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A Beginner’s Guide to Third-Party Logistics (3PL)

alinabeths September 23, 2021

Increased competition in the e-commerce industry has forced e-commerce companies to focus on delivering products in a fast and efficient manner. The E-commerce industry involves a range of processes that involves products to be procured, transported, logged, unpacked, stored in a warehouse, picked and packed, and then transported to the final destination. 

These processes are not as easy as it seems. Therefore, businesses often rely on international third-party logistics and shipping companies of Houston to survive and thrive in the industry. Outsourcing allows businesses to focus on the areas that need improvements. 

What is Third-Party Logistics (3PL)?

A 3PL company offers a range of services to businesses to meet their business requirements. A company often outsources a 3PL provider to do the receiving, inventory management, warehousing, picking and packing (order fulfillment service), shipping, and sometimes reverse logistics as well. 

When you choose a 3PL, it means you hand over the operational controls to someone who has the experience, knowledge, expertise, and resources in the logistics world. A 3PL is usually outsourced for logistics and supply-chain management to fulfill the company’s varying business needs; this may include:

  • Inventory management
  • Customs brokerage
  • Freight audit
  • Transportation
  • Warehousing
  • Materials procurement
  • Payment
  • Shipment tracking

Types of Third-Party Logistics (3PL) Companies

Third-party logistics providers can be of several types. Here are various 3PL models:

1. Warehouse/Distribution-Based 3PL: These types of logistics providers cater to warehousing and fulfillment as well as shipping demands.

2. Shipper-Based 3PL: These 3PL services offer end-to-end shipping process management, including freight consolidation.

3. Freight Forwarder-Based 3PL: Freight-forwarders are considered intermediaries who provide arrangements for freight transportation and other logistics requirements of the business.

4. Financial-based 3PL: These third-party logistics providers are involved with financial services, such as freight auditing and payment services, accounting and monitoring tools, along with inventory management and tracking.

Some Essential Functions of 3PL Providers

1. Shipping and Receiving

Shipping and receiving services of 3PL providers take care of the management of the whole shipping process of the businesses. These companies employ cutting-edge technology, usually a transportation management system (TMS), or integrated freight management service, to streamline efficiency and automate the shipping process and freight payment and accounting.  

2. Transportation

Transportation services of 3PL providers are responsible for transporting goods or products from one location to another. For example,  in Houston, they offer oil and gas shipping services at affordable prices. Many transportation 3PL providers often use their good connection with the other transportation firms to meet the business requirements of their partner.

3. Warehousing

Warehousing services of the 3PL providers are the most popular 3PL services among businesses. A 3PL company stores and distributes goods and services at a well-connected warehouse with transportation facilities. Many 3PL providers offer customizable services to store, distribute, and transport goods at affordable shipping prices from Houston to Nigeria.

4. Distribution

Several 3PL providers offer a range of distribution and wholesale services, such as outbound order fulfillment, picking and packing, custom labeling, and manufacturing. Streamlined distribution of bulk products can be challenging for a small business to handle. Outsourcing a 3PL provider helps them free from all distribution-related worries and focus on other core competence business responsibilities.

When Should You Consider Outsourcing a 3PL Provider?

While there is no specific method to decide whether it’s the right time to outsource a 3PL provider, some factors can help you decide whether or not to outsource. 

  • If your business is growing exponentially than expected, it automatically increases the costs.A third-party logistics company can help reduce the financial strain without sacrificing your valuable internal resources. Besides, it can significantly save you from various logistics headaches while saving your time and money.
  • The best thing is third-party logistics (3PL) providers  incorporate the latest and most advanced technology in their operations. So hiring a 3PL means your business will benefit from those technological benefits without making the financial investments.
  • Most 3PL providers are backed by in-house IT teams that utilize their own B2B integration, WMS, TMS, and inventory management software which can help to drive your business growth.

Wrapping Up

Outsourcing a third-party logistics (3PL) provider provides your business access to the proper infrastructure, transportation, and dedicated expertise and solutions. Needless to say, 3PL providers can be genuinely beneficial to any business, whether it’s a startup or an established one!

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