As companies grow they encounter many challenges associated with an increased customer base, new locations, updated manufacturing methods, and other factors. For some companies, meeting these challenges with investment in capital and overhead is ultimately not the most financially viable option. Many times, it’s a better choice for these companies to look outside their walls to 3rd party logistics services providers to deliver the enhanced functions that they need to continue growing. Logistics is certainly one of those functions that can benefit greatly from choosing the right third-party partner. This is where 3PL comes in to play.
What is 3rd Party Logistics (3PL)?
3PL stands for ‘third-party logistics’. This refers to a variety of logistics services and processes that are provided to a business by an external company, including inventory management, warehousing, and fulfillment. A business may choose to work with a 3rd party logistics services provider for a variety of reasons, such as wanting to reduce costs, improve efficiencies and expand capabilities. 3PL services are usually flexible and scalable based on the needs of the business, meaning that they can be utilized on an as-needed basis, or as a long-term solution depending on the goals and objectives of the business.
The 3PL Order Fulfillment Process
The order fulfillment process is a crucial aspect of logistics, and it is where 3PLs play a significant role. When a customer places an order on your ecommerce website, the 3PL fulfillment process begins. Let’s explore the various steps involved in the order fulfillment process:
The first step in the 3PL fulfillment process is the receiving of inventory. When your products arrive at the 3PL warehouse, they are checked in and stored. Each 3PL has its own receiving process, which may include filling out a Warehouse Receiving Order (WRO) to ensure organized and timely receiving.
After receiving the inventory, the 3PL stores your products in their fulfillment centers. Each SKU is assigned a dedicated storage location, such as a shelf, bin, or pallet. It is essential to choose a 3PL with sufficient storage capacity to accommodate your current inventory and allow for future growth.
When a customer places an order, the picking process begins. The 3PL’s warehouse management system (WMS) generates a picking list for the warehouse staff. The pickers locate the ordered items in the warehouse and prepare them for packing.
Once all the items in an order have been picked, they are packed securely for shipping. The 3PL uses standard packing materials such as boxes, bubble mailers, poly bags, and packing tape. Some 3PLs offer custom packaging options to help enhance the unboxing experience and reinforce your brand.
After packing, the order is ready for shipping. The 3PL purchases and prints shipping labels on your behalf. They work with various shipping carriers to ensure timely and cost-effective delivery. Once the order is shipped, the 3PL may provide tracking details to both you and the customer.
Many 3PLs also offer returns management services. If a customer needs to return a product, the 3PL handles the process, including restocking or disposing of the returned items. Some 3PLs even provide return shipping labels to simplify the returns process for customers.
Why Choose a 3rd Party Logistics Service Provider?
Whether you are B2B, brick-and-mortar, omni-channel retail, or direct-to-consumer e-commerce business, there are many reasons why companies choose to go the 3PL service route. Often, as a company grows, the need for warehouse space increases beyond that business’ ability to manage it. 3PL warehousing can be a good option for companies facing storage capacity issues. Other companies may be challenged with increasing transportation costs and investment in equipment and vehicles. The large fleets of modern vehicles and equipment that are available through 3rd party logistics services providers are often a much more cost-effective solution. Then there are US businesses looking to expand into the Canadian market – a good 3PL will have the depth of experience to help solve many logistics challenges involved with these scenarios.
Other reasons why companies may choose to partner with a 3PL include challenges with customer service, order fulfillment, returns, order tracking, technical services, inventory management, and more. As you can expect, the more of these struggles that a company faces as they grow, the more value a 3PL partner can provide.
6 Benefits of 3rd-Party Logistics Services
3PL logistics providers can deliver a great deal of value to companies such as direct-to-consumer (DTC) e-commerce retailers that are dealing with the challenges associated with rapid growth or changing market conditions. Here are some of the main benefits that can be realized by utilizing 3PL logistics.
1) Cost Savings
3PL providers have vast networks of resources across the country and the globe. This includes warehousing space, trucking, and transportation fleets, human resources, and technology that your company can take advantage of without the necessary massive investment in overhead and capital setting this all up on your own would require. This level of flexibility adds up to significant cost savings which have a big impact on the bottom line.
The level of service you obtain from a 3PL provider is entirely up to you and can be adjusted to accommodate different levels of business due to seasonal or cyclical demands. For example, if your company sees a big surge in orders every year for the holidays, 3PL companies can scale up services and labor accordingly to meet high demand needs, and then go back to normal levels once the surge subsides.
In addition to the savings in capital costs, many companies see significant savings in time through 3PL services. This can take the form of lower cost per unit shipped, faster transportation and reduced delivery times, and the ability for the whole organization to devote more time to its core specialties, including product development, customer service, sales & lead generation, or market growth.
Improved efficiency means a greater return on your investment.
4) Customer Experience
In addition to business-side benefits, there are many customer-facing benefits to 3PL services. Companies can expect to achieve faster and more reliable delivery times, improved tracking and order status communication, reduced chance of damage or incorrect product packing, and more. All these benefits make a big difference in overall customer satisfaction and retention while improving the average lifetime value of customers and your brand image.
5) International Reach
When an American company expands beyond its country’s borders into Canada, a new set of challenges arise in the form of regulatory compliance, customs clearance, and communications. 3PL providers are able to assist companies with a smooth and efficient entry into new markets through the use of their established & extensive Canadian networks.
For anyone considering a move into Canadian markets, the guidance available from experienced 3PL logistics providers is extremely valuable.
Canadian companies looking to expand into the U.S. can also work with a 3PL provider on a southbound fulfillment strategy that enables them to leverage the cost savings from the Section 321 exemption. Section 321 is an exemption in the Canada-U.S.-Mexico Agreement that allows small shipments valued under $800 USD to enter the U.S. duty-free. For DTC e-commerce retailers, this offers an opportunity to reduce their cost per unit through waived or refunded import duties on items that enter Canada bound for U.S. recipients.
6) Strategy and Planning
3PLs can take a strategic approach to your business and look at ways to reduce costs, risks, and complexity within your supply chain. In today’s borderless e-commerce market, a cross-border strategy is crucial. E-commerce retailers have seen great success in creating a more efficient supply chain through a combination of localization and Section 321 fulfillment, supported by a 3PL provider’s network.
Using localization and Section 321 as a strategy not only saves money on duties and tariffs but also creates a more efficient North American distribution model. By consolidating distribution in strategic centers in Canada, e-commerce retailers can optimize operations by servicing both the U.S. and Canadian markets from a single location (rather than having both U.S. and Canadian distribution centers servicing each market).
The right 3PL will have in-depth knowledge of the U.S. and Canadian supply chain industry, strategically located warehouses, and relationships with top U.S. carriers to help you create a competitive advantage. In addition, they will provide comprehensive support with strategic planning to maximize your fulfillment operations.
Services Available from 3rd Party Logistics Service Providers
While virtually any logistics function can be done by major 3PL providers, these are the most common logistics processes and services available from leading Canadian third-party logistics companies.
- Warehousing & Inventory Management
- Order Packing & Fulfilment
- Value Added Services
- Certified Technician Services
- Transportation & Shipping Coordination
- Order Tracking & Status Communication
- Customer Service
- Returns Processing & Reverse Logistics
- International Logistics & Customs Expertise
- Custom Solutions
How SCI Can Help Your Business
SCI is a leading 3PL provider that offers a comprehensive range of fulfillment services. With a network of strategically located fulfillment centers, advanced technology, and dedicated support, SCI can help streamline your logistics operations and enhance the customer experience.
Here are some of the key features and benefits of working with SCI:
1) Fast and Affordable Shipping
SCI ‘s distributed inventory model allows for faster and more cost-effective shipping. With fulfillment centers strategically located across the United States and globally, SCI can store your inventory closer to your customers, enabling fast shipping options at affordable rates.
2) Inventory Management
SCI provides powerful inventory management tools that allow you to sync inventory across multiple sales channels, view real-time stock levels, and automate reordering. With full visibility into your inventory, you can prevent stockouts and ensure efficient order fulfillment.
3) Returns Management
A returned product isn’t the end of its life. Find cost savings and operational efficiencies with SCI’s seamless returns management services, including return processing, inspection, and restocking.
4) Kitting and Packaging
SCI enables you to customize your orders with kitting and branding options. From custom packaging to seasonal promotions, you can create a memorable unboxing experience that reinforces your brand identity.
5) Dynamic Business Intelligence
Our award-winning integrated Business Intelligence (BI) tools give you end-to-end supply chain visibility so you can stay connected to your day-to-day to make nimble and informed decisions.
SCI’s intuitive, easy-to-use BI portal provides on-demand reporting and insights on your key business metrics, including:
• On-hand inventory
• Open orders
• Track and trace
• Performance dashboards highlighting trends and key insights on your business.
6) Strategy and Planning
SCI takes a strategic approach to your business and looks at ways to reduce costs, risks, and complexity within your supply chain. During implementation, over half our time is spent understanding your brand, your business, and your pain points. Equipped with this information, we combine the best suite of solutions to optimize your operations. Our goal is to design a fulfillment solution that will enrich your business and exceed your customers’ expectations. By leveraging insights from our award-winning Business Intelligence tool we can continuously optimize operations and anticipate issues before they happen.
In today’s competitive e-commerce landscape, efficient logistics operations are essential for business success. Partnering with a third-party logistics (3PL) provider can help you streamline your fulfillment processes, reduce costs, and improve customer satisfaction. Whether you need assistance with inventory management, order fulfillment, international shipping, or returns management, a 3PL can offer the expertise and resources to support your business growth.
As your company continues growing, it’s inevitable that you will encounter additional challenges related to rising costs, increased logistics complexity, and changing customer needs. 3PL logistics can be an excellent way to address these challenges before they become a hindrance to the continued success of your business. Identifying the areas where 3PL service can bring the most benefits to your company may be difficult, but with the right 3PL partner, you’ll get the guidance and direction you need to implement an effective plan.
SCI prides itself on adding value to our client’s business by removing friction points and seamlessly delivering on their business strategy. Through continuous improvement processes, business intelligence tools, data-driven insights, and progressive technology, SCI’s integrated team of experts are committed to reducing costs, risks, and complexity within the supply chain. By optimizing supply chain operations, our clients gain the competitive advantage they need to scale their business.
Contact us today and we will be glad to answer any questions you have about how 3PL logistics can bring your business forward and achieve your goals.
1) What does 3PL stand for?
3PL stands for third-party logistics. It encompasses the outsourcing of logistics processes, including inventory management, warehousing, transportation, and order fulfillment, to a third-party business. This model allows companies to focus on their key competencies and improve their operational efficiency
2) Why are third-party logistics important?
Third-party logistics (3PL) are important because they offer outsourced logistics services. This allows companies to focus on their core competencies, while the 3PL provider takes care of procurement, fulfillment activities, inventory management, warehousing, and product delivery. For eCommerce businesses, in particular, 3PL providers can reduce fulfillment errors and free up time for other priorities, enhancing efficiency and cost savings
3) What is 3PL and 4PL in logistics?
3PL and 4PL in logistics refer to third-party logistics and fourth-party logistics respectively. While 3PL providers offer outsourced logistics services, 4PL refers to a situation where a 3PL provider outsources its own contracted services
4) What industries benefit most from 3PL services?
3PL services are beneficial to a wide range of industries, including e-commerce, retail, technology, and healthcare. Any business that deals with inventory management, distribution, and transportation can benefit from the expertise and resources offered by 3PL providers to streamline their supply chain operations.
5) Can a 3PL service help with international shipping and customs clearance?
Yes, many 3PL providers offer international logistics services, including customs clearance and compliance. They have the knowledge and relationships with global carriers and customs authorities to ensure smooth cross-border shipments. By leveraging their expertise, businesses can navigate the complexities of international shipping more efficiently.