Third-party logistics (3PLs) companies are outsourced businesses that fulfill the needs of a company’s supply chain and logistics programs. Brands, retailers, and other merchants use 3PLs to outsource their distribution and warehousing needs..
3PLs are at the heart of the supply chain. 3PLs allow B2B, omnichannel, and ecommerce businesses to operate more efficiently by outsourcing their logistics and fulfillment needs to a third-party. These third-party warehouses offer inventory management, warehousing, and fulfillment of shipment inventory. With consumer demands increasing, warehouse customers are raising expectations on their service level agreements (SLAs) and expect that 3PL warehouses do more to serve online buyers.
But where do they fit in the Supply Chain?
From picking, packing, shipping, transportation, handling, etc. a 3PL warehouse acts as a service provider for their customer. It is important to note that 3PLs do not own any of the inventory within the warehousing process. They are an “intermediary” in which they are not the client nor the consumer. The primary goal of any 3PL is to make the logistics of the client’s business easier so that they are better at fulfilling the needs of their consumers.
Shipping, transportation, and distribution can cause inefficiencies for many brands. Most 3PL services have an extensive network that allows them to perform more efficiently than others. While some companies may prefer to work in-house, some companies leverage 3PLs as an effective outsourcing partner to utilize to drive efficiency during high seasons. Companies often prefer a 3PL to an in-house option to better address fluctuations during peak season. If companies cannot keep up with consumer demands, consumers may experience extended wait times for products/services, which in turn can create impact profits for the brand.
How Do 3PLs Manage Their Warehouses and Track Supply Chain Operations?
A warehouse management system (WMS) is a software solution used to track inventory and manage the operational processes of a given warehouse. This software provides visibility into the physical and non-physical aspects of the logistics pipeline. This includes everything from managing, shipping, and tracking inventory to better operate a warehouse’s needs.
WMS software can also be used to distinguish sections of ownership within a warehouse, assuming it manages processes specifically designed for 3PL warehouses. Sophisticated WMS solutions allow the warehouse to run more efficiently.
Functions of a 3PL Warehouse
3PL warehouses play a vital role in inventory management, warehousing, and the fulfillment and shipping of orders for their clients.
- Real-time visibility of inventory levels and status
- Reports and live integrations into shopping carts to avoid backorders and/or stock shortages
- Logging and tracking inventory locations, lots, serial numbers, and expiration dates
- WMS identifies and recognizes items/products being stored
- Visibility to the actual warehousing process
- Ease of access to inventory that sent through the logistics pipeline
Fulfillment and Shipping of Orders:
- Receiving, picking, packing, and shipping are all tracked through the WMS
- Assignment and tracking of products and storage locations through automation and software
- Complete control of supply chain logistics process to ensure consumers receive products on time
- WMS scales to support flexible periods such as peak season and low season
Why Partner with a 3PL?
Along with more efficient operations within logistics operations and the supply chain, 3PL warehouses can serve as ongoing support for their customers. 3PLs are not a one and done service. 3PL warehouses create a system that allows operations to run more efficiently so that the brand or merchant can better serve the consumer. 3PLs offer a wide variety of value by reducing supply chain inefficiencies, sharing market knowledge, and implementing industry best practices workflows.
Reducing Supply Chain Inefficiencies
3PLs offer a specialized view of the supply chain that can create a faster and more accurate approach. Most 3PLs have the technology capabilities to track inventory, handle shipping, and automate transfer of information. If the 3PL leverages a WMS, it can create a more automated approach which in turn can create a more efficient fulfillment process. 3PLs identify parts of the warehousing process that can be changed to become faster and more accurate. As with any service that a 3PL does, the end goal is to create the most proficient and efficient process to serve their customer.
In an environment where warehouse real estate commands a premium, shipping costs continue to rise, and consumer expectations demand near perfection, working with a 3PL warehouse to expand an offering or gain a new market where the brand had no known presence can be a huge advantage. Finding warehouses in locations with more direct shipping and access to high demand consumer environment can be huge for expansion. 3PLs can leverage existing shipping carrier relationships that would normally take extended time without on hand knowledge of the market. Because of the pay for services model, 3PLs often provide fewer overhead costs and fees associated with growth, allowing the brand / company to focus on their customers.
Industry expertise comes with time. As logistics and supply chain experts, 3PLs combine warehousing services into an efficient and optimized offering. Reducing costs, saving time, negotiations with shipping companies, packaging, and handling are all a part of the core 3PL offering. With so many 3PL warehouses covering so many verticals (e.g., cold storage, apparel, electronics, nutraceuticals, hazmat, etc.) and bringing decades of experience, a 3PL warehouse exists for virtually every fulfillment need.
Where does 3PL Central Fit in This?
3PLs are the intermediary between a brand and their customer. At the heart of the supply chain, 3PL warehouses can benefit the client in any part of the logistics pipeline. 3PLs are an integrated part of the business’s warehouse needs. If industry trends are any indicator of the future of 3PLs… they are more needed than ever.
To learn more about 3PL Central and how to optimize your 3PL warehouse, download our guide to evaluating warehouse management systems.
Written by Chad Kleiman
Chad Kleiman is a member of the marketing team experienced in various aspects of marketing and the supply chain as he seeks to share his knowledge with the third-party logistics industry at large in an easily digestible format.