3PL meaning – Third Party Logistics explained

Worker in warehouse smiling at the camera. She is packing an order in a warehouse.

Third-party logistics has become a popular way for businesses to manage their inventory. While outsourcing a 3PL company isn't a new idea when it comes to the logistics industry when it comes to inventory management, the rise of eCommerce has rapidly seen this become an integral part of many businesses.

Yet, despite its popularity, many businesses don’t fully understand what the actual meaning of a 3PL is or how you can utilise one to improve your logistics operations.

So, let’s break down four of the most common questions we get asked about 3PL!

What is 3PL?

Third Party Logistics (3PL) is the outsourcing of a business’s logistics and warehousing requirements to a third-party provider.

3PL providers are logistics experts who manage all facets of logistics; from receiving and storing goods through to fulfillment services. Some 3PLs offer additional value-add services.

What does a 3PL do?

While all 3PL services will differ slightly company-to-company, there are four key areas that most – if not all – 3PLs will cover:

  1. Receiving inventory
  2. Storing inventory
  3. Picking and packing this stock
  4. Shipping this stock to customers

Receiving –

3PLs will receive your business’ inventory and ensure it is entered into your Warehouse Management System (WMS).

Warehousing –

After receiving inventory, a 3PL will store it in their warehouse. A 3PL should allow your business to view your inventory levels in real-time, so they have oversight on your stock and can adjust their sales strategy accordingly.

Picking –

When an order is received, a 3PL will retrieve it from their warehouse and prepare it for shipping. Some 3PL’s integrate with your sales platform so they receive a notification when a customer places an order and can get it ready without any action required from your business itself.

Packing and shipping –

The 3PL will then prepare the order for shipment - the shipping cost will be charged when a customer is placing their order. This involves safely packing it according to your specifications and then shipping it - this may involve the use of shipping labels, engaging a delivery partner, or delivering it themselves.

You are then given a tracking number to keep your customer informed throughout the package’s journey.

Why use a Third-Party Logistics Provider?

There are several advantages that 3PL’s offer over managing logistics in-house. A 3PL warehouse can save your business time, as you don't have to focus on order fulfillment - this allows you to focus on other strategic areas of your operations. If you are a smaller business, this is particularly beneficial if you have limited resources.

Another major benefit of a Third-Party Logistics service is that you are likely to see financial benefits. Your business does not have to invest in warehouse space, staff, equipment, or technology required to fulfill orders on a large scale, making partnering with a third party extremely cost effective. 3PL’s also let businesses access the benefits of cutting-edge WMS and automation, without the heavier costs and risks involved.

The world of logistics can be incredibly complex, but working with a 3PL can help you navigate through it, ensuring you are compliant and getting the best bang for your buck.

From sharing the latest news and insights to negotiating the best price on shipping, a good 3PL company will act as a strategic partner. This means they should advise on all things logistics - this includes the best supply chain management solution for your business and reverse logistics.”

What should I look for in a 3PL?

There are hundreds of 3PL’s to choose from and not all offer the same services, technology, or level of care the majority of customers expect. So before choosing what will become a very important part of your business, take the time to consider your needs and then find one who meets (and hopefully exceeds) them.

Consider things like how quickly they can ship orders after receiving them, what – if any – guarantees they have in place, which services are included in their fees and which are additional (these can quickly add up). Depending on your business goals, it is also important to consider whether a company can accommodate your future growth, and what their reputation is in the logistics industry.

Find the right Third Party Logistics provider for your business

Now that you understand the meaning of a 3PL and how beneficial it can be for a business, you'll know whether this solution is right for you.

It is important to remember that the right 3PL can be the difference between a successful partnership and a failed one. At uTenant, our platform helps you take the guesswork out of things and connects you with companies who meet your specific requirements.

Click on the button below to start your own search for a 3PL provider. Alternatively, you can contact us directly with any questions.