3PL or third-party logistics as you might know it as; is a way through which eCommerce businesses outsource some of their tasks. Mainly because of the increase in customer base, new locations, to update their manufacturing process, and other factors. Therefore, it is considered a better choice to outsource some tasks to third-party service providers. Who also have the scale that helps bring down costs.
Logistics is one such activity which is actively outsourced to third-party logistics service providers. If you are one of these businesses looking into 3PL then it’s vital you understand every part of it before jumping in.
What is Third Party Logistics?
Third-party logistics, also known as 3PL, are external service providers for logistic requirements such as warehousing, distribution, packaging, and more. These providers specialize in such operational areas. They can customize their services to scale as per the demand and needs of their customers based on various factors. These could be internal business-related factors or external ones which are beyond a customer’s control.
Besides logistics, many 3PL service providers often help customers in the production and/or procurement of goods. This ensures that the eCommerce business can profit further by relying on third-party providers. Therefore they play a vital role in integrating the supply chain for eCommerce sellers.
What are the Services Provided by 3PL Companies?
As an eCommerce seller, the following services would be useful to you as you scale up your business.
Warehousing
This process begins as soon as your business delivers the final product to the 3PL, their part of the service begins. A 3PL may also collect the goods from your factory or warehouse and charge you for the transport. Before your customers place an order the products are stored in the third-party logistics warehouse. This is where your product is stored in inventory and is entered into warehouse management software.
An SKU code is assigned to the products, which identifies where the product is placed in the warehouse. Be it on a shelf, floor, bin, or pallet the code on the SKU helps identify this. Once coded into their system, the product is visible via their software and can also reflect on your software such as Browntape which can sync these warehouses to give you an overview of your whole business. It is then up to you to see which of these SKUs reflect on your online store. Take note that some 3PL providers allow you to customize the handling, distribution, and transportation process to a higher extent than others.
Inventory Management
For some 3PL companies managing, inventory doesn’t just involve keeping a track of the products warehoused. But it includes integrating the products with your eCommerce store, synchronizing the inventory levels at each fulfillment checkpoint, and lastly to reorder the inventory to ensure that there are no stockouts.
These are end-to-end service providers and this supply chain design works well for eCommerce sellers or D2C businesses which have just one or two sales channels online. As the number of channels or marketplaces increases, you may have to start using an inventory eCommerce management software like Browntape. Your 3PL service provider might also be doing the same.
Any eCommerce inventory management software allows you to keep an eye on the stocked inventory. You can also get data as to how many units were sold per day. Besides this, as per the 3PL’s technology and workflows you can have access to and manage the real-time stock counts on the store’s website. This helps display to your customers in case any item is out of stock.
Picking and Packing
This is where the fulfillment process officially starts. This step is called the pick-and-pack fulfillment phase. Some 3PL have systems that integrate into an eCommerce aggregation platform such as Browntape. Which is then linked back to 3PL fulfillment software, to have all the orders, shipments, inventory tracking, and stock levels all in one place. This makes the whole process easier rather than manually updating a spreadsheet with the order details and so on.
Now when an order is placed, it is passed on to the warehouse picking team; who further collects the order from the locations in its respective quantities and is further passed on to the packing team. As the name suggests this team gets the order ready for shipping. The packing entirely depends on what is offered as well as what your brand prefers. Commonly used packing materials are:
- Polybags
- Unbranded boxes
- Packing tape
- Paper-based dunnage
- Bubble mailers/wrap
As per your choice of packing material, you will be charged separately or this might be included in your fulfillment package. Since they are the experts in this area the third-party providers will recommend and offer you the best options for shipping. Keeping in mind the possible damage and the practical volumetric weight. Since volumetric weight is how the shipping company charges the company.
Shipping and Receiving
Your 3PL providers focus on the management of the shipping task right from start to finish. This means that the packing team will purchase, print, and stick the required shipping labels on your behalf. Now you have to keep in mind that some 3PL have preferred shipping partners. While there are some who compare the shipping cost and choose the most affordable pricing possible.
The latter choice would be a better choice. Such 3PL providers keep in mind the customer’s delivery speed and package size to offer you the most affordable option. Shipping carriers such as the following can be opted for by your 3PL providers:
- Aramex Courier Company
- Blue Dart Courier Services
- Delhivery for Courier Services
- DHL Shipping Company
- DTDC Courier Company
- FedEx Courier Partner
These carriers will directly pick up the orders from the warehouse and ship them as per the mentioned speed and policies selected by the customer. Once this is done your warehouse management software using API will push the tracking information to your eCommerce business. From which even your customer can easily track and receive the order.
Kitting and Customization
As a plus point, you can check with your third-party logistics provider if they allow or offer your business special packaging options. This is in the case of customized gift wrapping, subscription boxes, and so on. If your third-party provider allows it then you could offer and gain an advantage over your competition. Although this would cost you a bit extra, it is possible that 3PL offers such services too.
Reverse Logistics (Returns)
It is obvious for a business to expect a few returns. And your 3PL provider can deal with returns as well. As you would be aware, they term it as reverse logistics since the item is sent back to the warehouse. Also known as RTO or return to origin. The shipping team will include a return shipping print label to make it easier to be sent back to the warehouse.
Once the item is received back to the 3PL, the providers will dispose of the item depending on the policies and preferences of your business. If not disposed of the item will be refurbished or repacked and returned to the “good” stock inventory. The service offered by the 3PL makes it convenient for your business to handle returns and therefore make sure to have a reversed logistic strategy in place.
Benefits of Using 3PL
1. Reduces Cost and Saves Time
3PL, being a business that has a large role to play in the supply-chain ecosystem, has better connections compared to individual shippers. Thus they can negotiate and avail better discounts depending on the bulk volume as well as the frequency of orders, as they have other customers apart from you This results in your eCommerce business reducing warehouse and shipping costs.
Furthermore, in the long run, your business would also be saving on the price you would be paying for labor, expanding inventory space, and other such needs. As for saving time, with the logistic task transferred to a 3PL you are left with more time on your hands. Therefore allowing your business to focus on core issues.
2. Gain Flexibility and Scalability
While your business won’t always have an all-time high demand, hence the need to scale upwards or downwards depends on the demands of the market. Therefore appointing a 3PL ensures that there is no need to commit a fixed capital on redundant and unutilized resources. And you can change your inventory needs as per the market demands.
3. Tap into Industry Expertise
Appointing a third-party logistic provider for your business can bring to you the needed knowledge in this area. Even if you aren’t well versed with the process, your provider will have the needed experience, and skill to deal with situations that might arise. They will have the required knowledge on the required documentation, import and export connect, international export compliance, and economic regulation compliance helping you with the process.
Besides, you wouldn’t need to hire specialized personnel for this matter. This allows your end product to reach customers well in time and without any hassle. Right from labeling to completing the delivery.
4. Enables Business Growth
One of the key goals that you can achieve from outsourcing to 3PL is that you can focus on the growth of the business and consider market expansion. By prioritizing your core competencies you can establish areas in need of improvement and growth. Testing new markets and areas could be your main focus. Leaving most of the tedious tasks of management to the professionals.
Cons of Using 3PL
1. Loss of Control
When you appoint a third party to take care of your logistics and shipping, you’re handing over a certain amount of control to the 3PL providers. As a business, you need to take a leap of faith that the functioning of these services will positively impact your customer satisfaction.
Since you can’t overlook the process to ensure that everything is in order, this serves as a drawback. Although you can use various integrated EDI software to keep track of the orders being processed. But also need to ensure that you are using software that is on par with the information being updated accurately. Some softwares that are used by various 3PL providers include:
- Cleo Integration Cloud
- SPS Commerce Fulfillment EDI
- TrueCommerce EDI
- MuleSoft Anypoint Platform
- Jitterbit
2. High Initial Cost
When you are just starting off with adopting 3PL the upfront investment may seem large. This cost goes into setting up the infrastructure for your business. However, in the long run, it is effective. If you are a start-up and do not have as many orders and the warehousing facilities are too expensive, opting for 3PL can be prohibitive.
But also take into consideration that if you hold back and try to skimp through the cost this could hurt the way your customers see your company, in turn hurting your initial profits. Therefore instead of a loss eventually, investing in a reputed 3PL provider will boost your customer satisfaction as well as profits.
3. Bad Service Hampers Company Image
While your company adopts the 3PL services there is a relationship of trust formed. For your customers, this relationship remains unknown. Therefore any mishaps that might occur, be it delay or shipping damaged goods, this directly reflects on your brand. Hence this makes it your duty to ensure you are entrusting a reputed and experienced third-party logistics provider.
How to Choose the Right 3PL for you
1. Flexibility to Accommodate Sales Surges
Fluctuating demands in the market calls for the need to be able to scale down and up as per your demands in the market. This is why you need to consider the future of your business where you might have a spike in sales or think of expanding. Accordingly, you need to select a 3PL partner for these future changes. Take into consideration if they have the manpower, the storage facilities, and also have the same effective performance with the surge.
2. Compatible Technology
Another point for you to take into consideration if you want your fulfillment process to be handled easily; is to make sure that the 3PL partner you choose has advanced robust technology solutions. This is in terms of fulfillment management software and in terms of the mechanical technology used. But also keep in mind that you too would need to adopt the same inventory management software used by the 3PL. Or if you use your own software, then they should have the capability to sync with the software used by your 3PL. It is possible through something called APIs. Browntape for example helps provide customized API integrations.
3. Good Company Reputation
You will be putting your trust in your 3PL partner, hence ensuring that the provider is reputable and worth your trust. Consider doing some research about the company; look for reviews, feedback, success stories, talk to other customers and you could even get a report on the company’s performance over the last few years. Only after being satisfied with the performance should you partner with the third-party logistics provider. Since this is a crucial part of the fulfillment process make sure that your 3PL partners will leave a good impression of your brand over the customers.
4. Available Facilities
It should be your top priority to check for the basic specifications needed to ensure that pairing with a particular 3PL will be beneficial. This is why before agreeing with the pair-up look at how the third-party logistics providers function. A few points to look for in your 3PL partner:
- Infrastructure: Keep an eye out to see how your 3PL providers store their inventory. Is it in a way that will cause no damage to the item? Is there enough space to accommodate your future sales surges? Are the inventory items already present in the warehouse in a good condition? And other such queries need to be addressed.
- Operational Capabilities: This would include enough manpower for the smooth running of the service. The machine and equipment used, need to be assessed. Also, make sure that the functioning of these factors is effective so that there will be no inefficacy in the fulfillment process.
- Planning: This is in the sense that, before finalizing your 3PL partner you also need to make sure of backup plans in case of any mishaps or emergencies. Therefore taking note of alternative delivery modes, customer service, and so forth. Make sure you have a written contract agreement regarding all such matters.
Top Indian 3PL/ Third-Party Logistics
1. Pickrr
This is India’s largest logistics and shipping situated in New Delhi. Irrespective of the size of your eCommerce business this 3PL provider aims to have your shipping as well as logistic problems much simpler and effortless. They provide your business automated solution with the help of which you connect all your eCommerce stores directly to the provider’s system. Now with Pickrr you can deal with international orders easily as well.
2. ShipRocket
Shiprocket, from the parent company Bigfoot Retail Solution Pvt. Ltd., is working towards creating a happy client base with their services. By removing a load of shipping and logistics from the eCommerce businesses. As they have around 20,000 happy clients with 35,000 daily shipments making them a reliable choice. Besides this, they also offer automated shipping software that can make shipping easier.
3. Shyplite
This 3PL provider can be your one-stop for all your automated logistics and fulfillment process. Allowing your business to increase efficiency in shipping as well as other steps of the supply chain. Sporting 70,000+ trusted sellers base and providing 30+ courier services. Moreover, they also have multiple marketplaces as well as carts integrations, and 26000+ shipping pin codes PAN India with 220 countries served globally. By adopting this provider you can no longer be overwhelmed with the selling cycle.
4. Shadowfax
Even if your business deals with food, eCommerce, grocery, or healthcare you can rely on Shadowfax to get your fulfillment process job done. Shadowfax covers 500+ cities, 7000+ pin codes, and 500k+ orders per day that you can assure they are agile and reliable. They have 15,000+ delivery partners to ensure that your customers receive their orders on time.
5. AWL India Pvt. Ltd.
AWL India Pvt. Ltd is an international logistic and supply chain management solution provider. This 3PL provider has around 80 warehouses, serves 75000 clients, and covers 2100 plus pin codes all done in a safe and timely manner. Besides this, they deal with a wide variety of products be it electronics, cosmetics, engineering, energy, entertainment, and many more. Furthermore, they assign appropriate vehicles from the fleet of the available ones, keeping in mind the standard shipping rules to provide accurate temperature and humidity for the perishable goods with a limited shelf life.
6. Nimbus Post
Nimbus Post has developed keeping in mind the start-up community as well as entrepreneurs making the fulfillment process easier. They provide you with the best choice with reason so you can make a well-advised choice. Besides this, they have their headquarters in Gurugram, Haryana fro where they have multiple warehouses to cater to your business needs. Moreover, they cover over 27000+ pin codes and serve 10000+ happy clients.
7. EcomExpress
Ecom Express is one of India’s leading providers of end-to-end technology-enabled third-party logistics solutions. They have their headquarters in Gurugram, Haryana, and was started in 2012. Since then making their mark in the industry. Furthermore, this 3PL partner has its presence in all 29 states of India. From which they operate in over 2650+ towns across 27000+ PIN codes around the country. Therefore making it easy to reach almost every doorstep.
Conclusion
With that, we hope that we have broken down & simplified the role of third-party logistic service providers for your understanding. This will allow ing you to take the required steps into enhancing your business. The fulfillment process is a resource-heavy part of your business but without any doubt is one of the most important parts of it. Since it contributes to your customer service experiences. Hence make sure that you are making an intelligent choice when choosing your 3PL provider.
