You’ll want a partner who can factor pricing needs along with other key considerations like delivery times and custom packaging.

Our last bit of advice is that, for the most part, you should avoid having too many cooks in the kitchen. If your 3PL candidate outsources multiple facets of their operation, you’ll probably want to opt for a one-stop partner that gives you the clear level of transparency your company requires.

After reading this article and (hopefully) becoming a 3PL devotee, we hope you’re that much closer to making the right decision for your business! If you’d like to dive into the fulfillment world further, you might want to check out these reads:

Comments? Questions? Let’s hear it! Shoot us a line and we’ll get back to you ASAP.

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