What is 3PL or Third-party Logistics?

Image of inside a third party logistics warehouse.Image of inside a third party logistics warehouse.

There are many businesses that don’t have the space or the money needed to operate a warehouse and a full distribution network. Yet, even the smallest of companies need a way to get their product to the customer and keep up with the pace of their growing business. This is when the role of a third party logistics company becomes so vital.

What Does 3PL Logistics Mean?

The 3PL meaning is third-party logistics. The 3PL definition states that it is the logistics capabilities that are offered by another company. Basically, it’s outsourcing your warehouse and distribution network. A good 3PL company will connect a business with warehousing, distribution, and monitoring as it needs.

Storage and shipping of your products can be a costly part of business. But companies that are able to work with a third party logistics provider can get the benefits and cost savings generally reserved for much larger companies.

Now that you understand the 3PL logistics definition, it is time to move onto the way that a third party logistics company works.

The Role of a 3PL or What is 3PL Services?

A 3PL provider works in tandem with your company to help you be more efficient when filling customer orders. This efficiency helps you scale up your business, taking your business to the next stage in your journey.

Third-party logistics providers can offer various services, including warehousing, transportation, distribution, and act as a shipping and receiving department. Some 3PLs may only specialize in one of these areas, but larger and more robust providers are able to offer these four aspects and more.

For instance, a 3PL that specializes in transportation will offer the shipment of your inventory from the manufacturer to your warehouse or even between your company’s facility to your customer. Many smaller companies may be trying to handle all the shipping on their own, but by working with a 3PL, the company will be able to access better bulk rates than they would be able to receive on their own.

Who Needs a 3PL?

Not all businesses will benefit from the services of a 3PL, but it may be difficult to determine whether your company is ready to start the search or not. There are a few factors that will help determine who needs a 3PL and who can keep handling things in-house.

You might need to consider working with a third party logistics company if

  • You are having trouble scaling during seasonal fluctuations. If your regular workforce can’t meet the demands on your business when the seasonal fluctuations are at their peak, you may want need to consider outsourcing some of the packing and shipping to a 3PL.

  • You don’t have enough space to store your inventory. There may come a point where your business is growing faster than your warehouse space. A 3PL that specializes in warehousing may be something to look into.

  • You can’t expand. Offering new and better products is generally a great idea for a business, but if you find that your innovation is being stifled due to logistics issues, you may need a 3PL.

Services that a 3PL Can Provide

There are many advantages to working with a good quality 3PL provider. One big one to consider is that you will get to work with professionals with expertise in their field. The entire function is to optimize logistics. They are literally the experts in shipping, fulfillment, and warehousing of goods.

Another advantage of partnering with a good-quality 3PL is that it will limit your company’s overhead. Maintaining and staffing a warehouse is an expensive prospect for a business, and it will severely cut into the cash flow of the business. However, it is often much more cost effective to outsource the fulfillment duties to a third party logistics provider.

So if you find your struggling to keep up with the demands of growth, needing additional space and resources, or simply need to focus energy on other areas of the business. It might be time to find a 3PL solution.

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