As your business grows online, you may have heard the phrase ‘third party logistics’ being thrown around. Maybe you’ve heard from brands who swear by them for their success? Or maybe you’ve even been approached by some asking for your business?
Third party logistics doesn’t have to be as complicated as it sounds. However, if you’re not sure exactly what a third party logistics business is and how they work, it might seem daunting.
But, it doesn’t need to be this way! In fact, if implemented at the right time of your business growth, one day you will probably look back and wonder how you could have built up your brand without one!
So, to help you get a foothold in the world of third party logistics companies, we thought we’d help you get to grips with the absolute basics – just what is one exactly, and how can your business work with one?
Let’s begin – what is a third party logistics provider?
Basically, a third party logistics provider is a company that fulfills your ecommerce orders for you. Typically, they will house your product inventory for you in one of their own fully-serviced warehouses. As your orders come in, your third party logistics provider (or, ‘3PL’) will pack them, arrange the most suitable delivery service and distribute them on your behalf.
At the same time, a third party logistics company will help you manage your inventory more effectively through use of their management software. This is updated for you with your incoming and outgoing stock, giving you up-to-date and real-time insights into the movement of your products.
Is this sounding good to you? It should!
In fact, it has been reported that a huge 96% of Fortune 100 companies use a 3PL as part of their supply chain. Using a third party logistics provider can give you improved visibility over your stock, not to mention freeing up a substantial amount of time and money that you can use on developing other aspects of your business.
How does third party logistics work?
Now, let’s get down to the nuts and bolts of how third party logistics works in practice. The process will usually look something like this…
You create and market your product
This is the heart of your business and is the reason why your brand exists.
Send your products to your 3PL warehouse
They can be shipped straight from your supplier to your warehouse, where your 3PL will add them to your inventory to be tracked via their software system – this also should integrate with your own commercial platform.
Your orders are packed and sent out to customers
After your customer hits the order button, the entire process is taken care of by your 3PL – your customer receives their confirmation email, the products are packed to your liking and the best value shipping service is arranged.
Returns and exchanges are managed too…
Returns shouldn’t be a problem with a 3PL, either. Your inventory will be updated and your customer will either be refunded or sent their new item.
You review the process
Key to a good third party logistics company is visibility. At any point, you can access analytical data for insights on how your business is operating and how you can improve it.
Overall, third party logistics are an extension of your business. They work by seamlessly integrating with your supply chain, providing you with the storage, inventory management and delivery services you need to keep your customers happy.
What is the role of a third party logistics company in a business?
The role of a third party logistics company can vary slightly from business to business – after all, every business is unique.
However, the role of a good third party logistics company is to address the needs of each business with efficient solutions. For example, maybe your business prides itself on its beautiful packaging? Or, it could be that super-quick, next-day delivery is your number one USP in your industry. It might even be that your business needs most support in branching out into global delivery.
Whatever the specific requirements of your business, the role of a third party logistics company should cover the following points:
- Warehousing – storing your products in a suitable environment
- Transportation – ensuring your products arrive safely and undamaged
- Distribution – orders arrive where – and when – they are supposed to
- Shipping and receiving – the most suitable and cost-effective shipping is arranged
- Visibility – you can always see where your stock has gone
Acting as a crucial link in your supply chain, a 3PL is there to make your business flow easier. They should be there to help you give your customers the best experience possible, while giving your business what it needs to grow as effectively as possible.
For more on the role third party logistics could play in your business, read our blog post on the best eCommerce order fulfilment strategies.
Why do companies use third party logistics?
So, now you know all about what third party logistics are, you might be wondering why so many companies use them.
Well, did you know that brands can save 10 to 35% on shipping rates with a fulfillment partner?
And, that 62% of customers expect online delivery to arrive within 2 days?
These are just two insights into why so many companies use third party logistics. They can save money and time, all while improving your customers’ experience. A 3PL makes managing your inventory as easy as possible, while also saving you money on renting warehouses. You also won’t have to worry about finding staff for your warehouse, as your 3PL will have all operations covered by any health and safety regulations.
Finally, many companies choose to use a third party logistics provider as they provide the basis of business growth.
When you are ready to take your business up to the next level there are two paths you could go down – you either go it alone, or use the support of a 3PL. With a 3PL, you are ready to adapt to change, to take on more orders and optimise your supply chain seamlessly. You can focus on getting your product and brand right, rather than worrying about logistics.
Is a third party logistics provider right for your business?
Now we’ve reached the end of this article, you might be wondering whether third party logistics is right for your business.
Getting the timing right for introducing a 3PL to your company is key to your success. While you don’t want to wait until you are overwhelmed by orders, you need to already have substantial orders coming in to make it worth your while.
Running out of order space, increases in order volume and plans for a boost in marketing are all signs you might be ready to benefit from a third party logistics provider.