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Third-party logistics (3PL)

Third-party logistics, also known as 3PL, helps companies manage two of their most critical operational tasks: inventory storage and shipping. Learn what 3PL is, why you should consider it, and how to choose the right partner.

What is 3PL?

Third-party logistics, or 3PL, refers to outsourcing logistics processes, such as sourcing, warehousing, fulfillment services, and inventory management. By facilitating the direct delivery of products from manufacturing to consumers, 3PL providers help reduce the workload for ecommerce brands.

Some 3PL companies offer a variety of services beyond just warehousing and shipping, including:

Others offer specialized services. For example, a company providing 3PL services to the food industry might focus on cold fulfillment. Other companies deal with hazardous materials or bulky products, such as furniture. In any case, their warehouses, transportation methods, and partner vendors should be up to the challenge.  

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How can 3PL services help your ecommerce business?

Ecommerce companies often struggle with managing fulfillment logistics—on top of their core business operations—which is why many turn to experienced 3PL providers.

Entrusting your ecommerce fulfillment logistics to a 3PL provider can offer you the following perks:

Benefit from their expertise

A 3PL service provider is an expert in logistical matters. They are familiar with international and domestic trade regulations, documentation, shipping regulations, and economic compliance. Whenever a shipping issue arises, they can pull from their experiences and find a solution. It’s essential to know your products well, but you don’t need to be an expert on everything—especially regarding supply chain complexity and unpredictability. 

Focus on business development

Logistics is a critical component of your business, but it’s often not one of your core competencies. Management usually has its hands full with responsibilities like product development, marketing strategy and planning, and other revenue-generating tasks. Outsourcing fulfillment allows you to focus on your strategic business activities without compromising a key operational process.

Increase time and cost savings

Outsourcing ecommerce fulfillment to a 3PL company allows businesses to save time and money in two ways. First, as part of their logistics service, they share their technology, transportation, warehouses, and personnel with you. Second, their expertise in supply chain management can reduce the likelihood of ecommerce businesses making costly and risky errors. For example, they can help predict inventory levels and provide valuable insights into how seasonal fluctuations may impact fulfillment.

Provide greater flexibility

Businesses go through peaks and troughs. You’ll need to pay your own logistics team regardless if you’re in a bind. But 3PL providers enable you to more easily manage market changes. You can either customize their services or shift to a lower-tier package to reduce costs. When demand picks up again, they can accommodate you by providing more 3PL warehouse space and faster deliveries, if needed. 

Promote continuous business growth

By working with a third-party logistics service, companies can reach markets they don’t currently serve—without significant upfront expenses. When you rely on a 3PL provider, you have immediate access to their equipment, labor, and warehouses. This reduces your overhead and protects your financial interests in case the expansion doesn’t pan out.

Improve customer satisfaction

Customers value quick delivery. Since 3PLs offer turnkey logistics services, you can expect faster deliveries and greater brand trust. This translates to satisfied customers—the ultimate goal for every business—and inspires loyalty and retention. On the other hand, in-house logistics that cannot meet demand will negatively impact your brand.

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How does 3PL pricing work? 

You’ll often see 3PL providers providing packaged services. But some, like Airhouse, offer a la carte pricing so you can choose which services are necessary for your business. Let’s talk about their differences:

  • All-in-one pricing means you only have to look at a single rate that covers all the associated fees. While it seems more straightforward, bulk pricing can sometimes result in less bang for your buck.
  • A la carte pricing offers more transparency. Your expenses will depend on your orders, so they vary every month. Though it may seem overwhelming at first, this pricing model is popular with growth-oriented and large enterprise brands because it allows brands to optimize their fulfillment costs.

Each company offers a different 3PL pricing model based on its service inclusions. As you evaluate their services and your needs, don’t forget to take cost and pricing into account.

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How to choose a 3PL company?

In addition to understanding a potential 3PL partner’s pricing model and cost structure, there are a few key qualities you should look for. If you intend to outsource your logistics operations to a 3PL provider, consider the following when researching and speaking with potential partners:

Excellent customer service

Since modern 3PL companies do more than just warehousing and shipping, they’re more involved in your business. This level of involvement calls for seamless communication whenever an issue arises. Better still, if your 3PL partner is proactive. Look for one who can spot problems early or anticipate your needs—and take action quickly.

Positive reputation

Logistics providers should have a good reputation not only from their clients but also from the vendors and agencies they work with. If they do, it’s a sign they can offer you great service and allow you to connect to an amazing network. For instance, a 3PL provider can find you a warehousing facility specializing in the type of products you sell—instead of you finding one yourself.

Data security

Security is an important indicator of a 3PL provider's performance. Your partner’s responsibility is to safeguard your data and the resources you give them. Using their services obligates you to comply with their security policies and protect your business information from loss, misuse, unauthorized access, disclosure, alteration, or destruction. 

Flexibility and scalability

In 3PL, flexibility equals customization—and customization supports scalability. Businesses grow. As your operations change, your logistics partner should be able to accommodate these developments. As an example, imagine you’d like to add subscriptions and wholesale services to your ecommerce business. Your 3PL partner should be able to customize a package to suit your new set of needs. Otherwise, you’ll need to find a new provider.

Branding support

Brand consistency is an essential component for any ecommerce brand. And this need for brand consistency extends to order packaging and shipping. You need to make sure your 3PL partner personalizes everything down to the shipping labels. Every detail should mirror your branding, including customer service. If you want every customer interaction with your brand to start with a satisfying unboxing experience, your partner company should have no issue adhering to your strict packaging guidelines. 

Technology

Integration with the rest of your ecommerce ecosystem is key to the success of your 3PL provider. Getting it up and running shouldn’t be difficult. Make this a priority, especially if you’re not tech-savvy. You’ll also need access to a fast, real-time interface to help you make informed business decisions.

Precision

Supply chain management shouldn’t operate on assumptions and estimations. 3PL systems should call for accurate inventory, shipping, and order processing. If you don’t trust their infrastructure, it can come back to bite you. Remember that your products will go from your manufacturer to your 3PL provider to your customers. Having to double-check the process defeats the purpose of outsourcing.

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Is it worth investing in a 3PL?

So, is a 3PL worth it? The answer will depend on your business needs and current situation. If your in-house logistics functions like a well-oiled machine, there’s no need to outsource. However, if you need expert assistance in any part of your supply chain management strategy, then look for a 3PL provider that can handle it for you. Some 3PL companies only deal with warehousing and order fulfillment, while others provide additional services, like forecasting. Find one that suits your ecommerce company's needs.

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A 3PL service can be your ecommerce fulfillment ally

Claiming that satisfactory order fulfillment is a key element of ecommerce success isn’t an overstatement. That’s why many direct-to-consumer (DTC) brands around the world rely on 3PL providers to manage order fulfillment and shipping. Using a third-party logistics provider like Airhouse to manage your fulfillment logistics can ensure smooth supply chain operations, satisfied customers, and a healthier bottom line. 

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