Third-Party Logistics 101: The Ultimate Guide to 3PLs

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If you’re ready to expand your eCommerce business, it’s time to partner with a third-party logistics (3PL) provider that can handle all of your order fulfillment needs. You might have several questions about what a 3PL does, how to choose the right one, and what you can expect when working with logistics experts. To help, here’s the ultimate guide to 3PLs.

What Is Third-Party Logistics?

All eCommerce business owners want to grow their operations by serving more customers and expanding their reach. However, this is not always easy. Storing and keeping track of inventory, picking and packing items, and providing fast and accurate shipping can be an incredibly time-consuming part of running an online store. In addition, you may find a considerable amount of resources are used towards in-house order fulfillment.

A third-party logistics company takes the complexity out of the equation by doing all these things for you. Essentially, you are outsourcing all the logistics aspects of your business to a company that has the experience and resources to do it much more efficiently and cost-effectively for you. You’ll be able to accomplish more in less time and at a more scalable rate when you decide to partner with an eCommerce 3PL provider.

What Are 3PL Fulfillment Services?

Third-party logistics fulfillment services are designed to help businesses successfully fill online orders quickly and accurately. Many eCommerce companies outsource their logistics needs to 3PL providers to take advantage of an established infrastructure that would be very expensive if they tried to handle the same operations themselves. These include:

These valuable fulfillment services help to streamline the process from easy integration with your online shopping cart to providing affordable 2-day shipping options. By leveraging the expertise of a 3PL company, you give yourself more time to focus on growing your business without the burden of complicated logistics.

How Does a 3PL Work?

The focus of any third-logistics provider is to offer logistics and order fulfillment services to their clients. When working with a 3PL, the company’s fulfillment technology should integrate with all major eCommerce platforms and shopping carts, making it easy for your online orders to get sent straight to their fulfillment center. Part of their service should include partner integration that will work seamlessly with your existing platform.

Once the online order is received by the fulfillment center, the items are located in the warehouse using a highly organized SKU system, picked, packed, and made ready to ship as quickly as possible. There is usually a quality assurance (QA) process before labels are added to shipping materials and the package is picked up by a shipping carrier for delivery.

Your inventory levels should be updated in real time, so you know exactly how many items remain in the warehouse and whether you need to restock those products. Also, your 3PL should have some kind of return management process if you customers need to return the item. In some cases, it may be added back into your inventory, shipped back to you for refurbishing, or disposed of based on your instructions.

Almost the entire fulfillment process is automated, creating a seamless process that doesn’t require your valuable time and attention in order to be successful. A 3PL works with you to improve order fulfillment, customer satisfaction, and overall business strategies.

What Is the Difference Between a Fulfillment Center and Distribution Center?

While a distribution center may be similar to an order fulfillment center in some ways, they are not quite the same. Generally, a distribution center serves retail stores directly, while a fulfillment center focuses on picking, packing, and shipping orders for both B2C (business to consumer) and B2B (business to business) eCommerce clients.

In addition, distribution centers usually receive large quantities of products and ship them altogether at one time to retail stores. These goods are delivered and stored on pallets, so they are not packed in the distribution center like products would be in a fulfillment center. For this reason, a distribution center is not the right choice if you need items packed individually and shipped directly to your online customers.

Why Split Inventory Between Fulfillment Centers?

If you get orders from across the country, it makes sense to find a 3PL with several warehouse locations where you can keep your inventory closer to your customers. An established 3PL company will have strategically placed fulfillment center locations that have the resources and network connections to reach consumers in that area with reduced transit times and accurate shipping. This is call distributed inventory.

Another reason to consider splitting your inventory between multiple locations is to have a backup in the event that one fulfillment center is unable to ship that item. Whether its due to extreme weather conditions or an accident that caused the warehouse to pause operations, you will still have inventory in another location that can ship to your customers.

RELATED: Which Is the Best Shipping Carrier for Your eCommerce Products?

How Do 3PL Companies Select Fulfillment Center Locations?

The first thing you may notice when looking at your 3PL’s fulfillment center locations is that they are generally around larger cities, metropolitan areas, or densely populated parts of the country. A bigger population means a higher number of consumers and more opportunities for potential sales in that area.

You always want to be as close as possible to your customers to speed up transit times and lower shipping costs. Offering 2-day shipping is absolutely essential if you want to remain competitive, and being strategic about fulfillment center locations plays a significant role in that.

Another component to choosing 3PL warehouse locations is the available infrastructure and resources in that area. Are there several shipping carriers that cover that region? Are the roads easily accessible. Can the warehouse team move inventory quickly and easily from the fulfillment center to potential customers? A greater reach translates to less money and time spent on shipping, leaving customers and eCommerce business owners happy.

Learn More About the Benefits of Third-Party Logistics

Choosing the right 3PL fulfillment provider can help you reach your eCommerce business goals with a network of fulfillment centers, logistics expertise, and cost-effective shipping options. If you’d like to learn more about the 3PL services at Rakuten Super Logistics and how we can help you grow and scale your business, contact our team today to request a quote!

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