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 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, helping to reduce carrying costs and prevent stockouts.

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.

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.