A Guide to Third-Party Logistics

From warehousing, inventory management, and order fulfillment, third-party logistics is at the heart of the supply chain. For companies that rely on these logistics businesses, the receiving, storing, and shipping of inventory are crucial components to their growth—especially when the management of  the supply chain can be complicated. With the specialization of logistics functions becoming a necessity for many organizations, especially with the rise of ecommerce and omnichannel fulfillment, the outsourcing of these specific responsibilities has fallen to warehouse businesses called 3PLs, or third-party logistics warehouses.

But what exactly is a 3PL? What do they do? And what are the reasons for hiring one?

What is a 3PL Warehouse?

A third-party logistics warehouse, or 3PL for short, is an outsourced business that takes care of a company’s supply chain and logistics operations. Simply put, 3PLs are used for the outsourcing of warehouse and distribution needs for their customer’s inventory and fulfillment.

3PL warehouses manage, hold, and ship the inventory of multiple businesses or other businesses in addition to their own inventory. If they fulfill and store orders for both their own business as well as their clients, they are what’s known as a hybrid 3PL.

 

Many have 3PLs have fulfillment specialties or sub-types denoting a specific vertical or industry. These include, but are not limited to: 

  • B2B 
  • Ecommerce 
  • Retail 
  • Apparel 
  • Raw Materials
  • Bulk Goods 
  • Nutraceuticals 
  • Wines & Spirits 

What a 3PL is Not?

Private warehouses, or warehouses that only fulfill orders of their own products, are not considered 3PLs. These types of warehouses are usually owned and managed by manufacturers or retail stores. They use specific accounting, billing, and shipping software that often does not allow for the flexibility needed to manage inventory and billing for multiple customers. If a private warehouse is looking to monetize additional warehouse space, they will likely need to invest in a warehouse management system (WMS) designed for 3PLs. 

What Are the Responsibilities of a 3PL?

Third-party logistics warehouses take on important supply chain operations to help their customers focus on growing their own businesses. This means everything along the supply chain and includes logistics operations like: 

  • Scheduling and executing out the receiving of inventory to the warehouse 
  • Sorting, managing, and accounting for all inventory
  • Maintaining inventory in proper conditions 
  • Negotiating discounted shipping rates 
  • Picking, packing, and shipping products Kiting and assembling products if necessary 
  • Managing recurring subscription boxes

Why Hire a 3PL Warehouse?

Many businesses choose to hire a third-party logistics warehouse to help reduce costs while also improving customer experience. This allows warehouse customers to spend less time and money on coordination and logistics, and instead focus on the core of what differentiates them– allowing their business to grow. 3PLs offer value to their customers through speed and accuracy, regulatory navigation, and industry expertise that many businesses simply don’t have on their own.  

Speed & Accuracy

3PLs combine logistics services into one offering, under one roof

Regulatory Navigation

3PLs help businesses navigate the latest trends and regulatory changes

Industry Expertise

3PLs are logistics experts who bring value to their customers

warehouse worker quickly scanning boxed inventory

Speed & Accuracy

With consumers demanding speed and accuracy from the businesses they purchase from, hiring a 3PL who specializes in these processes makes sense for many growing ecommerce retailers who may not have the infrastructure to take on these operations in-house. 3PLs already have the technology to manage their customer’s inventory, automate routine tasks, and deliver complete visibility to drive not only value but efficiency. 

 

Regulatory Navigation

Another reason businesses opt to hire a 3PL warehouse is because of the type of inventory the business carries. Certain types of products are controlled with many rules and regulations surrounding, and unless the facility is built to accommodate these regulations, the inventory and company selling it, can be in serious jeopardy. Some products that have regulations around their storage include cold storage, hazmat, nutraceuticals, wine and spirits, and more.

3PL Warehouse Worker obeying workplace regulations with hard hat and safety vest
Third Party Logistics Warehouse Industry Expert

Industry Expertise

3PLs offer a wide array of expertise that cannot be obtained without the proper connections from years of industry experience. 3PLs are able to combine a number of services all in one offering—all under one roof. Things like negotiating lower shipping rates, picking and packing efficiency, or materials management are areas of expertise for a 3PL business. In most cases, they are much more likely to do it better and more cost-effective than a business trying to do it on their own.

Learn More About Warehousing and Logistics

The ins and outs of the supply chain and third-party logistics warehouses are vast. To learn more about 3PLs and the logistics industry, we recommend reading the 3PL Industry Glossary, or checking out some of our other logistics industry resources