For e-commerce business owners, order fulfillment is a crucial part of their operations.
As your business grows, it may become impractical to process customer orders in-house due to limited warehouse space or the need for faster delivery – especially as approximately two-thirds of consumers worldwide expect to receive their goods within 24 hours.
If you are considering bringing a 3PL service provider into your operations, you are likely evaluating the pros and cons.
In this article, we will help you make your decision, explaining everything you need to know about 3PLs in detail.
We will define what 3PL means, introduce the benefits of working with a 3PL, and guide you through the key factors to consider when choosing a service provider.
What is a 3PL?
Third-party logistics (3PL for short), also known as 3PL partner, refers to outsourcing e-commerce logistics operations to external service providers. These operations include transportation, warehousing, packaging, inventory management, packaging and customs clearance.
Using a 3PL service provider can bring many benefits, such as providing technical support, saving costs, and improving operational efficiency in a highly competitive market.
The difference between 3PL and 4PL
3PL service providers are responsible for specific logistics services such as storage, transportation and order fulfillment. They are an external partner that manages day-to-day logistics operations, but the customer still retains control over parts of the supply chain.
In contrast, 4PL service providers (also known as leading logistics service providers) go one step further and are responsible for managing the customer’s entire supply chain.
They serve as the central point of contact for operational support and communication with other suppliers, optimizing merchant logistics by taking charge of strategic operations.
4PLs typically coordinate relationships with multiple 3PL service providers and manage transportation, inventory and warehousing technology.
Working with a 4PL, you no longer need to manage multiple supplier relationships or make routine logistics-related decisions yourself.
Another key difference between 3PL and 4PL is:
3PLs typically own the logistics assets they need, such as warehouses and fleets; while 4PLs typically do not own physical assets; they provide logistics expertise and IT systems, such as fulfillment software.
3PL order fulfillment process
The fulfillment process is a key aspect of supply chain management and follows a series of steps consistent with standard supply chain procedures.
Whether you handle logistics in-house or use a 3PL or 4PL service provider, these steps are a guarantee to ensure the smooth completion of your order.
1. Receipt of goods
The first step in order fulfillment is receiving the goods. Receiving is the process of receiving, unloading, and storing inventory in a warehouse or fulfillment center.
All types of 3PL service providers follow this standard procedure, but each may receive your shipment slightly differently.
For example, some 3PLs use automated systems to scan and classify incoming inventory, while others use manual inspection and recording to ensure accuracy before warehousing.
2. Storage
When merchandise arrives at the fulfillment center, employees organize and store it. Each SKU is assigned to a designated location in the 3PL warehouse and tracked by shelf, case number or pallet number.
3PL service providers vary in their storage capabilities, and not all service providers have the same type or amount of warehousing resources.
Order fulfillment is highly dependent on warehousing capacity, so it is crucial to choose a 3PL that has enough space to support all your products and can expand as your business grows.
3. Picking
When a customer places an order, your 3PL partner should quickly find the item and prepare it for packaging and shipping.
This requires 3PLs to maintain accurate inventory records and process customer orders efficiently to speed up delivery.
4. Packaging
Different products have different packaging needs for safe transportation, and your 3PL should have the capabilities to handle these needs.
Common packaging materials include paper, tape, shockproof bags, cushioning materials and cartons. With their industry expertise, 3PLs are able to choose the best packaging method to ensure products reach customers safely.
5. Shipping
Your 3PL partner is responsible for shipping items to customers and may work with different carriers.
Some 3PLs will choose the cheapest shipping method, while others prefer specific carriers they work with. You should understand its shipping process and service scope before cooperating.
Also, find out how they handle shipping labels. Some 3PLs will print and purchase the labels for you, while others will pass that cost on to you.
6. Returns
Most 3PLs provide returns processing services to deal with situations where customers are not satisfied with an order, such as damaged goods, etc.
They will process the returned merchandise and choose whether to restock it or scrap it based on your policy.
Who needs 3PL warehouses and partners?
Whether you are a small start-up or a multinational company, 3PL warehouses and partners can optimize resources and improve efficiency.
Scenarios where you might consider using a 3PL partner include:
- Warehousing space is limited
- Difficulty managing a growing customer base
- The number of customer complaints rises
- Delays in the fulfillment process
- Shortage of manpower
- Operational adjustments are being made, such as shifting from local to international producers, etc.
Key benefits of working with a 3PL
By offloading professional work to experts, you can focus more on your core business and allocate resources more efficiently.
- Improve efficiency:3PL improves the efficiency of the overall supply chain by streamlining the entire process from warehousing to transportation.
- Cost savings:Working with a 3PL can reduce operating costs without building your own logistics infrastructure or hiring personnel. For example, you can leverage the 3PL’s existing facilities and resources and avoid moving to a larger warehouse, thereby saving on real estate investment and management costs.
- Scalable and flexible:3PLs can easily handle demand fluctuations and business expansion, adapting to growth without additional investment.
- Leverage 3PL’s experience:3PLs know the logistics industry inside and out. You can leverage their expertise to optimize your logistics strategy. For example, they can suggest optimal shipping routes and methods, or recommend the latest technology to improve inventory management and order fulfillment efficiency.
How to find the best 3PL partner
Taking the time to research and carefully evaluate potential partners can lead to a smoother supply chain, higher revenue, and happier customers.
1. Research
Start by collecting information about each 3PL service provider. Check out customer reviews, case studies, and testimonials to learn about their reliability and performance.
When choosing a 3PL, make sure it meets the following criteria:
- Have experience working with companies in your industry
- Price is competitive
- Have a good reputation
- Ability to scale as business grows
- Equipped with advanced technology, including automated warehouse management and order fulfillment systems
- Quickly adapt to changes in demand during peak seasons such as Black Friday or holidays
2. Evaluate partners
Evaluate potential partners based on their experience, capabilities, and fit with your business goals. Consider their customer service capabilities, scalability and flexibility to handle logistics challenges.
You can also ask them if they:
- Operate automated warehouse
- Provides modular and scalable solutions
- Using picking solutions and warehouse management systems (WMS)
3. Ensure that 3PL service providers use Modula’s automation solutions
To determine if a 3PL can optimize your operations, ask them if they use Modula APAC’s automation solutions.
At Modula APAC, we provide 3PL service providers with advanced warehousing technologies, such as WMS software, vertical lifting modules (such as Modula LIFT NG, Modula NEXT, Modula SLIM), horizontal rotating racks and automatic picking systems to maximize storage, improve productivity and reduce human errors.
Our solutions help 3PLs:
- Securely store and organize SKUs
- Comply with storage requirements for chemicals, electronics, pharmaceuticals or food through the use of temperature-controlled systems and special applications such as clean rooms
- Reduce reliance on manpower, further reducing human error
- Reduce costs by improving efficiency and productivity
For eCommerce business owners, order fulfilment is a crucial part of operations.
And, as your business grows, handling customer orders in-house may become impractical due to limited storage space or the need for faster shipping times — especially since two-thirds of shoppers around the world expect to receive their items within 24 hours.
If you’re thinking about implementing a 3PL provider to your operations, you’re most likely evaluating its advantages and disadvantages.
In this article, we’ll help you decide by explaining everything you need to know about 3PL.
We’ll define what it is, discuss the benefits of working with a 3PL partner and walk you through the top considerations when choosing a provider.
What Is 3PL?
Third-party logistics (3PL), also known as a 3PL partner, is the outsourcing of eCommerce logistics operations, such as transportation, warehousing, kitting, managing inventory, packaging and clearing customs to an external service provider.
Leveraging a 3PL provider offers plenty of benefits, from providing tech services and cost savings to boosting efficiency in a competitive market.
3PL vs. 4PL
A 3PL provider handles specific logistics services, such as storage, transportation and order fulfilment. They’re an external partner that manages the day-to-day logistics operations, but the client still maintains control over aspects of the supply chain.
On the other hand, 4PL providers (also known as lead logistics providers) take logistics outsourcing a step further by managing the client’s entire supply chain.
They act as the centralised point of contact for operational support and communication with other vendors, optimising logistics for merchants by handling their strategic operations.
A 4PL oversees relationships with various 3PL providers and manages transportation, inventory and warehouse technologies.
When collaborating with a 4PL partner, you don’t need to manage multiple vendor relationships or make general logistics-related decisions.
Another key difference between 3PLs and 4PLs:
3PL providers often own the assets they need for logistics services, such as warehouses and fleets. In contrast, 4PLs typically don’t own physical assets. Instead, they provide logistics expertise and IT systems, like fulfilment software.
The 3PL Order Fulfilment Process
The fulfilment process plays a key role in supply chain management, following several steps that align with standard supply chain procedures.
Whether you handle logistics internally or with the help of a 3PL or 4PL, these steps ensure the successful completion of an order.
1. Receiving
The first step in the order fulfilment process is receiving. Receiving is the process of accepting, unloading and storing inventory in a warehouse or fulfilment centre.
While all types of 3PLs follow this standard step, each may use a slightly different method to receive their inventory.
For example, some 3PLs may use automated systems to scan and sort inventory as it arrives, while others manually check and record items to ensure accuracy before storage.
2. Storage
Once products arrive at the fulfilment centre, employees organise and store them. Each SKU is assigned a designated location in the 3PL warehouse, tracked by a shelf, bin or pallet number.
3PLs vary in their storage capabilities, and not all have the same type or amount of storage.
The order fulfilment process heavily relies on warehousing, so it’s crucial to choose a 3PL that has enough space to support all your products and can scale with your growth.
3. Picking
When a customer places an order, your 3PL partner should quickly locate the item and prepare it for packing and shipment.
This requires the 3PL to maintain accurate inventory records and efficiently process customer orders to speed up delivery.
4. Packing
Different products have specific packing needs for safe transportation, and your 3PL should be equipped to handle these requirements.
Common packing materials include paper, tape, bubble mailers, dunnage and boxes. With their industry expertise, 3PLs can determine the best packing methods to ensure your products are securely shipped out.
5. Shipping
Your 3PL partner manages shipping your goods to customers and may work with different carriers.
Some may choose the least expensive option, while others prefer specific carrier partners. Before partnering with a 3PL, understand their shipping processes and transportation services.
Additionally, consider how they handle shipping labels. Some 3PLs print and purchase labels for you, while others pass this cost on to you.
6. Returns
Most 3PLs provide returns processing services if a customer isn’t happy with their order (think
Most 3PLs offer returns processing services for customers who aren’t happy with their orders, such as damaged products. They’ll process the returned goods and either restock the item in your inventory or get rid of it, depending on your policy.
Who Needs a 3PL Warehouse and Partner?
Whether you run a startup or have a multinational corporation, a 3PL warehouse and partner can optimise your resources and increase efficiency.
Consider a 3PL partner if you:
- Have limited warehouse space
- Struggle to manage a growing customer base
- Face an increasing number of customer complaints
- Encounter delays in your fulfilment process
- Experience labor shortages
- Make operational changes, such as switching from local to international manufacturers
Key Benefits of Collaborating With 3PL Partners
When you leave it to the experts, you can focus on your core competencies and allocate resources more effectively.
- Increased efficiency: 3PLs streamline logistics operations, from warehousing to transportation, streamlining the entire supply chain.
- Cost savings: Partnering with a 3PL can reduce operational costs by eliminating the need for in-house logistics infrastructure and personnel. For example, instead of moving to a larger warehouse, your business can use a 3PL’s existing facilities and resources, helping you further save on property investment and management expenses.
- Scalability and flexibility: 3PLs can easily adjust to fluctuating demand and scaling operations, accommodating business growth without the need for additional investments, such as
- Leverage the 3PL’s experience: 3PLs understand the industry like the back of their hand. Use their specialised knowledge and experience to improve logistics strategies and operations. For example, 3PLs can provide insights into the most efficient routing and shipping methods or suggest the latest technology to streamline inventory management and order fulfilment processes.
How To Find the Best 3PL Partner
Taking the time to research and carefully evaluate potential partners can pay off by providing a more streamlined supply chain, increased revenue, and happier customers.
1. Research
Begin your search by gathering information on different 3PL providers. Look at reviews, case studies and testimonials to gauge their reliability and performance.
Ultimately, when choosing a 3PL partner, ensure they offer the following:
- Experience with companies in your industry
- Competitive pricing
- A solid reputation
- Scalability to grow with your business
- Advanced technology, including automated solutions for warehouse management and order fulfilment
- The flexibility to quickly adapt during seasonal demands, such as Black Fridays or holidays
2. Evaluate the Partner
Assess potential partners based on their experience, capacity, and alignment with your business goals. Consider their customer service, scalability and flexibility in handling logistics challenges.
You can also ask if they:
- Operate an automated warehouse
- Provide modular and scalable solutions
- Take advantage of picking solutions and a warehouse management system (WMS)
3. Make Sure the 3PL Provider Is Using Modula’s Automated Solutions
To determine if a 3PL provider can boost your operations, ask if they use Modula APAC’s automated solutions.
At Modula APAC, we equip 3PL providers with state-of-the-art warehouse technology, such as WMS software, vertical lift modules, such as our Modula LIFT NG, Modula NEXT, Modula SLIM horizontal carousels and automated picking systems to maximise storage, strengthen productivity and minimise human error.
Our solutions enable 3PL providers to:
- Safely store and organise SKUs
- Comply with regulations for storing sensitive items like chemicals, electronics, pharmaceuticals or food, using special applications, such as Climate Control and Clean Room
- Reduce human workforce dependency, thereby further decreasing human error
- Cut costs through enhanced efficiency and productivity
