3PL Guide: What Is Third-Party Logistics?
Time to read 9 min
Time to read 9 min
Third-party logistics, commonly called 3PL, refers to the outsourcing of the logistics processes. This includes inventory management, warehousing, fulfillment and more.
3PL providers allow businesses to accomplish so much more, without the need to invest in the infrastructure to accomplish it. They bring industry expertise, and a wide array of tools to get your job done.
When the supply chain, warehousing, and transportation services are integrated, it is referred to as third-party logistics. Now you know!
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If you’re looking to fuel your business with a 3PL company that can take you to the next level but don’t know where to start, that’s okay.
The 3PL fulfillment process is all about making your life easier. So where do you start with working with one? Read on to find out.
A 3PL needs to receive your inventory to handle the rest of the process. That means you either negotiate shipping rates to their warehouse, or work it out directly with them as part of the cost.
Typically you will provide them with an inventory list, they will sign off on the incoming items, and the real work can begin.
Every 3PL will have their own process for receiving your inventory, but once that’s done you can move to the next steps.
Now that your items have been delivered, they need to store your SKUs in their warehouse. They’ll have more information about their warehouse capacity, security, and access.
We have an underground facility that is protected from heat and humidity, making it ideal to protect your products.
Each 3PL will have different capacities, and not all of their space is equal. You should research which 3PL warehouse fits your products the best, and will allow you to grow as you sell more products - that way you can scale.
Once stored, a 3PL will manage your inventory, which is where the real value-added services begin. Now that you’re not paying directly for leasing the storage space, you’re saving but still have real-time access to your product inventory.
At Bennett, we offer real-time inventory management so you can be confident about both our services, and your products.
Once your products are in their system, you can compare your quantity in the warehouse with how many products you sell per day. This will insure you have enough product at hand reduce downtime.
Again, make sure you research the 3PL and their services, that way you’re certain about what you are getting and how it fits into your supply chain plan.
The next step is packing your orders as requested. This involves assembly lines and automated equipment to pack your items safely, and includes packaging supplies:
The most common packing materials:
The right 3PL will be able to perform a packaging analysis and determine the best packaging materials, shipping box size, and an overall shipment strategy to cut all excess costs.
To get the best shipping rates, you must remove as much air as possible from your packaging, and the shipping freight itself - otherwise your paying for air!
Cutting down the shipping box itself, and creating a strategy to stack the items in freight will give you the best rates, and a crucial part of the process.
If you use unbranded shipping boxes and don’t consider the “customer experience” then you risk the chance of never creating a connection with your customer and not creating customer loyalty.
We can help create custom packaging for your products that screams your brand! By giving your customers an unboxing experience, and using a branded approach to your packaging, you stay in their mind longer.
The days of a one-size-fits-all approach to your packaging are gone, upgrade today!
Now a 3PL moves into actually shipping your order.
The best 3PLs will have a variety of carriers and established relationships and can negotiate the best shipping rate on your behalf. This will allow them to compare the costs and find the best rate for you.
They will also need to purchase and print shipping labels for your orders - this is either an included cost or a line item.
They will either send the box to a shipping outlet, or deal directly with a carrier who will pick it up from their warehouse.
Once the order is shipped, a 3PL should have integrated technology to give you delivery notifications - we offer notifications when orders are within a mile.
Now we can talk about the benefits of a great 3PL. Every 3PL is not created equally, and like I mentioned, it’s worth researching which is the best fit for your needs.
So about those benefits...
Your primary focus should always be your product, and your business. What if you could actually focus solely on that?
A 3PL focuses on taking your product and taking care of fulfillment. The best choices are typically turnkey solutions that are also single source suppliers.
While your focus might be management, developing new products, marketing, or growing your brand in general - a 3PLs focus is to develop better and faster assembly lines to give you the best solution, reliable results, and consistent quality.
Imagine spending your time only on your business. Improving sales, market share, efficiencies, and knowing that you had a partner who was helping you achieve all of that extremely efficiently.
The biggest benefit of an outsourced operation is reducing your overall costs of operations. A great 3PL can take on any packaging request, and process them in their own facility.
3PLs have already made these infrastructure investments and are ready to work to take your products to the next level. Think through what you would need to get your job done:
They can help save products from being damaged during the manufacturing and packaging process. They can fix any components, add new labels, and more.
Have you considered the “hidden costs” that are dragging your bottom line down? Here’s a few examples of savings.
Moving products between warehouses during packaging and distribution can raise the freight bill almost 40%.
The distribution cycle can take seven days longer, and adds extra costs for labor, storage, and carrying that inventory.
Multiple teams are required for different roles, and optimization between them is difficult.
Most companies that ship products between packagers and 3PL’s add costs of about 3% in product damages.
These are the kinds of hidden costs that can disappear with the right contract packaging partner. One that can work with you to hit every delivery you need.
Because a 3PL is focused on one aspect of the business, and they are working with a range of industries, they’re likely to be experts about their entire supply chain, and how they can help yours.
And it’s not just about the packaging itself, often they are experts in the most efficient way to apply labels, tape, and they’re even distribution experts.
They can pinpoint areas to fix your business, and help you know what your competition is doing and maximize your market exposure.
A Contract Packager is likely working with dozens of companies and knows exactly what machinery to use, which materials to include, and how to save hundreds of thousands of dollars.
They will go out of their way to source the best products for each operation, and will have access to an extensive network professionals within the industry.
Think about the following questions, do you know the answer?
A Packaging Expert will be able to give you the exact answer.
Labor management is one of the biggest factors when it comes to choosing the right co-packer. They can handle the hiring, the training, and all the management of the workforce required to package your products - which not only reduces your operational costs, but gives you one phone call to find out what the status of your project is.
Lower your overheard by taking this additional workforce off your books. You don’t need to provide health coverage, wages, or any other costs of taking on another employee.
The right co-packer will have a number of talented trained labor at their display, and available to take on your next project.
Forget about needing more space, staff, or even machinery. Let a specialty business focus on that, and add to your bottom line.
How much free space do you have in your facility? If you could move the production to another facility, you could reuse that space for your core business.
Business is off peak this time of year - why pay for that space?
If you need to ramp up production and get more product to market, outsourcing can be extremely effective to move from an internal division, or to expand on your capacity - all without needing additional space for your business. And the costs will become part of a partnership with your 3PL.
Consider their additional square footage as an extension of your own company.
Working with a 3PL gives you accessibility to a huge range of resources. They’re able to identify the right resources needed to get a job done, can access them easily, and save you all the time needed to jump into the market.
We have over 3 decades of experience, and have built up a catalogue of information, materials, resources, and more to help all of our customers with their work.
Your products packed how you want, where you need them, on-time, in-full, and on-budget.
You are growing, but you’re not sure when is the right time to take the jump. That’s normal.
When you're starting a business, you will typically handle order fulfillment, and incorporating a 3PL is a gradual process.
Here are a few signs it’s time to switch:
Plenty of categories are seasonal, so if you are selling more at certain times of the year, it doesn’t make sense to commit to staff or space.
A 3PL will be able to scale up and down to match your customer demand. They can do a huge push for sales or promotional periods, and throttle it back when it’s over.
If you business seems to move like the tide, finding the right partner could help you maxmize the selling periods.
When you started out, you had more than enough space to handle your inventory, but now you’re growing and the pain is real.
When you are struggling to cover storage, that means it’s time to either lease new space, or find a 3PL to incorporate in your strategy.
We offer a humidity controlled underground environment to keep your products safe.
By now, it should be clear why you should partner with a 3PL, but how can you pick the right one?
Yes they save you money, free up resources, help match customer demand, and allow you to focus on your product, but what if you pick the wrong one?
Gather your current supply chain plain, and make a list of key things you’re looking for in a 3PL, things you can’t live without.
And then do your research!
Bennett is a premier packaging and retail displays manufacturing company striving to protect and promote our clients' products with customized corrugated solutions. When you work with us, you’re part of the family. We will partner with you every step of the way.
With our fully-integrated design-to-delivery process, we can be the single supplier source. We are an award-winning manufacturer of virtually anything corrugate. We offer everything from plain brown shipping boxes to sophisticated, high-graphic printed point-of-purchase displays, and everything in between.
Third-Party Logistics, commonly called 3PL, will store your inventory for you, take care of fulfillment, but they do not own your products. They have the warehousing space, and expertise to help grow your business by outsourcing inventory management, shipping optimization, and cover fulfillment.
Check out our Contract Packaging Services page for more information about what we offer.
Yes! We have facilities across North America. Take a look on our Contact Page for the locations.