3PL (Third Party Logisitcs) What You Need To Know
While it’s great that your products are flying off the shelves, having an overwhelmed fulfillment process can put a fast halt to your growth. Even though some companies have trusted systems in place for rising demand, many do not and that could spell trouble for your business. It may be time to consider working with a 3PL company.
First, what’s a 3PL? 3PL stands for Third-Party Logistics, which provides companies a strategic way to outsource all of their fulfillment. You may here some people refer to 3PL as TPL (Third-Party Logistics). None the less, both represent the same thing.
3PL companies can be used to outsource both distribution and fulfillment.
Third-Party Logistics has been around for decades but there’s no question that the growth of the internet has propelled the 3PL marketplace. The rise of ecommerce businesses throughout the world gave fulfillment companies a whole new market to provide services too.
It also forced Legislation to act in 2008, defining 3PLs as, “A person who solely receives, holds, or otherwise transports a consumer product in the ordinary course of business but who does not take title to the product.”
While start-ups often choose drop-shipping and self-fulfillment business models, established companies heavily rely on 3PLs for their distribution and fulfillment. Out of the Fortune 500, 86 percent of their companies use third party logistics. Not to mention that out of the Fortune 100, 96 percent use these services.
Is 3PL Services Right For My Business?
That’s a fair question and it’s going to differ from one company to the next.
Choosing a 3PL company is a big responsibility, one that should never be took lightly.
Before you choose a 3PL or not, what’s your goals for your company? What’s your vision moving forward? Are you in need for third party logistics now or later? Do you want to outsource pieces of your fulfillment or all of your fulfillment?
All of these are valid questions to ask. However, a lot of companies find themselves in a tough spot with their distribution and fulfillment, hence why you may be searching now for help.
Benefits Of Using A 3PL Service
There’s a number of reasons why 3PL companies choose to go with a 3PL.
Let’s break them down.
(1) More Time And Focus For Your Business
Let’s face it, there’s a lot of working pieces in your fulfillment process. Having the opportunity to outsource your fulfillment or parts of your fulfillment can free up a lot of your time to focus on other areas of your business.
(2) Strategic Partners
With some 3PL companies like Thill, you get much more than just a fulfillment or distribution partner, you get a strategic partner that can help your business grow. Our priority focus is to help you optimize your fulfillment. We’ve been doing fulfillment, warehousing and shipping since 1959. Over the decades, we’ve mastered “the art of fulfillment,” we even added it as our tag line.
We’re experts at fulfillment and you get a high level of expertise you’ve likely never had before, that’s a vital asset to any growing business.
(3) Lower Shipping Cost
Depending on the 3PL you hire, there’s likely a chance you can lower your shipping cost by working together with a 3PL logistics company that has a sound infrastructure. Ordinarily your third-party logistics provider can use their resources and partners to help you reduce your shipping cost.
(4) Limit Your Overhead
It can be tough to get your own warehouse set up, finding space and hiring your own fulfillment team. Getting this added can be costly and maintaining it all can be expensive. In essence, working with a 3PL warehouse eliminates all the overhead.
(5) 3PL Cost And Fees
The cost to hire a 3PL provider varies depending on the company you hire. With that in mind, here’s some of the common fees you need to be aware of.
- Account Set-Up – Some 3PLs will charge a fee to create your account and get you integrated with their software.
- Minimums – Your provider may have a minimum monthly spend you must meet just in case your business is slow for a month.
- Pick And Pack Fees – This is the price charged by a provider for picking and packing your products.
- Receiving Cost – This is the cost your provider will charge you for offloading products from your transportation provider to their warehouse.
- Shipping Cost – The price it cost to ship your product to your customers.
- Warehousing Fees – Often a monthly fee for storing your products based on volume, usually charged per pallet.
If Not – What Do You Do?
Outsourcing your order fulfillment will be a key step in your growth – unless your going to buy your own warehouse to do fulfillment.
Let’s say you go that route – the 1st question to ask – do I have enough capital to purchase everything I need?
Warehouses are not cheap right now. Even if you’re converting a commercial space, it still takes a lot of capital to get it accomplished.
If you have a warehouse, you still need staff, equipment, you have to train staff, you’ll need to make sure you’re insured, make sure you’re paying the electricity, water, garbage, etc.
It takes a lot of money to go that route, but if you can, more power to you.
Dropshipping and self-fulfillment are your only other two options. If you’re making a lot of sales, you can fulfill those orders until you can’t. If you’re struggling to keep up with your order fulfillment now, it’s time to start thinking about solutions.
No matter what route you go, the last thing you want is unhappy customers. We can both agree on that.
Your Next Steps To Choosing The Right 3PL
On your journey to find the right third party logistics partner, we recommend this.
The best 3PL companies have a proven track record of success. There’s just no way to find the right 3PL by visiting their website or reading a review.
We recommend talking to a fulfillment expert so they can understand the true scope of your fulfillment, distribution and logistics needs.
If you want to speak with one of our fulfillment experts, feel free to reach out to us at 1-920-967-9201 or you can use our contact form. We’d be more than happy to schedule a time where our team can talk to you and discuss the goals you have in mind for your fulfillment.