What is 3PL (Third Party Logistics)?

July 15 , 2022 | CATEGORY : SERVICES

3PL (Third-Party Logistics) is when a company hands over all logistics operations to an expert service provider, who will manage all aspects including warehousing, order fulfillment, inventory, packing and shipping as well as returns or reverse logistics.

The e-commerce industry is one that has seen exponential growth over the past few years. The Indian e-commerce industry is expected to grow to US$ 111.40 billion by 2025. This unprecedented growth has led to companies opting for Third-Party Logistics (3PL) to meet the rising customer expectations. 3PL is at the heart of the e-commerce industry and is the reason for its seamless functioning

No matter what the size of a business is, customer satisfaction will always be of utmost priority, and there are few things more important to a customer other than fast deliveries. However, this is easier said than done, as managing a supply chain is not just complex, but also expensive. This is where 3PL providers come in.

As the supply chain interacts with customers, errors made in logistics can seriously affect customer experience, profits and business growth. 3PL companies can help overcome a lot of these issues with their specialization in managing the supply chain process.

Services provided by a 3PL company

The role of a 3PL company is to handle all your logistics-related needs and streamline the entire process, and here’s how it is done:

  • Warehousing

Many businesses lack physical warehousing facilities, as it can be costly to maintain them throughout the year, especially given the fluctuating demands. 3PL companies allow businesses to rent spaces in a warehouse, where they can store their products. Multiple warehouses across different locations also help cut down on delivery time.

  • Order Fulfilment

Simply fulfilling an order is not enough. Customers should get their order on time, with no damage, and at minimal shipping cost. Fulfilling orders under these conditions can be complicated, as it involves coordinating a lot of resources. Order fulfillment can be make-or-break for many customers and is hence, the most crucial aspect of e-commerce.

  • Shipment consolidation

3PL companies help sellers fulfill both B2C and B2B orders. B2B orders tend to be shipped in bulk. Shipping such bulk orders, which are often large, requires a lot more resources and planning that would end up costing the seller a fortune in taxes, duties, and shipment charges alone. 3PL companies minimize these costs by expertly consolidating shipments.

  • Inventory Management

Sellers and customers are given access to a real-time view of inventory via inventory management software provided by 3PL companies. This allows sellers to plan for backorders to minimize stockouts. Being updated on inventory status helps sellers reduce the gap between demand and supply, besides accounting for inventory at all times.

  • Packaging and Shipping

There are a lot of different options for packaging and shipping decisions. Deciding the right option can vary based on a multitude of factors such as the size of the order, make of the goods, location, cost, and many more. A 3PL company can pinpoint the best option to pack and ship the order in the most cost-effective and efficient manner.

  • Reverse logistics

Facilitating returns is crucial to ensure customer satisfaction. Even with the best resources and services, there are bound to be a few miscalculations along the way. Products may need to be returned due to damage, incorrect fulfillment, and dissatisfaction. Reverse logistics is an essential part of the supply chain to ensure a good customer experience.

Apart from these core services, many 3PL companies also provide IT services, real-time tracking, compliance support, financing options, and other customizable services to streamline the supply chain process.

Why opting for 3PL makes sense:

3PL companies provide professional services that streamline your supply chain and bridge the gap between a buyer and seller. It allows for flexibility and scalability as and when needed to be able to adapt to the changing needs of the market and supply.

Their operational and technological expertise guarantees access to the best resources and latest technology for the business to efficiently adapt to the industry with ever-changing requirements. 3PL companies leverage their industry expertise to save time, money and be more responsive. But, most importantly, customers enjoy a more satisfying experience as a result of superior services. Delegating this responsibility also means the business can make better use of the saved time and resources and focus on other areas of the business.

Logistics is a complicated process with many moving parts. Although it may be manageable on a small scale, the rapid increase in the growing demands of the customer expectations can be challenging.

Statistics suggest that 44% of online shoppers abandon their carts because of shipping charges and 24% have cancelled their orders due to shipping delays. A 3PL company allows the seller to be able to expand their reach with the help of inventory distributed across multiple geographical locations. This bridges the gap between the shopper and seller and ensures fast and affordable deliveries.

Thus, the highly sophisticated operations and services provided by 3PL companies are vital for a business to stay competitive and be successful.