What Is The Purpose Of 3PL Fulfillment?

What is 3PL fulfillment?

Definition

The term 3PL fulfillment is used when a business outsources the logistics operations of storing, moving, picking, packing, labelling, shipping, tracking, and delivering customer orders to a specialist third-party logistics provider third-party logistics company (3PL).

Third-party fulfillment services, including inventory management, warehouse management, order fulfillment, and transportation services, help companies maximise their supply chains and logistics operations, eliminate operational burdens and save costs.

Options of the scope of services

3PL providers offer different logistics services and scope of work, which can be scaled up or down as the need arises.

Sometimes, 3PL fulfillment encompasses the entire supply chain process, including warehousing, fulfillment centres, managing inventory, forecasting, and reverse logistics. Only parts of these processes, such as shipping and delivery, are outsourced.

Principal Logistics Technologies specialises in WMS and SCM software solutions for businesses of all sizes, 3PL providers, and 4PL providers.

To find out what we can do for you, or to book a demo, please contact us.

You can call us on +353 (0)1 683 33 33 | +44 (0)121 368 0057 or email us at info@principalsystems.com

What are the benefits of outsourcing fulfillment to a 3PL? (Third-Party Logistics Provider.)

Sustainable global supply chain management solutions

Value added services

3PL fulfillment centres specialise in logistics and value-added services, providing comprehensive supply chain management solutions, allowing your business to focus on its core competencies.

Professional collaboration and business contacts

The top 3PL providers have built strong associations with all the reputable stakeholders in international and cross-border trade and strictly regulated industries, to help them navigate the complex maze of legislation, customs, taxes, regulations, and protocols.

3PL providers have also established reliable connections and relationships with the top transportation contractors, customs brokers, and local experts in countries or regions where your business has no footprint or known reputation.

Those relationships enable them to identify local infrastructural limitations, language barriers, systemic obstacles and disruptions, idiosyncrasies, and expectations and develop and implement viable solutions.

Cross-border expertise and local business connections

It is often necessary to use multiple modes of transportation to move goods from your warehouse to a customer, possibly in a remote town in another country, leading to considerable challenges that can only be solved by a 3PL that understands the conditions along each step of the shipping route and can move goods by sea, air, rail, and road, all within a single order.

Access to geographical networks on both sides of the international borders becomes a major issue if a company chooses to manufacture or fabricate products in a different country because of labour issues, tax benefits, lower cost of production, and availability of raw materials and resources.

3PL providers can manage order fulfillment along the entire process from production to warehousing and final delivery to the customer or only those logistics processes you choose to outsource.

Worldwide opportunities

Seasonal opposites in the northern and southern hemispheres present challenges but also create immense business opportunities that require agility and ready access to the kind of expertise offered by 3PLs. Using 3PL fulfillment helps you make the most of these opportunities while eliminating most or all difficulties.

Cost savings

Outsourcing logistics operations to 3PL providers can help you achieve cost savings and improve profitability in several ways:

Capital expenses

Working with a 3PL partner largely negates the need for expensive investments in warehouses, vehicles, equipment, technology, conveying systems, and trained staff. This is true especially when you need more or fewer resources at different points in the business cycle.

Economies of scale

By combining orders and logistical processes of various businesses,3PL third-party logistics providers) can achieve volume discounts and create cost-effective shipping, storage, and delivery solutions. Freight consolidation and shared warehousing can further reduce costs.

Some 3PLs handle economic bulk orders that are divided and distributed to various distribution centres or retailers, allowing you to benefit from the lower costs without having to carry the expense of the entire order.

Coping with seasonal fluctuations

Most businesses experience seasonal or cyclical fluctuations, often leading to fruitless expenditure for unused warehouse space and storage, idle equipment or vehicles during the low season or having to rent additional space during the high season.

By paying only for the logistical services as they are required, businesses save on variable costs per transaction when volumes increase or decrease, keeping pace with your business’ profits.

Improved productivity

Affordable access to advanced technology

3PL providers aggregate several enterprises onto a single platform, enabling them to invest in skilled staff, automation, and technology such as WMS, SCM, transportation management, freight analytics, and performance metrics software, more cost-effectively than a single business. Partnering with a third-party logistics company gives you affordable access to those resources, increasing your output and profitability.

Leveraging the 3PLs resources

In addition to improving their business operational efficiency, you can leverage the 3PL partner’s investment to grow your business. Their technology and software solutions can analyse and predict trends, streamline your processes, and improve customer service, significantly enhancing your business’ efficiency and productivity.

Lower labour costs

Labour expenses include not only salaries, but also health insurance, leave and sick leave, and often other benefits packages, as well as the cost of supervision and training. This places a huge financial responsibility on your business. By using 3PL services, they take on that burden.

Access to skilled labour

New staff require intensive, often expensive, training and existing staff need refresher courses. Human resource management is also a costly and time-consuming duty of management.

A 3PL provides immediate access to expertise and skilled labour, largely removing the labour burden from you and ensuring continuous availability of workers, adapting to seasonal demands.

Regulatory compliance

It can be expensive for any business to retain experts on diverse and complex regulatory compliance of various industries, distribution practices, consumer legislation, and cross-border trade. Non-compliance can cause costly delays or even hefty fines and confiscation of goods.

3PL partners understand the transnational regulatory web and have the documentation and processes to ensure compliance and seamless processes, eliminating the risk of costly disruptions.

Ready access to industry and logistical expertise

3PL partners provide access to specialised expertise, advice, and support, in logistics management of the various industries, helping your businesses improve efficiency and reduce costs. They are logistics specialists fully equipped to deal with new business trends and complexity, keeping you updated, and saving you time, frustrations, and money.

Cost-effective access to up-to-date advanced technology

3PL providers invest in advanced technology and automation, providing your business access to state-of-the-art techniques and equipment for order processing, inventory management, and real-time tracking.

A reliable 3PL provider will ensure their systems and technology are constantly updated, giving you the benefit of the latest upgrades, without additional costs.

The best 3PL services will also invest in the best warehouse management software, supply chain management solutions, and online security, staying abreast of all the latest developments and innovations taking advantage of market trends, securing your data, providing reliable data analysis, and forecasting market trends.

Without huge capital outlays, you can leverage their technology and software solutions to facilitate supply chain integration and drive your business’ success.

Reduced shipping costs and delivery times

 We live in an age where customers have come to expect swift delivery and value for their money. The leading online stores have set the bar and customers expect the same swift delivery, even from a small online store.

Superior shipping capacity

• A reliable 3PL can help you improve delivery time at affordable rates, leading to greater customer satisfaction. 
• Your business benefits from economies of scale and the 3PL aggregating transactions across business partners to reduce shipping costs.
• 3PLs can economically offer a much wider range of delivery options according to size, weight, packaging, and type of products, all of which radically impact shipping costs and delivery times.
• Using innovative technology and software solutions, dedicated 3PLs improve efficiency through streamlined picking, sorting and packaging processes.

Bigger footprint

• Larger 3PLs can reduce the travelling distances and concomitant expenses by using a network of strategically placed warehouses as hubs in different regions.

More efficient customs clearance

• Customers do not distinguish between the various stages of shipping and delivery and hold the online business responsible for any delays, even in ports and customs clearances.
  Well-run customs clearances by an experienced 3PL provider can significantly speed up your deliveries, with greater customer satisfaction.

Scalable warehousing and storage capacity

• 3PLs offer a wide network of safe and secure warehousing facilities. By multiplying the warehouse hubs, you are effectively closer to your customers. Because a diverse or greater selection of variations of inventory can be stored in these warehouses, you may have the opportunity to diversify.
• You can benefit by renting scalable storage space in a 3PLs warehouse at a lower cost per square metre, according to market conditions, especially for cyclical variations and peak times without having to invest in expanding your warehousing facilities.
• Cyclical variations require the flexibility of inventory, storage and staff requirements, the volume of fulfillment, and increased shipping and delivery capacity. Worldwide, businesses see an order ratio of almost 10 times during peak periods compared to low season.
• This means you need to scale up during peak periods and scale down again afterwards. With in-house order fulfillment, this will require complex labour issues, hiring, training, and firing staff, paying for equipment that will only be fully utilised during peak periods, and finding additional warehousing storage space at the same time as most other businesses in the same position.
• During peak periods, demand for additional storage capacity is at a premium, making it expensive and difficult to find. With a 3PL contract, you can scale up or down as your requirements and business volumes change.
• Hiring and training temporary staff during peak periods can become untenable. Not only is it expensive, you will probably compete for the same labour pool, driving up wages and making it harder to find skilled workers. Using a 3PL all but eliminates this problem.
• A range of storage options are available, including pallet-, bin-, or shelf-storage.
• You profit from the 3PL’s automation and trained staff as your needs vary, without capital outlay or overhead costs.
• Advanced software solutions give you full visibility of stock levels in different warehouses so you can manage inventory and track movement from anywhere on your smart device in real-time.
• Some 3PLs offer kitting services, customisation, sorting or assembling parts, etc. from several warehouses.
• 3PLs can help businesses improve customer service by offering same-day or free shipping and simplifying reverse logistics. 

Outsourcing fulfillment allows you to focus on your core competencies and business expansion

• Logistics are a crucial part of your business success, but are expensive and time-consuming, often leaving little time for innovation.
• Some companies, such as manufacturers and fabricators, are brilliant at what they do but are distracted by the tedium and red tape of logistics.
• Your 3PL services provider will focus on the operational issues, leaving you free to concentrate on strategic planning and management.·   
• Outsourcing fulfillment to a third-party logistics 3PL) partner ensures efficiency and leaves business leaders free to concentrate on the creative aspects of their business, such as developing new products, identifying new market opportunities, and developing strategic advantages.
• As businesses grow, the management demands evolve, making it difficult for the owners to cope with all aspects of the business, often leading to failure. Ensuring the practical aspects of order fulfillment and fulfillment are in good hands, they can focus on the changed demands on their time.
• eCommerce is largely data-driven in a fast-changing world, requiring quick but informed insights and decisions. Leveraging advanced software solutions and data analytics offered by 3PL providers gives real-time inventory visibility and tracking, predicting market trends and anticipating events.
• This allows you to respond quickly, for instance, by adjusting prices, changing or adding offerings, or revising product availability.

3PL fulfillment helps to increase sales

3PLs can become directly involved in the sales support of your business in several ways:

• With the expanded capacity and “on-tap” expertise 3PLs offer, you can cost-effectively expand into new markets and product lines through multi-channel platforms.
• By choosing a 3PL with advanced IT functionality, you can develop unique brand and marketing strategies. This includes creating brand awareness using video content; direct response to TV adverts; product demos; webinars; an online store; content articles; blogs; subscription programmes; loyalty and club plans where members get different products tailored to their interests; and regular product promotions.
• Employing vendor dropship strategies, where the 3PL delivers products to the customer, directly from the supplier.

3PLs can expand your distribution network

Finding the right 3PL with an extensive reach and distribution networks that match your vision, enables you to optimise the physical distribution of your products in diverse locations.

Handling reverse logistics

As the name implies, reverse logistics is the opposite of (forward) logistics, with products flowing in the other direction, from the consumer back to the supplier for refunds, repairs, replacement, refurbishment, recycling, and ultimately disposal.

This has become a huge component of the eCommerce platform and can either be a huge headache, or a huge opportunity if handled correctly.

You can use 3PL reverse and logistics services to strengthen customer relationships and loyalty, boost exchange or repurchase, recoup some of the original value, and responsibly manage environmental impact.

Who should use 3PL fulfillment?

Nearly all business types can reap significant benefits by outsourcing fulfillment services. The scalable options offered by 3PL providers make 3PL fulfillment viable for all types of business, big and small and allow you to scale up as your business grows.

Whether a big or small enterprise, it should be clear how many benefits can be gained from employing a suitable 3PL provider but it is of the utmost importance to do thorough research and find the right 3PL that suits your business goals and strategies.

Factors to consider when evaluating 3PL Providers

• Pinpoint your business scale, vision, complexity, business volumes, and specific needs for outsourcing and fulfillment process 3PL fulfillment.
• Clearly define your KPIs (key performance indicators) and measure the working with a 3PL against those.
• Determine the importance of customised solutions and specialised industry or product expertise.
• Thoroughly research their experience, expertise, competence, software and technology capabilities, infrastructure, reach, distribution network, and capacity. Depending on your type of business, bigger is not always best. Find a match for your needs.
• Assess their reputation, customer experience, support services, and customer satisfaction.
• Review their financial stability, security, compliance with regulatory requirements and industry standards, and longevity.
• Evaluate the amount of control and supervision of service levels required.
• Ensure there are well-defined and clear communication channels between you and the 3PL provider.
• Build a strong partnership. You need to build a lasting and trusting relationship with a 3PL provider that shares your vision and takes ownership of your goals.

Businesses that can benefit most from 3PL fulfillment

eCommerce

Business-to-consumer (B2C)

This is arguably the most common business model, where businesses buy products in bulk and resell them directly to the consumer.

This type of business could include traditional brick-and-mortar wholesalers or retailers, warehouses, and distribution centres, to purely online stores from a warehouse or directly from the producer.

The process typically involves sourcing, ordering, receiving, warehousing, processing customer orders, picking and packing, shipping and delivery, and after-sales customer communication. The more complex these processes, the greater the need for a 3PL fulfillment centre and customised value-added solutions, but even small eCommerce businesses can benefit from leveraging the expertise and capacity of 3PL fulfillment to lower costs, and more efficient shipping and delivery.

Consumer-to-business (C2B)

This business model is distinctive in that traditional consumers, such as review platforms, bloggers, SEO writers, webpage designers, graphic artists, focus groups, celebrities, labour contractors, and so forth, provide goods or services to companies.

3PLs create the link between these providers and businesses that need to advertise and grow their business.

Business-to-government (B2G)

Companies selling goods or services to government agencies are required to comply with strict procedures, regulations, laws, and conditions.

Specialist 3PL services providers can help them seamlessly navigate the complex labyrinth of procurement and fulfillment.

Dropshipping

Typically, a business pays a drop shipper to sell and distribute a variety of products to consumers, without having to carry a large inventory.

3PL fulfillment allows a drop shipper to scale their business according to demand and delivery areas, ensure quality control of products, consolidate goods from multiple suppliers, customise packaging, and reduce shipping and delivery costs. You can build your separate brand through customised packaging.

Direct-to-consumer (D2C)

Manufacturers or producers of a particular brand, product, or commodity sell it at lower prices, directly to consumers, without middlemen like wholesalers and retailers. 

3PL fulfillment enables D2C e-commerce store brands to compete against large e-commerce platforms like Amazon, eBay, Temu, etc.

International trading

Multichannel. eCommerce fulfillment across international borders has become the norm and an increasing number of companies are using 3PL fulfillment to benefit from their expertise and distribution networks.

Summary of the 3PL fulfillment process

The scope of services varies greatly, depending on your needs and the capability and specialisation of the 3PL. Some offer basic services like picking, packing and shipping; some specialise in complex regulated industries outsourcing logistics; yet others provide a fully blown fulfillment service. Here is a summary of the most common 3PL fulfillment services:

Warehousing and Storage

• A range of organised, safe, and secure warehousing facilities and inventory management, either for all inventory or for supplementary warehousing and storage.
• A range of storage options is usually available, including bulk storage, bonded warehouse, pallet racking, mobile shelving, static shelving, multi-tier racking, bin storage, cantilever racking, automated storage and retrieval, and cold storage.
• Regulatory compliance with the storage of various products and raw materials. This includes the safety of workers, the proper storage and handling of goods and hazardous materials, food safety, environmental standards, and the efficiency of operations. 

Supply chain and inventory management

• Planning and forecasting demand and trends to ensure proper stock levels and prevent overstocking or stockouts.
• Sourcing inventory materials or goods and services.
• Coordinating and managing supply chain processes from beginning to end, providing full visibility and real-time inventory information.
• Warehouse management, flow, storage, and tracking of inventory to optimise storage space, retrieval, and accuracy.
• Using advanced WMS software, specialised technology, and equipment for handling, storing, retrieving, packaging, and delivering goods.
• Managing shipping and logistics operations to ensure regulatory and legal compliance and swift and cost-effective delivery.
• Customer satisfaction and follow-up communication and marketing.
• Reverse logistics.

What is the possible downside of 3PL fulfillment?

Since you have less direct control over order fulfillment, you will have to ensure you select a trustworthy 3PL partner.

You may be exposed to data loss if you select a 3PL partner with 100% data security.

Make sure there are no hidden or unexpected costs.

Before selecting your 3PL partner, ascertain that all software and technology are reliable and compatible with your systems and integrate your e-commerce platforms.

Clarify all communication challenges before entering into a contract with a 3PL services provider.

What is the difference between 3PL and 4PL?

A 3PL third-party logistics provider serves as a fulfillment partner along the supply chain. 3PL providers typically have multiple fulfillment centres helping several industry partners to reduce logistics costs and boost day-to-day operational efficiency.

Fourth-party logistics providers normally act as consultants or outsourced logistics specialists. They are sometimes called the Lead Logistics Partner (LL) and function at a higher integration and optimisation level, aligning logistics with business goals. They typically take full responsibility for end-to-end logistics, coordinating the activities of more than one 3PL to improve overall performance and effect cost savings across the entire supply chain strategy.

For expert advice and service to match your company’s size, and WMS and SCM requirements, contact Principal Logistics Technologies online or by telephone at +44 (0) 161 888 2580.