Guide

What is 3PL?

Understanding third-party logistics (3PL) is essential for any business looking to optimize its supply chain and fulfillment processes. 3PL refers to the outsourcing of various logistics services such as warehousing, inventory management, and order fulfillment to a specialized third-party provider. This approach allows businesses to focus on their core competencies while leveraging the expertise and infrastructure of a 3PL partner.

Whether you are an e-commerce startup or an established enterprise, learning about 3PL can help you streamline operations, reduce costs, and improve customer satisfaction. In this article, we will explore what 3PL stands for, 3PL benefits, and how it works within the logistics industry.

Understanding 3PL

3PL definition

What does 3PL stand for?

What is the order process a 3PL follows?

What is 3PL fulfillment?

How is a warehouse used in 3rd party logistics?

What are the benefits of a 3PL provider?

What is a 3rd party logistics company?

How to choose the right 3PL partner?

Frequently asked questions

3PL definition

3PL means hiring another company to handle logistics and supply chain tasks like warehousing, inventory management, transportation, and order fulfillment. By working with a 3PL provider, businesses can improve efficiency, save money, and focus on what they do best. This partner uses their logistics expertise and infrastructure to help streamline and optimize the supply chain.

What does 3PL stand for?

3PL stands for third-party logistics. This term refers to the practice of outsourcing logistics and supply chain management functions to an external provider.

Imagine your favorite online fashion retailer that focuses on designing and marketing clothing and accessories. Instead of handling the logistics of storing, packaging, and shipping their products, the retailer partners with a 3PL provider. The provider takes care of warehousing the fashion items, processing online orders, and delivering them to customers. This allows the fashion brand to concentrate on designing new collections and marketing their products, while the 3PL ensures efficient and timely delivery to fashion enthusiasts.

What is the order process a 3PL follows?

When working with a 3PL provider, the logistics process for managing orders is streamlined and efficient. Here is an in-depth look at the typical steps involved, from your customers placing an order to receiving their shipment:

Receiving inventory

The process begins with the 3PL provider receiving inventory from the client. This involves checking, recording, and storing incoming products. Each SKU is assigned a dedicated storage location in the warehouse.

Storing inventory

Once received, the inventory is stored in the fulfillment center. The storage can be on shelves, in bins, or on pallets, depending on the nature of the products. The 3PL provider ensures that the storage space is organized and scalable to accommodate growing inventory needs.

Order placement

When a customer places an order on the client's online store, the order details are automatically sent to the 3PL provider through integrated fulfillment software. This software ensures that the order information is accurately captured and processed.

Order picking

The 3PL provider's warehouse team receives a picking list that includes the items, quantities, and storage locations. The picker then collects the ordered products from their respective locations in the warehouse.

Order packing

After picking, the items are securely packed for shipping. The 3PL partner uses appropriate packing materials to protect the products and optimize package size. This can also include temperature-controlled packaging for sensitive products like medicines. Custom packaging options are available to enhance the customer's unboxing experience.

Shipping

The 3PL partner purchases and prints shipping labels, often leveraging relationships with multiple carriers to secure the best rates. The carrier picks up the orders from the warehouse for delivery. The 3PL provider's software updates the client and the customer with tracking details.

Delivery

The carrier delivers the order to the customer. The 3PL monitors the delivery process to ensure timely and accurate delivery. Customers receive their orders as expected, with the option to track the shipment throughout its journey.

Returns management

If a customer needs to return a product, the 3PL provider handles the return process. This includes receiving the returned item, updating inventory records, and either restocking or disposing of the product based on the client's preferences.

What is 3PL fulfillment?

3PL fulfillment encompasses the end-to-end management of logistics processes by third-party providers, covering everything from warehousing and inventory management to order processing and shipping.

Advanced inventory management: Cencora utilizes the latest technology to provide real-time tracking and management of inventory. This ensures accurate stock levels, reduces the risk of stockouts, and helps businesses maintain optimal inventory levels.
Comprehensive returns management: Cencora provides efficient returns management services, handling the entire returns process from receiving returned items to restocking or disposing of them as required.
Efficient order processing: Orders are automated, meaning they get processed as soon as they are received and accepted. Once accepted, the order is prepared to be shipped out.
Reliable shipping and distribution: Cencora partners with leading carriers to offer reliable and cost-effective shipping options. Our robust distribution network ensures that deliveries are timely and reach customers in excellent condition.
Scalable storage solutions: Cencora offers flexible and scalable storage solutions that can grow with your business. Whether you're a small startup or an established enterprise, ICS can accommodate your warehousing needs without compromising on efficiency.
Strategically located warehouses: Cencora operates a network of strategically located warehouses across the world to ensure quick and efficient distribution. This network allows businesses to store products closer to their customer base, reducing shipping times and costs.

How is a warehouse used in 3rd party logistics?

A warehouse is the central integral hub where various logistics activities converge to ensure efficient supply chain management. Here is an in-depth look at how warehouses function within the 3PL framework.

Key roles of warehouses in 3PL:

Inventory management

Warehouses are responsible for receiving, storing, and tracking inventory. This includes detailed processes to ensure accurate stock levels and prevent discrepancies. Advanced inventory management systems (IMS) help 3PL providers maintain real-time inventory data.

Cencora warehouse staff pick, pack, and prepare the items for shipment.

Order fulfillment

Warehouses are the heart of the order fulfillment process. Once an order is placed, warehouse staff pick, pack, and prepare the items for shipment.

Distribution

After orders are packed, warehouses facilitate the distribution of products to customers. This involves coordinating with various carriers, printing shipping labels, and ensuring that packages are dispatched on time.

Day-to-day tasks of warehouse staff:

Warehouse staff inspect and record incoming shipments for accuracy
Staff place items in designated storage locations
Workers locate and collect items from storage for orders
Staff securely package items for shipping
Employees print labels and dispatch packages for delivery
Staff process and restock or dispose of returned items

Warehouse software requirements:

A warehouse management system (WMS) manages all warehouse operations
An inventory management system (IMS) tracks stock levels and SKU performance
An order management system (OMS) handles the entire order lifecycle
Shipping software compares rates, prints labels, and tracks shipments

Ensuring that all incoming goods are accurately received and recorded

Important warehouse processes:

Ensuring that all incoming goods are accurately received and recorded
Efficiently storing products for easy retrieval
Quickly picking, packing, and shipping orders
Regularly monitoring and updating stock levels
Handling returns to maintain inventory accuracy

What are the benefits of a 3PL provider?

In the scope of pharmaceutical distribution for example, there are many benefits of 3PL logistics. Providers have specialized expertise in handling pharmaceutical products. This means compliance with industry standards and maintaining the integrity of temperature-sensitive items. Partnering with a 3PL provider allows pharmaceutical companies to gain a competitive edge, streamline their operations, and ensure the safe and efficient distribution of essential medications to patient.

Adaptability and scalability

3PL providers offer flexible solutions that can adapt to the changing demands of the healthcare sector, enabling companies to adjust their resources as needed. As the industry continues to experience tumultuous few years, flexibility is a sure-fire way in successfully navigating the global healthcare landscape with 3PL.

Enhanced customer service

By ensuring reliable and timely delivery of pharmaceutical products, 3PL providers help increase customer satisfaction and elevate the brand's reputation.

Risk management and compliance

3PL providers ensure strict adherence to pharmaceutical regulations, reducing the risks of non-compliance, errors, and product recalls.

Advanced technology and innovation

3PL providers use innovative technology for inventory management, monitoring, and analytics, which enhances supply chain visibility and operational efficiency.

Warehouse space and proximity

Using third-party logistics means companies do not have to lease warehouse space. 3PL providers offer scalable warehouse solutions, saving money on storage and making expansion easier. Additionally, businesses can place their products closer to customers by choosing a 3PL with strategically located warehouses, resulting in faster delivery and lower shipping costs.

Shipping cost savings

Through economies of scale, a 3PL partner may be able to save you money on shipping. Fulfillment warehouses are volume shippers and often secure reduced shipping rates with major carriers, especially for oversized, bulky, or heavy products.

Value-added services

3PL providers offer value-added services that can enhance your business, including kitting, package consolidation, and freight shipping.

Expert partnership

A third-party logistics provider can help you choose the best packaging, shipping, inventory management, and reverse logistics options for your company. Fulfillment professionals provide top-notch picking, packing, and shipping for customer orders, driving customer satisfaction and loyalty.

By understanding the benefits of 3PL logistics, businesses can appreciate how these providers contribute to overall efficiency and success. 3PL benefits include saving time and money, leveraging industry expertise, expanding reach, and enhancing customer satisfaction. An experienced 3PL can help you scale your business for predictable growth, ensuring that you can focus on what you do best.

What is a 3rd party logistics company?

Many people ask, "What is 3PL?" A third-party logistics (3PL) company is an outsourced service provider that manages various logistics operations for businesses. This includes tasks such as inventory management, warehousing, order fulfillment, and transportation.

3PL providers offer specialized expertise and advanced technology to ensure efficient and reliable logistics solutions.

How to choose the right 3PL partner

With the question ‘how does third-party logistics work?’ now fully answered, the next step in the 3PL process is to choose the right partner. When selecting a 3PL provider, consider factors such as scale and experience, goal alignment, value-added services, and customer service. You should be asking can your 3PL partner grow with you? To fully access the benefits of 3PL logistics, here are key points to look out for when considering your options:

Scale and experience

Look for a 3PL provider with extensive industry experience and a proven track record.

Goal alignment and strategic guidance

Ensure the 3PL provider aligns with your business goals and offers tailored strategies to enhance supply chain efficiency and maximize return on investment (ROI).

Value-added services

Choose a 3PL that offers comprehensive logistics solutions beyond distribution, such as relabeling, repackaging, returns processing, recall coordination, and enhanced reporting.

Customer service and account management

Opt for a 3PL partner that provides excellent customer service and resolute account managers, ensuring high accuracy and acting as a strategic partner.

Customization and flexibility

Consider whether they can customize their services to meet your specific needs, whether it is for pharmaceuticals, medical devices, or other products.

By considering these factors, you will reap the full benefits of 3PL logistics. Your partner will not only meet your logistical needs, but also support your overall business objectives and growth.

Frequently asked questions (FAQs)

What is 3PL experience?

3PL experience refers to the expertise and knowledge that a third-party logistics provider has gained through years of managing logistics operations such as warehousing, inventory management, and transportation for various clients. This experience ensures that the 3PL partner can handle complex logistics challenges efficiently and effectively. With over 150 years of experience, Cencora is a trusted name in the industry, capable of providing reliable and expert logistics solutions to meet your needs.

What is 3PL in supply chain?

Within the supply chain, a 3PL provider offers outsourced logistics services, managing aspects such as warehousing, inventory management, and transportation. Cencora can help optimize your supply chain with our extensive experience and comprehensive logistics solutions.

What is a 3PL warehouse management system?

A 3PL warehouse management system (WMS) is a software solution used by third-party logistics providers to manage and optimize warehouse operations. It handles tasks such as inventory tracking, order fulfillment, and shipping, ensuring efficient and accurate logistics processes. Cencora uses advanced WMS technology to streamline operations and provide real-time visibility into inventory and order status.

What is a 3PL in trucking?

In trucking, a 3PL provider manages transportation services for businesses, including coordinating shipments, negotiating freight rates, and ensuring timely delivery. They act as an intermediary between shippers and carriers, optimizing routes and managing logistics to enhance efficiency and reduce costs.

What is 3PL management?

3PL management involves overseeing and coordinating the activities of third-party logistics providers to ensure efficient and effective supply chain operations. This includes managing relationships, monitoring performance, and optimizing logistics processes such as warehousing, transportation, and order fulfillment.

How can we help?

We’re always eager to answer questions about how Cencora can help. Just reach out, and we’ll get back to you soon.

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