Product-based businesses depend on logistics just as much on marketing or production functions.
This function is so crucial for the success of a small business that it can be a significant obstacle to expansion.
The emergence of 3PL solutions has changed the situation for the better. Here is all you need to know about 3PL and its impact on e-commerce business models.
History of 3PL
The e-commerce model of business is on the rise, and it will continue to define the lives of millions of people worldwide for the foreseeable future. And it’s made easier because of the ease of outsourcing logistic functions.
Traditionally, logistics was a massive part of the business – defining the whole business model. Huge companies could maintain offshore warehousing and transportation units. They kept their fleet and warehouses, employed a skilled workforce, or trained them on-site to prepare for their LGV theory test for licensing.
At the same time, smaller businesses were limited because of lack or had to rely on a complex network of different logistic solutions and deal with separate providers.
With the emergence of e-commerce business models, complete logistic solutions to cater to international vendors became indispensable. Several total logistic solution providers emerged to respond to this demand. These providers cover the whole supply chain process from receiving the goods from the production unit of their clients to warehousing them at convenient locations to supplying these goods to the end customers.
Here is the complete detail of operations provided by 3PLs.
What is 3PL?
We can see that 3PL is a complete logistics solution for business. It provides a wide array of services, including loading supplies from the production unit, delivering them to the warehouse, storing them according to their storage needs, and fulfilling the delivery order received from the end customer.
Some e-commerce businesses also like to outsource their transaction processing function to these partners. In such cases, the 3PL will receive online orders on behalf of their clients, pack, and ship them to the end user. Some e-commerce businesses also outsource the return function to these partners. When they do so, the 3PL takes charge of receiving returns, documenting them, and restocking or disposing of the item as necessary.
Most 3PLs provide international and national shipping arrangements. But the businesses are tasked with ascertaining the area of service before signing the deal.
Note that these logistic partners also differ based on the type of item they handle. If your business needs movement and storage of fragile items or chemicals, you may have a smaller pool of service providers. On the other hand, lifestyle and fashion products are easy processes for most service providers.
Interestingly, these partners will customize the contract to suit the needs of their clients. So, if a client only wants freight forwarding service, the contract will include only that. Other clients may only want warehousing services.
Not all 3PLs provide the full spectrum of services. Some may only ship locally and network with international shipping providers to complete the service when requested. These providers are often known as 4PLs, as they include a fourth-party logistic provider to complete the package.
How 3PLs Help E-Commerce Businesses
E-commerce businesses are not the only beneficiary of this service model but account for the largest market share. Here is how it helps these businesses stay afloat and maximize profits.
Wider Reach
The most significant advantage of these services is the widening of the e-commerce business’s reach. Because of the completeness of these logistic solutions, the seller doesn’t have to be physically present in any of the countries where it sells its products.
The interconnectedness of its complex functional units allows businesses to focus on building products and relationships, and 3PL will take care of the rest.
Distributed Storage
Most 3PLs offer warehousing facilities at multiple locations around the globe. This helps with the timely fulfillment of orders. This feature fosters customer satisfaction and keeps the costs of moving inventories lower. Combine this benefit with data analytics provided by some quality 3PLs, and you will get a smooth flow of sales orders.
Data Analytics
Some businesses outsource the whole supply chain management function, including production planning. To do so without fail, these companies look for an efficient and reliable partner to keep tabs on the sales activity, raise production demand, show agility, and remain in close communication with the company.
Although not all 3PLs are dependable enough to handle complete planning inventory movement, some service providers complete their packages with relevant and up-to-date data analytics. With these data points, the company can understand customer behavior better and improve its operations to meet the demand.
Ease of Operations
This is the most significant reason for businesses to choose 3PL services. If these businesses decide to set up their transportation lines or outsource independently to these companies in offshore companies, they will have to allocate a budget to all these contractors. These individual costs may be higher than one collective cost of 3PL.
And we haven’t even discussed the cost of warehousing and order processing. 3PL services save money and allow businesses to outsource secondary activities without hassle.
Increased Experience and Specialization
Ultimately, 3PLs have specialized knowledge of freight forwarding and warehousing industries. They understand the dynamics of transport and customers’ expectations for timely delivery. They are well-connected and know the right partners who can complete the shipment of supplies in case their reach is limited.
Because of their industry-specific knowledge, they know the proper channels and routes that are both cost-effective and efficient for moving the inventory.
Take Away
This post discusses the history, operations, and benefits of 3PLs for the e-commerce industry. These full-spectrum supply chain management solutions help businesses to keep their costs down without forgoing the reliability and quality of their delivery operations.
These service providers include different routes of transportation to suit the needs of the industry being served, as well as timeliness and cost. Their packages are customizable, and businesses can choose to enhance the delivery experience with specialized packaging.
