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Who is a third-party logistics partner: How to select one?

Third Party Logistics are service partners who offer outsourced logistics support. Learn more about their advantages, working and types of 3PLs in this blog.

Logistics is an important part of any business, especially those involved in international trade. To make their functioning easier, many businesses outsource shipping and logistics to third-party partners and service providers (3PL – third-party logistics). With this method, exporters can collaborate with experts for shipping, and focus on other aspects of their business.

Who is a third-party logistics (3PL) partner?

A third-party logistics provider or 3PL is a service provider or partner who aids online retailers in controlling their supply chain. Storage and inventory management, order fulfillment, shipping organization, retail distribution, swaps, and returns are some of the common services provided by 3PLs. An exporter’s partnership with a 3PL enables them to concentrate on other areas of their business¹.

How does a 3PL work?

While the procedure associated with 3PLs can differ depending on the supplier and services chosen, below is the process²:

· Each SKU is organized by 3PL after receiving goods at its warehouse.
· The order is pushed to 3PL. Post that, goods ordered are picked up by a member of the warehouse staff using a picking list.
· Along with order receipts and order information, goods are packed in boxes.
· One of the 3PL’s shipping carrier partners prints a shipping label or the 3PL uses its own.
· From the distribution facility of the 3PL, the shipping carrier picks up the product and delivers it to the customer.
· The 3PL system receives tracking data and syncs it with the order management program.

When should an exporter consider a 3PL?

Some of the reasons to consider a 3PL are:
· When the cost of a business starts to increase.
· When the number of customer complaints are rising.
· When employees are overwhelmed with the amount of orders coming in.
· When inventory management of a business is not that good.
· When you want to expand your business.

Types of 3PL service providers

Some of the common types of 3PL providers are:

Standard 3PL providers

When exporters require most basic and important logistics, they opt for a standard 3PL provider. The services provided by these businesses are limited to product inventory and delivery.

3PL service developers

3PL service providers provide additional IT infrastructure and administration along with the usual shipping and storage. Security, shipping monitoring, and compliance management are a few of the value-added services they offer to their clients in terms of safety and dependability.

3PL customer adapters

This kind of 3PL organization takes care of almost all client’s logistical needs – managing shipping processes from start to finish and negotiating costs with carriers. Clients have access to innovative technology such as a transportation management system, which gives them visibility into the workflow.

3PL customer developers

Large companies usually opt for 3PL where the entire logistics operations are handled by the 3PL.

Pros and cons

Advantages of 3PLs

You can store your inventory at a 3PL vendor’s warehouse which is later directly transported from manufacturers. After a customer places an order online, the 3PL’s warehouse immediately ships the ordered goods. This is a straightforward and seamless process.

Disadvantages of 3PLs

Real-time multi-order tracking issues are among the significant challenges faced with several 3PLs. A crucial step in the online purchasing process is tracking orders. Things can quickly get out of control if this is not monitored, especially for large-scale orders.

Factors to consider when selecting 3PL partners

Some of the factors to consider are:
· Company’s current scenario and planned expansion.
· Specifics about the range of shipping needs.
· Competitive prices.
· Warehouse organization into zones.
· Interesting data.

Difference between 3PL and 4PL

In a 3PL model, an organization has managerial control but outsources transportation and logistical operations to a provider, which may then subcontract out some or all of the execution. For the supply chain to be more valuable, additional services like packaging and boxing may be provided.

In a 4PL (4th Party Logistics) model, an organization outsources administration of logistic activities as well as execution throughout the supply chain. More strategic management and insight are often provided by a 4PL provider. The whole logistics department of a manufacturing company will be virtually outsourced using a 4PL.

3PL vs. dropshipping

The primary producers or distributors of goods offered by dropshipping fulfillment partners are those they dropship from. The initial investment needed to launch a dropshipping business, which mostly focuses on marketing and managing an online store, is extremely low. Inventory is managed by the business owner, and management and logistics are handled by a 3PL fulfillment partner. Owners of businesses receive assistance with infrastructure and logistics from third-party fulfillment partners.

How can 3PL services help business?

Customer experience can be enhanced in two ways by a 3PL: They will guarantee effective delivery, leaving more time for sellers to concentrate on their important business operations. All e-commerce companies today strive for efficient delivery. Quick and accurate delivery is one of the top requirement criteria for customers. By offering significant infrastructure, resources, and an execution team, a 3PL provider can guarantee risk-free and on-time deliveries.

With e-commerce programs and the logistics support provided by them, selling not just in India but internationally has become simple and hassle-free.

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Amazon Global Selling is an e-commerce exports program that enables sellers to reach over 300 million international customers shopping on Amazon marketplaces in USA, UK, Australia, UAE, Singapore, and more. Apart from Amazon inventory management system and FBA, you can also use other international tools and programs – Exports Compliance Dashboard, simple listing and A+ content – that make your exporting from India easy and seamless.

To support you for hassle-free logistics, Amazon has also launched SEND, enabling you to ship directly to international fulfillment centers at competitive prices. All you have to do is book, pay and track shipments without any hassles from India to the world.

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Frequently Asked Questions

What is the difference between 3PL and a freight forwarder?

As a middleman between a client company and shipping companies, freight forwarders serve as intermediaries rather than real carriers of goods. A freight forwarder works on various logistics issues such as pricing negotiations, choosing an effective mode of transportation, and establishing cost-effective shipping routes.

Is 3PL the same as order fulfillment?

Third Party Logistics (3PL) facilities are known as fulfillment centers. Fulfillment, however, usually offers additional services that go beyond the scope of a standard 3PL and cover a range of needs. As an illustration, fulfillment centers accept, oversee, and finish online orders for clients on behalf of e-commerce brands, etc.

How do you measure 3PL performance?

Percent of deliveries made on time, order and shipping accuracy, inbound receiving time, timing of return processing are some of the key performance indicators of 3PL performance.

Which is better – 3PL or 4PL?

A 3PL provider concentrates on ongoing logistics of the supply chain, whereas a 4PL concentrates on streamlining the end-to-end supply chain. A 4PL then assumes control of the entire process.

What does a 3PL handle?

A third-party logistics provider or 3PL is a service provider or partner who aids online retailers in controlling their supply chain.

Published on January 23, 2023.

Sources:
1. https://en.wikipedia.org/wiki/Third-party_logistics
2. https://redstagfulfillment.com/3PL-definition-process-resources/
3. https://www.apsfulfillment.com/third-party-fulfillment/what-are-the-different-types-of-3PL-providers/
4. https://www.inflowinventory.com/blog/small-business-3PL/
5. https://www.inc.com/entrepreneurs-organization/5-factors-to-consider-when-choosing-a-third-party-logistics-partner.html
6. https://dclcorp.com/blog/3PL/the-difference-between-a-3PL-and-4pl/#:~:text=A%203PL%20provider%20focuses%20on,grow%20and%20expand%20your%20business.
7. https://www.nextsmartship.com/blog/dropshipping-vs-3PL-a-complete-analysis
8. https://fulfillmenthubusa.com/3PL-freight-forwarding-difference/#:~:text=A%20freight%20forwarder%20focuses%20on,products%20to%20the%20end%20customer.
9. https://home.corpcomm.com/what-is-the-difference-between-3PL-fulfillment/
10. https://www.channelape.com/blog/9-key-performance-indicators-kpis-for-monitoring-3PL-operations

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