What Do Third-Party Logistics (3PL) Companies Do?
Getting products from Point A to Point B is a complex process that entails much more than just plotting a route on a map. The logistics involve numerous moving parts that must work in harmony for customers to receive their orders promptly and accurately. This is where third-party logistics (3PL) companies play a crucial role. Many brands outsource or partner with these companies to fulfill orders and move freight.
Once a customer places an order, they expect it to be delivered as soon as possible. Where that once could take weeks, novel advancements like next-day or same-day shipping have reconstructed consumer expectations. In response, modern supply chains require not just speed but precision and efficiency, which are central tenets of what 3PL companies provide. In this post, we’ll explore what they do, including how to select the right 3PL services for your burgeoning business.
Key Takeaways
- Third-party logistics companies offer a range of shipping, carrier, and fulfillment services, playing a pivotal role in bridging the gap between businesses and their customers.
- 3PL services are beneficial for small and medium-sized businesses, enabling them to meet customer demands efficiently and foster customer loyalty.
- Selecting the right 3PL provider requires thorough research and consideration. Do your due diligence to find an experienced, knowledgeable, and scalable partner like SFI.
Understanding 3PL Companies
Third-party logistics companies specialize in the movement of goods throughout the supply chain. This can include a range of duties, like shipping, storing, packing, or brokering. Ultimately, they act as a link between consumers and the brands they buy from, connecting shoppers with the goods they desire from the companies where they buy.
The COVID-19 pandemic has propelled many businesses to expand their digital footprints and, by default, an E-commerce presence. In turn, 3PL companies grew exponentially, striving to accommodate the surge in demand while maintaining their fundamental operations. While the initial rush has stabilized, the sector continues to thrive. In fact, Statistica reports the logistics costs of this market are expected to amount to $13.6 trillion (USD) in 2028.
Core Functions of 3PL Companies
3PL covers a wide range of services related to supply chain management. Generally, brands hire these companies to do it all, from managing inventory and brokering as needed to fulfilment. Here are some of the primary services offered by 3PL providers:
Transportation Management
Transportation needs are vast and varied when it comes to shipping and logistics. 3PL services help streamline the process, overseeing everything from selecting routes to carriers, and tracking shipments to booking. They also play a crucial role in cost control and offer valuable insights to enhance a brand’s overall supply chain efficiency.
Warehousing and Distribution
Brands who work with 3PLs get to store their products in strategically located facilities. These warehouses can handle items that are temperature sensitive or even what’s considered hazardous materials. 3PLs manage the receiving, storage, picking, packing, and shipping of products, ensuring they reach their destination efficiently.
Inventory Management
Third-party logistics companies can track stock and optimize inventory levels using inventory management systems. This allows them to ensure products are available when they are needed. Forecasting software may also be used to help reduce carrying costs and prevent stockouts, enhancing overall supply chain efficiency.
Order Fulfillment
3PL companies streamline the fulfillment process, encompassing order processing, picking, packing, and ultimately shipping products directly to customers. When an order is received, third-party logistics ensures orders are accurately fulfilled, working efficiently to get it shipped, thus meeting customer demands and expectations. This service is especially advantageous for E-commerce businesses, which rely heavily on timely and accurate order deliveries.
Freight Brokerage
A key component of 3PL services is functioning as an intermediary between shippers and carriers. Thanks to their extensive networks, 3PLs can leverage their expertise to secure optimal shipping terms and oversee the logistics of product transportation, ensuring goods are delivered efficiently and cost-effectively.
Customs Brokerage
Businesses involved in international trade require customs brokerage services from the 3PL companies they work with. Support might look like compliance, documentation, and clearance of goods through customs. Ultimately, it is crucial for imports and exports to adhere to legal standards, preventing costly delays or penalties.
Section 321 Fulfillment
At Strader-Ferris International, we take customs brokerage a step further by offering Section 321 fulfillment services. This exemption in the Canada-U.S.-Mexico trade agreement allows companies with overseas manufacturers to avoid paying duty and import tariffs on shipments from Canada to the U.S. totalling less than $800. Working with us as your 3PL provider, we store your products in one of our conveniently located warehouses in Canada. When an order is placed by a U.S.-based customer, we’re promptly notified and arrange for the product to cross the border to be delivered by one of our domestic carriers, bypassing unnecessary customs you would have to pay to import internationally to the U.S.
Benefits of Using 3PL Services
The essential nature of logistics cannot be overstated, but for many businesses, the ability to handle this internally is a non-starter. Working with a 3PL service not only serves immediate needs but boasts plenty of benefits.
- Cost savings: Possessing the infrastructure and knowledge to streamline logistics, 3PLs can potentially reduce operational expenses, transportation, and warehousing costs by consolidating shipments, optimizing routes, and leveraging their network of carriers.
- Scalability and flexibility: 3PL companies offer the flexibility to scale your logistics operations according to your business needs. This scalability ensures that you only pay for the services you require.
- Expertise and industry knowledge: 3PL providers understand the complexities of logistics. Leveraging this expertise, you can benefit from informed decision-making, optimized supply chain strategies, and the confidence that your logistics operations are in capable hands.
- Enhanced customer service: 3PL services mean timely order fulfillment, accurate inventory management, and reliable transportation, which all contribute to a positive customer experience.
- Focus on core competencies: By outsourcing logistics functions, you can redirect your internal resources and energy toward activities that directly impact your products or services, such as research and development, marketing, and customer engagement.
How to Choose the Right 3PL Provider
Communicate openly with potential 3PL partners and ask questions about their processes, their ability to handle surges in demand, and their disaster recovery plans. Take your time to evaluate companies in detail and find one that aligns with your business objectives and can help you achieve your supply chain goals effectively.
Assessing Specific Logistics Needs
Before choosing a 3PL partner, determine what aspects of your supply chain you want to outsource, such as transportation, warehousing, or order fulfillment.
Evaluating Technology and Infrastructure
Ensure that the 3PL company you select has robust, up-to-date systems for managing inventory, tracking shipments, and optimizing routes. Their technological capabilities can significantly influence efficiency and transparency.
Verifying Industry Expertise and Reputation
Look for experience in your specific sector and check for client references. A 3PL provider with established expertise in your particular industry and a reputation for excellence. Obtain client testimonials or references if possible. Providers with a history in your sector are better equipped to comprehend your distinct hurdles and provide customized solutions.
Understanding Pricing Models
Review the pricing models of 3PL services, including any upfront fees, ongoing costs, and any potential extra charges. Clear, transparent pricing is vital to prevent unforeseen costs and to confirm compatibility with your financial plan.
Ensuring Scalability for Future Growth
A scalable 3PL can adapt to your evolving needs as your business expands. Discuss your growth expectations with potential partners and ensure they have the flexibility to accommodate. This foresight ensures a long-term, fruitful partnership.
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3PL vs. 4PL Explanation
You can consider a fourth-party logistics (4PL) provider an extension of 3PLs, covering similar tasks but also having more control and responsibilities. A 4PL, also known as a lead logistics provider (LLP), acts as an intermediary, or consultant, between a brand and 3PLs. These providers manage multiple aspects of the supply chain, and connect with multiple 3PLs. However, 3PLs operate independently from the 4PL above them and use a separate operational system.
The key difference between a 3PL and a 4PL is that a 3PL works primarily on order fulfillment, setting standards for security and customer service, while a 4PL manages the entire supply chain, handling and delegating the transportation of goods and shipping orders to customers.
By working with a 4PL, an E-commerce business can reduce its workload as it relates to logistics, putting more trust in the hands of its provider to manage that aspect of the supply chain.
Fulfillment Process Details
While logistics can seem straightforward in theory, the process is unique and requires strict management to ensure each item gets where it needs to be on time and in proper condition. Let’s look at a detailed breakdown of the fulfillment process, from receiving inventory to shipping orders, to demystify this aspect of 3PLs:
Receiving
After your cargo is ready to go, it needs to be shipped to a warehouse, received, and stored. This first step is crucial as it sets up the rest of the fulfillment process for success. You may choose to store items in your own warehouse or take advantage of your 3PL’s warehousing options. At SFI, our receiving process is thorough and detail-oriented, ensuring your cargo is accounted for and stored safely until packing.
Picking
The 3PL company you work with will either require you to upload an online order directly into their system manually or be able to integrate seamlessly within your online store, such as Shopify or Magento. Once an order is placed, it should be sent to a warehouse picking team or an individual picker. The pickers will then receive a ‘picking list’ of items and where they’re stored. These products are generally scanned through WMS technology and UPC barcode scanners to verify they are correct before moving on to the packing phase.
Packing
Once the items are collected, they can be packed. As an E-commerce business, it’s important to note that some 3PLs charge for packing materials separately, while others include them in the cost of their service. When you choose a 3PL, ensure that you detail how you would like your items packed and if there are any specific steps to take before sealing up the box.
Shipping
After the order is packed, it can be shipped. Most 3PLs will buy and print shipping labels for you, and some have preferred carriers with which they have established partnerships. Other 3PLs may compare shipping costs between different carriers before shipping. Depending on the volume of orders going out, your provider may opt for LTL or FTL.
Once the order has shipped, the 3PL will automatically send you and the customer tracking information. This will be updated at each step of the shipping process, including whether there are foreseen difficulties in delivery and when the item arrives on the right doorstep.
SFI Service Highlights
There’s a lot to consider when choosing a 3PL provider, whether you are new to the E-commerce space or looking to optimize your logistics needs. At SFI, our 3PL solutions are rooted in expertise and years of experience, ensuring efficiency and quality service for each of our clients:
Streamlined Freight Forwarding Solutions
We understand the critical importance of efficient transportation in today’s global marketplace. Our freight forwarding solutions are designed to streamline the movement of goods across borders, oceans, and continents, empowering businesses to expand their reach while minimizing logistical complexities.
Tailored Transportation Strategies
Every business has unique shipping requirements, which is why we offer tailored transportation strategies to meet our clients’ specific needs. Whether air, ocean, rail, or road freight, our experienced team works closely with each client to develop customized solutions that optimize transit times and reduce costs.
Global Network, Local Expertise
With a vast network of partners and agents worldwide, we have the global reach to facilitate seamless international shipments. Our local expertise in key markets ensures that shipments comply with all relevant regulations and requirements, minimizing delays and mitigating risks associated with cross-border trade.
Efficiency Through Technology
We leverage cutting-edge technology through WMS technology and UPC barcode scanners to enhance the efficiency and visibility of our 3PL operations. Our advanced tracking and monitoring systems provide real-time insights into shipment status, enabling proactive decision-making and timely delivery.
Compliance and Regulatory Expertise
Navigating complex customs regulations and trade compliance requirements can be daunting for businesses. Our team of customs brokerage specialists possesses in-depth knowledge of international trade regulations and works diligently to ensure that shipments clear customs smoothly and without delay.
Value-Added Services
In addition to core freight forwarding services, we offer a range of value-added solutions to further support our clients’ supply chain needs. From warehousing and distribution to cargo insurance and supply chain consulting, we are committed to providing comprehensive solutions that drive efficiency and profitability.
Technology and Integration
Each and every 3PL uses technology in various ways to enhance their offerings and keep on top of all aspects of the logistics process. Here are some essential features to consider in your chosen 3PL when it comes to the efficiency and effectiveness of technology:
- E-commerce Platform Integration: These platforms are central in facilitating online transactions and order fulfillment. Our systems are fully compatible with leading E-commerce platforms such as Shopify, WooCommerce, Magento, and Amazon Seller Central, enabling seamless integration of order data and inventory management processes.
- Real-Time Inventory Visibility: Our advanced inventory management software provides real-time visibility into inventory levels, allowing our clients to monitor stock levels, track shipments, and manage orders precisely and efficiently. With automated alerts and notifications, our system ensures that inventory levels are always optimized, minimizing stockouts and improving order fulfillment rates.
- Order Fulfillment Automation: Streamlining order fulfillment processes is essential for meeting customer demands and maintaining competitive advantage. Our integrated systems enable automated order processing, picking, packing, and shipping, reducing manual errors. From order placement to delivery, our technology ensures a seamless and streamlined fulfillment process.
- Customizable Reporting and Analytics: Informed decision-making is key to driving business growth and profitability. Our systems provide customizable reporting and analytics tools that empower our clients to gain insights into their supply chain performance, identify trends, and make data-driven decisions. From inventory turnover rates to shipping costs analysis, our reporting capabilities enable proactive optimization of supply chain operations.
- Scalable and Flexible Solutions: We understand that businesses evolve and grow over time, which is why our technology solutions are scalable and flexible to accommodate changing needs and requirements. Whether our clients are small startups or large enterprises, our systems can be tailored to suit their specific business goals and objectives.
By harnessing the power of technology and integration capabilities, Strader Ferris International delivers modern and efficient 3PL services that enable businesses to thrive in today’s dynamic marketplace.
Trust Strader-Ferris International with Your 3PL Needs
Ironing out the details of your logistics as a brand is a crucial step to ensure you remain competitive, competent, and instill confidence in your customers. At SFI, we treat our clients as partners when it comes to their 3PL needs. Our professional team understands all aspects of this service and seeks to find solutions that work ideally for every business. To learn more about how we can streamline your logistics, reach out to us.
Frequently Asked Questions
How does a 3PL provider ensure the security and safety of my inventory?
At SFI, we are dedicated to ensuring client trust and peace of mind when it comes to their cargo. Our team handles safety and security from multiple angles, adapting as needed to keep up with trends and shifts in the industry. Some features of our security measures include:
- Physical Security: We employ secure warehouses equipped with surveillance cameras, alarms, and access control systems to monitor and restrict entry.
- Inventory Tracking: Utilizing advanced inventory management systems, we track your inventory from receipt to shipment, minimizing the risk of theft or loss.
- Quality Control: Regular inspections and quality checks are conducted to ensure that your inventory remains intact and undamaged.
- Compliance Standards: Adhering to industry regulations and standards ensures that security measures meet legal requirements and industry best practices.
What are the environmental sustainability practices of a 3PL service?
The sustainability practices of 3PLs are not regulated and may vary from provider to provider. Some strategies include:
- Optimized Routing and Transportation: Utilize advanced route planning software to minimize fuel consumption and emissions by ensuring efficient delivery routes.
- Packaging Optimization: Employ sustainable packaging solutions like recyclable or biodegradable materials to reduce waste generation and environmental impact.
- Warehouse Efficiency: Implement energy-efficient lighting, heating, and cooling systems in warehouses, along with automated systems, to optimize space utilization and minimize energy consumption.
- Green Technology Adoption: Embrace innovative technologies such as IoT sensors and data analytics to monitor energy usage, identify inefficiencies, and implement improvements.
If environmentally sustainable practices are important to you when choosing a 3PL provider, ensure you ask them about their approach during the consultation process.
How flexible are 3PL services in accommodating special product needs (e.g., fragile items, perishables)?
In order to serve their clients effectively, it is crucial that 3PL providers can accommodate the logistics of various products, including fragile items and perishables. At SFI, we take pride in our services in effectively handling goods across multiple industries, including pharmaceuticals, health and beauty, and electronics. We do this through a multi-pronged approach:
- Temperature Control: Some items require specific temperature conditions to maintain freshness. Our facilities are equipped with monitoring tools for temperature-controlled heating throughout storage and transportation.
- Handling Procedures: Fragile items need delicate handling to prevent damage during shipping procedures. We have implemented proper packaging, loading, and unloading protocols for these items via training staff and using appropriate equipment, like cushioning materials and specialized containers.
- Inventory Management: Accurate inventory management is essential for perishable items to prevent spoilage and ensure freshness. Our real-time tracking systems use RFID to help clients monitor inventory levels, expiry dates, and shelf-life.
- Supply Chain Visibility: Enhancing supply chain visibility is critical for the effective management of perishable and fragile items. Utilizing RFID tags and IoT sensors, clients have real-time insights into product location, condition, and transit times.
- Compliance and Regulations: Perishable items are often subject to stringent regulations, especially when moving across the border. The SFi team is up-to-date on all relevant legislation and compliance measures, including proper documentation and adherence to quality control.
How do 3PL providers handle sudden changes in demand or emergency situations?
Agility is crucial for 3PL providers to handle sudden changes in demand or emergency situations effectively. Not all providers prioritize the ability to navigate these instances with resilience and efficiency, which could impact a company’s chain and delivery schedule. Luckily, at SFI, our decades of experience have shown us the importance of planning for anything.
- First and foremost, we maintain flexibility in our capacity planning processes to accommodate sudden fluctuations in demand, whether that’s in our warehouses or with our carriers.
- By using advanced technology, such as transportation management systems (TMS) and warehouse management systems (WMS), we have real-time visibility into changes in demand patterns, inventory levels, and transportation routes, allowing for rapid adjustments.
- We ensure a collaborative relationship with our clients, carriers, suppliers, and other supply chain partners. This open communication means we can quickly share information, coordinate responses, and implement contingency plans.
- Comprehensive contingency plans are part of our process to mitigate risks and respond effectively to emergencies. These plans may include alternative transportation routes or backup inventory storage locations.
- Finally, we regularly review our processes, performance metrics, and response protocols to implement changes and handle future disruptions more effectively.
What strategies do 3PL services use to optimize shipping costs?
3PL services employ various strategies to optimize shipping costs, ensuring efficiency and cost-effectiveness. Although approaches may vary, here are some key strategies we leverage at SFI:
- Leveraging our extensive experience and industry knowledge, we negotiate favourable rates with carriers to keep shipping costs low.
- Rather than relying solely on one carrier, SFI collaborates with a network of carriers. This approach allows us to select the most suitable carrier for each shipment based on factors like destination, size, weight, and urgency.
- We are experts at consolidation techniques and can combine multiple smaller shipments into larger, more efficient loads. This means we can achieve economies of scale, reduce transportation costs per unit, and minimize empty space in shipping containers or trucks.
In addition, we are committed to continuous improvement and ongoing cost-reduction initiatives through regular evaluation of our processes, performance metrics, and market trends to identify areas for optimization.
Can I visit the 3PL facilities where my products will be stored and fulfilled?
We serve clients throughout Canada and the U.S. and ensure their goods will be stored in a warehouse that offers the greatest ease of shipping and fulfillment. If you choose to work with SFI as your 3PL provider, you are welcome to tour our facilities to gain a better understanding of how your logistics will be handled. However, it’s important to note that not all clients may have easy access to these locations, as they could be situated in another province or state.
If visiting our 3PL facilities is important to you as you select a service provider, we are happy to accommodate you. During the consultation process, please inform us of your intentions to visit in advance, so we can make the necessary arrangements to welcome you at a convenient time.
What is the process for integrating a 3PL service with my current E-commerce platform?
At SFI, many of our E-commerce clients choose our 3PL services because of our emphasis on straightforward integration with their existing platforms. Our process is easy and, once set up, is completely manageable from one place. Some of the platforms we support include:
- Shopify
- Amazon
- Magento
- eBay
- Salesforce
Our solutions not only streamline shipping but also customs clearance, thus reducing delayed or stagnant cargo and enhancing customer satisfaction. You also gain insight into real-time reporting and the ability to manage all of your shipments from one platform. To learn more about the E-commerce integration process, connect with our team.
How transparent is the billing and invoicing process with a 3PL provider?
Part of working with a 3PL provider is to help reduce the time, effort, and costs associated with handling logistics services in-house. As a result, billing and invoicing are crucial to understanding the benefits a 3PL provider offers and determining which company suits your budget and needs.
At SFI, our consultants have a deep understanding of logistics and work with companies across various industries. This means that we can answer all of your questions related to billing and invoicing and share accurate information and estimates regarding the cost of our services.
For example, we provide a clear breakdown of fees related to warehousing, shipping, and customs. We are also experts in Section 321 shipments, helping our customers reduce customs fees for goods worth $800 USD or less from U.S. import duties and tariffs.
In case of damaged or lost inventory, what are the 3PL provider’s policies and compensation processes?
This varies from provider to provider. To make an informed decision when choosing a 3PL company to work with, ensure you discuss their policies and compensation process related to damaged or lost inventory.
For more information on our procedures at SFI, you can explore our terms and conditions policy. If you have questions or require further details, please reach out to us.