3PL Logistics: How Third Party Logistics Companies Work

Choosing a Third Party Logistics company, also known as a 3PL, to work with is a big decision and one that shouldn’t be taken lightly. So what is 3PL Logistics and how do third party logistics companies work? The right 3PL logistics provider can help you streamline the growth of your business. 3PL service providers can differ in the segments that they serve. For example, some 3PL companies focus on warehousing and distribution while others may focus more on freight shipping or sourcing products.

It’s important to note that all 3PLs are not equal and you need to make sure you take the time to understand the service offering they provide before you hire them.

3PL Core Sectors

There’s 4 core sectors that 3PL companies work within.

• Procurement
• Growth
• Distribution
• Transportation

As an ecommerce seller and as business owners, 3PL services gives you the opportunity to use professional expertise in all 4 core areas. The challenge is knowing which 3PL services to implement into your business. What services will you keep in-house and which services will you outsource to 3PL experts?

Now that you know the 4 core parts to the supply-to-sale cycle, we’re going to explore each sector further to give you clarity around the 3PL services you want to invest in.

(1) Procurement: 

Procurement refers to the process of how you get your products to sell. Products and goods can be made in a number of different ways, such as making them from scratch, using a manufacturer or by buying pre-built (ready-made) goods. No matter what methods you use, this falls under procurement.

Some 3PL companies concentrate on procurement processes, helping you develop, manufacture and source ready-made goods to sell.

Let’s look at the procurement services you can find at some 3PL companies.

1. Finished Goods Sourcing – 3PLs can manage who is making customized ready-made goods and they can help you meet your goals.
2. Production Facilties Scouting – 3PLs often work with a wide range of production facilities and can help you find the right factories for your product offering.
3. Product Development – 3PLs can help you in a few different product development areas, such as engineering, design and securing patents.
4. Raw Materials Sourcing – 3PLs can help you find the best raw materials to use at a cost-effective price.
5. Scheduling Manufacturing – 3PLs can help you build cost-effective production plans and help you schedule manufacturing for growth.

The Cost Of 3PL Procurement Services

The cost of 3PL procurement services can vary depending on reordering and sourcing. For the most part, 3PL procurement companies charge by account retainer fees or on a per-project basis.

If you’re only looking for a one-time manufacturing run, you may be charged a consultancy fee or charged a service fee by the procurement 3PL. If you have on-going manufacturing needs, 3PLs will usually work on a retainer. By doing so, it gives the 3PL the opportunity to monitor capacity markets and materials to ensure the best cost-effective cost for your company.

Overall, procurement 3PL Logistics service fees are tied to the types and quantities of the products that are being made. It includes the materials used, where they’re produced and how often they’re used.

(2) Distribution: How 3PL Services Manage FulFillment

The distribution sector is one that’s quickly growing in 3PL industry, growth that is being stirred by the fulfillment needs of ecommerce companies. Equally important are fulfillment 3PL services that focus on efficiently storing goods and shipping them to customers.

Many startups and small businesses soon discover that 3PL fulfillment can help quickly grow and scale. More so, they find out it’s often more cost effective to outsource fulfillment rather than operating their own warehouse.

3PL fulfillment providers can offer a wide range of services that deliver goods to both business-to-business consumers (B2B) and business-to-consumers (B2C) users.

• Inventory And Warehousing – 3PLs can efficiently receive, store and track inventory, also special handling services like climate controlled or high-value good storage.
• Order Processing – 3PL partner can receive and process your customer’s orders, typically with software although some may use spreadsheets.
• Packing Orders – A majority of 3PL partners offer accurate order guarantees, meaning that your packaging will be exactly how you want it and shipped accurately.
• Product Kitting And Packaging – 3PL Logistics also handle specialty packaging, which is very important to your growing brand. They can offer product assembly, order kitting and handle branded packaging.
• Freight Shipping (B2B) – 3PLs can work hand-in-hand with truck freight companies to help you ship LTL freight, full load truck shipments and partial shipments.
• Parcel Shipping (B2C) – 3PL fulfillment companies have extensive shipping networks, shipping parcels to consumers together with FedEx, UPS or USPS.
• Returns Management – 3PLs that offer returns management services can handle all of your returns or they can be sent to your facility. 3PLs may also offer restocking and handling.
• Forecasting Stock – 3PLs can help your company forecast stock levels too, helping you efficiently meet rises in demand and growth.

How Much Do 3PL Logistics Distribution Services Cost?

3PL distribution services can vary in their cost, it all depends on the 3PL distribution company you’re partnering with. Some 3PL companies will charge per service, charging for;

• Warehousing – these are the fees charged based on how much space your goods take up or charged by per pallet
• Picking And Packing – per-order and per-item fees charged for picking and packing
• Shipping – this is how much it cost to ship to your customers
• Receiving (Inbound Stock) – Unloading, unpacking, sorting and storing your goods
• Other Fees – may include packing materials, boxes, customer service, special handling or handling returns

How To Find A 3PL Distribution Partner

3PL distribution companies are often a part of industry trade shows and you’ll find a wide range of fulfillment services (B2C) and distribution services (B2B) available there.

(3) Transportation: How 3PLs Help With Inbound Shipping

Additionally, it doesn’t matter if you’re bringing in goods from overseas or domestically, a transportation 3PL service can help you find locate carriers at cost-effective rates. In total. there’s three main 3PL transportation services and many 3PL Logistics providers offer all three. These include;

1. Domestic Freight – Deals with freight brokers who can help you get great rates on truck rates and U.S. rails.
2. Import/Export – If you’re exporting goods to other countries or importing goods here to the U.S., 3PL Logistics can help ensure that there’s no hidden fees and shipments are cost-effective.
3. Overseas Shipping Services – 3PLs can help you get good shipping rates when manufacturing goods overseas.

How Much Does 3PL Transportation Services Cost?

You’ll find that most 3PL transportation partners include their fees into the final transportation charges. Freight brokers, consolidators, and importers service a lot of customers and often deal in big volume. Due to this, you can usually get good low rates from trucking, rail lines and shipping. Despite their charges, 3PL services’ fees are often lower than what you’d pay working directly with most freight carriers.

While lower rates are always great, 3PL services can help you save time, money and avoid mistakes. By the same token, finding the right carriers can be a challenge and this is an area where 3PL transportation partners can help.

How To Find 3PL Transportation Partners

There’s a few different ways to find the right 3PL transportation partner.

(4) Growth: How 3PLs Can Help You Grow Sales

Over the course of the article, you’ve learned about the 3 core pillars of 3PL services, which are procurement, distribution and transportation. As the 3PL industry has adapted, many 3PL providers now provide opportunities for you to grow your business with such a partner.

There’s a wide array of 3PL services that do include front-end sales and marketing. There’s a few specific 3PL growth strategies that you should be aware of.

• Brand Development – 3PL Logistics can help you develop a strong branding concept, logo, designs and packaging.
• Multichannel Platforms – 3PL Logistics such as Thill can populate your Amazon, Ebay or Shopify products.
• Online Stores – Some 3PLs can help you build and manage online stores, helping you integrate with ecommerce platforms.
• Social Media – If you want to sell on popular platforms like Facebook and YouTube, a 3PL Logistics company can help connect your store.

The great thing about some 3PL partners is the fact that they can help you collect and analyze sales data. This is vital to making real-time decisions about your business.

How Much Does 3PL Sales Services Cost?

For the most part 3PLs will include these cost in your overall fulfillment fee or they can be billed as value ad on services. In addition, other 3PL companies may charge product fees for marketplace listings or website listings.

Do keep in mind, this is still a relatively new 3PL service offering. A lot of 3PL service providers don’t even offer this yet, others are in the midst of launching these types of services.

How To Find 3PL Logistics Sales Partners

There’s a lot of industry change going on right now as ecommerce fulfillment providers are starting to offer sales support.

When deciding on a 3PL sales partner, look for a partner that offers marketplace and website listings too.

Conclusion

As you can see, 3PL Logistics providers have opted out of your typical supply chain logistics model. Today, you can use one or more 3PLs to cover your supply cycle and sales.

In your final analysis for a 3PL to handle your ecommerce fulfillment needs, be sure to contact Thill Inc. first. Thill has a national network of warehouses and works with a wide range of small to enterprise level companies.

Remember though, 3PL Logistics can do much more than just fulfillment. From manufacturing and sourcing to import/export shipments, you can outsource to a 3PL for a wide range of service offerings.

3PL Logistics has come a long way over the last decade and many of them are shifting to business models like we’ve discussed here.