What is 3PL and know how it can boost your business?

If you are in e-commerce business, you must have seen the term of 3PL flying around. 3PL or third-party logistics companies handle outsourced procurement. As order fulfillment is the heart and soul of e-commerce and while the business grows, it becomes a herculean task to fulfill the customer orders. At this point, companies take the helping hand of 3PL companies. As a business owner, it is vital to know every detail of how 3PLs work in order to grow and scale your business.

What is third-party logistics?

3PL refers to outsourcing of e-commerce logistics processes such as warehousing, inventory management, and fulfillment. Moreover, 3PL companies enable e-commerce merchants to achieve more with advance infrastructure and tools to automate business processes. Although it is unknown who coined the term of 3PL, companies have been riding the wave of 3PL services since late 1970s and ‘80s. The 3PL industry has become a norm now. In short, the supply chain integration of warehousing operations and transportation services together come under the umbrella of 3PL services.

The services offered by 3PL are much more than just shipping. Some 3PL providers aim at a particular region and geographies. On the other hand, several providers have scaled their services by incorporating shipping services using advanced technologies and collaborating with public and contract warehouses. Moreover, several firms offer different types of freight transportation to customers.

However, if looked carefully, advanced technology is at the core of 3PL. Companies that provide 3PLs often offer additional services such as in-depth reporting, forecasts, and transportation along with freight bill auditing. According to Allied Market Research, the third-party logistics market is projected to garner $1,513 billion by 2025, growing at a CAGR of 7.1% from 2018 to 2025. The rise in trading activities due to globalization, increase in e-commerce industry and reverse logistics operations are the major factors for the growth of the industry.

Major examples of 3PL

• Transportation

3PL providers engage carriers and consolidate LCL or LTL freight along with tracking its payment and insurance documents. Moreover, 3PLs help reduce transportation costs and improve the efficiency of complex supply chain processes.

• Global shipping

Shipping packages across the globe could be complicated and stressful for businesses and consulting a 3PL provider could take care of your such global shipping requirements and allow you more time for other processes. Furthermore, 3PLs take care of all trade compliances, cost, and execute accordingly. 

• Information technology

As mentioned above, advanced technology is the backbone of any 3PL provider. 3PLs use information technology (IT) to handle e-commerce and maintain customer relationships and warehouse operations. Services such as electronic data interchange (EDI), application programming interface (API), and cloud-based systems are majorly used by 3PLs to increase transparency of supply chain processes.

What is 4PL?

While researching and understanding 3PL, you may come across 4PL. 4PL abbreviation for fourth-party logistics adds an additional degree of separation between e-commerce merchants and 3PL services for a client. For instance, when one asks for 4PL providers, those companies manage and arrange 3PL services for a client. In addition, 4PL providers provide end-to-end supply chain management for their customers, which includes 3PL services as well as manufacturing.

3PLs offer expertise and help streamline the supply chain processes to save time and money. Thus, trusting a 3PL experts to fulfill your shipping logistics could make a huge difference for growth of your business and it would allow you more time to focus on overall customer experience.

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