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3PL (Third Party Logistics)

What is 3PL?

3PL is short for third-party logistics, and it refers to a business that takes care of logistics for eCommerce companies. 3PLs generally handle inventory management, warehousing, and fulfillment but often offer complementary services, including reverse logistics (returns management). A 3PL’s service list might include (but would rarely be limited to):

  • Warehousing
  • Inventory management
  • Picking and packing
  • Shipping
  • Reverse logistics

How do 3PLs operate in every stage of the logistics process?

Third-party logistics providers (3PL) provide essential services to streamline logistics operations, enabling businesses to concentrate on their main activities. These services encompass receiving, selecting, packaging, shipping, and managing returns.

  • Receiving:

    A 3PL performs essential functions throughout the logistics process. They receive merchandise from companies for order fulfillment and warehousing, often collaborating with freight forwarders for bulk shipments. Utilizing warehouse management software, they track product locations and optimize storage for streamlined order processing.

  • Picking:

    When a customer places an order, the 3PL processes it and forwards the request to the warehouse or fulfillment center. The desired items are then selected from storage in preparation for shipment to the buyer.

  • Packing:

    After the picking process, the 3PL determines the most suitable packaging method considering security, branding, and cost. Employing appropriate technology, they ensure effective and efficient packing.

  • Shipping:

    Shipping is a crucial stage where the 3PL develops a strategy encompassing shipping options, carriers, locations, cutoff times, and cost-effectiveness. By focusing on these factors, their aim is to provide timely and cost-efficient shipping services that guarantee customer satisfaction.

  • Returns:

    Returns are a common part of the shopping experience, and proficient 3PLs are equipped to handle them. When a customer wishes to return an item, the 3PL receives the product, documents its receipt, and establishes clear return handling guidelines with the seller. This enables efficient processing and resolution of return requests.

What's the difference between 3PL and 4PL?

The main difference between a 3PL and a 4PL is their level of involvement in managing the supply chain. A 3PL focuses on order fulfillment, handling tasks such as warehousing, picking and packing, and shipping. The merchant outsources these logistics responsibilities to a single 3PL partner. In contrast, a 4PL takes on a more strategic role, managing the entire supply chain and acting as a single point of contact for the merchant. They oversee multiple 3PL providers and coordinate various logistics services, including transportation, inventory management, and technology.

In summary, while a 3PL optimizes specific aspects of the supply chain, a 4PL manages the entire supply chain on behalf of the merchant. The choice between a 3PL and a 4PL depends on the business's specific needs and stage of growth.

Is Amazon a 3PL company?

Amazon offers fulfillment services through two programs, FBA and MCF. Although similar to a 3PL company, Amazon primarily operates as an online marketplace and retailer, focusing on its own retail business rather than solely providing 3PL services to other companies. The FBA and MCF programs allow sellers to utilize Amazon's logistics network for storage and shipping. Therefore, Amazon is more accurately described as an online marketplace with its own fulfillment capabilities rather than a dedicated 3PL provider.

Benefits of 3PLs

Traditionally, businesses used to handle services internally, but with the growth of eCommerce, they now outsource resource-intensive functions to third-party logistics providers (3PLs). This allows eCommerce retailers to focus on areas like marketing and customer service.

Other benefits of 3PLs can include:

  • Storage that grows with your business - 3PL warehousing space can scale with requirements as demand grows and shrinks.
  • Faster deliveries - 3PLs will often have warehouses dotted throughout regions to facilitate faster delivery.

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