What Is a Third-Party Logistics Partner?

Between the rise of small business and impact of the COVID-19 pandemic, third-party logistic companies have become increasingly important. These companies allow businesses to outsource their operational logistics, including warehousing, supply chain management and delivery.

If you’re considering working with a third-party logistics partner to fulfill business orders, here’s what you need to know.

What is a third-party logistics partner?

Working with a third-party logistics partner (3PL) can become the key component of success for many small retail businesses. 3PLs streamline all the operational responsibilities of fulfilling, creating and distributing orders. All you have to do as the business owner is accept orders; then, you can send that information to your 3PL partner to ensure it gets to your customer’s door.

This outsourced process can alleviate the stress of supply management, creation and distribution. Businesses that use logistics partners can focus on other aspects of their business, providing a better customer experience and giving the company the ability to scale up or down as demands fluctuate.

However, keep in mind there are drawbacks to using a third-party logistics partner, including having less control and paying a large upfront investment.

Common services 3PL partners offer

Inventory management

Working with a 3PL helps business owners better manage their inventory. A 3PL allows businesses to see the quantities of products on hand and the units sold each day, and update their store's website immediately if an item is out of stock. You can easily sync your inventory data with your online store, view and manage real-time inventory levels at the fulfillment centers, and reorder to prevent stockouts.

[Read: How to Simplify Your Inventory Management]

Two-day or same-day shipping

Amazon Prime has changed customers’ expectations of delivery times. Since 3PLs often have multiple warehouses and distribution centers, they can usually guarantee two-day or same-day shipping anywhere in the domestic United States. Additionally, because of their size and output, many of these providers have existing relationships with shipping carriers that allow them to have discounted rates.

Distributed inventory

3PLs have several warehouse locations, so inventory can be split across multiple fulfillment centers. This puts your product in inventory closer to your customers, allowing you to offer guaranteed two-day ground shipping. The variety of warehouses also helps businesses in the event that orders cannot leave a certain fulfillment center, rerouting shipments through a different one.

What is the 3PL order fulfillment process?

Once you send off your order to your 3PL, the fulfillment process is fairly straightforward:

• Receiving inventory. Every 3PL has a different inventory process. Some request the inventory from their business partner, while others provide options for the partners to use for the manufacturing of their products. Once they receive the inventory, they will store it in their fulfillment center.
• Warehousing. 3PLs will store your inventory in their fulfillment centers before they are distributed. When choosing a partner, it's important to work with one that has the storage capacity for all your products. Some 3PLs have limited capacity and may not have enough storage space for all of your inventory.
• Picking and packing. Once a customer places an order, the 3PL will begin the fulfillment process, picking up the item from their warehouse and securely packaging it for shipping. The packing materials used depend on the partner's capabilities and your brand's preferences. Some businesses prefer to use specific, stylized packaging boxes or extra secure packing materials if their product is fragile.
• Shipping. Once an order is packed, the 3PL will print and purchase shipping labels on behalf of your company. They will then send off the orders through their carrier partners at the delivery speed the customer has chosen. Most 3PLs also offer companies and customers the ability to track their packages.
• Handling returns (if applicable). Some 3PLs fulfill returns if a customer is dissatisfied with their product or has received an incorrect one. Your partner will process the return, restart or dispose of the item depending on your policy, and send a replacement item if applicable.

[Read: Warehouses Increase Robotic Automation as a Result of COVID-19]

CO— aims to bring you inspiration from leading respected experts. However, before making any business decision, you should consult a professional who can advise you based on your individual situation.

Follow us on Instagram for more expert tips & business owners’ stories.

CO—is committed to helping you start, run and grow your small business. Learn more about the benefits of small business membership in the U.S. Chamber of Commerce, here.