As someone who runs an eCommerce business, you’re no doubt familiar with handling shipping and inventory management.
These aspects of doing business often eat up more time and focus than they ought to. High order volume and growing profit interests any business owner, but how do you address fulfillment efficiently? Today’s customers expect fast and professional service around the clock.
This is where 3PL comes in. What does 3PL stand for, and what can it do for your business? Let’s define 3PL’s meaning and break down each component of it.
3PL stands for third-party logistics; the singular term that encompasses e-commerce logistics operations. Third-party logistics (3PL) refers to outsourcing your order fulfillment and management to another company. There are different types of 3PL service providers, each of which serves distinct functions based on your business’s needs.
The phrase third-party logistics first surfaced in the 1970s and 80s. During this time, more businesses sought to delegate their fulfillment processes to external providers. As e-commerce has grown, including the sheer variety of businesses that exist today, the need for customized fulfillment providers has grown with it.
What Does 3PL Mean
A 3PL provider handles your warehousing, picking and packing, transportation, and delivery so you can focus on priorities. Utilizing a 3PL service both frees up your time and decreases the likelihood of in-house fulfillment errors. It’s a form of leverage that allows you to allocate more energy for big-picture concerns, like product development or branding.
Knowing what 3PL stands for also includes identifying the right provider for your products. Below we break down the different 3PL company types that exist in today’s e-commerce landscape.
What Is A 3PL Company?
Now that we’ve addressed what 3PL stands for, let’s examine the different services 3PLs offer. Depending on the unique requirements of your business, you may find a natural fit with one 3PL provider over another. Becoming familiar with the differences between providers makes it easier to select the right company.
3PL Logistics Company
A 3PL logistics company typically offers one or two specialized services for small- to medium-sized businesses. For example, an all-inclusive provider handles the entire process from order confirmation to delivery, whereas a logistics company may only handle daily transactions.
These types of 3PLs make a great fit for companies that want to manage their own warehouse or use a favorite carrier, but need help in other stages of fulfillment. A 3PL logistics company is also a great option for small companies experiencing rapid growth.
3PL Fulfillment Companies
3PL fulfillment companies differ from logistics providers as well. While many 3PLs focus solely on product packing, warehousing, and/or distribution, some are large enough to handle additional tasks. Fulfillment refers to everything from receiving goods from the seller through promptly shipping (think things that need delivery quickly, like shipping alcohol) and delivering products to customers. The fulfillment process integrates with the seller’s website and software, meaning a 3PL fulfillment company handles orders, tracking numbers, and packaging.
3PL Freight Companies
When it comes to shipping, it’s important to distinguish between freight forwarders and 3PL freight companies. Freight forwarders are middlemen who charge a fee for the seller to work with preferred carriers. A 3PL freight company offers a broader scope of services at a responsive scale, including transportation.
Instead of only forwarding goods to an existing carrier, 3PL freight providers handle the warehousing, picking, packing, invoicing, and carrying of your products. It’s a simple way to minimize your carrier touchpoints and save time and money in the process.
3PL Warehouse Companies
A 3PL warehouse company is dedicated to stocking, maintaining, and monitoring their clients’ products, either in the business’s own warehouse or another. Working with this type of 3PL is useful if you have a massive inventory, recently expanded your warehouse, or need to free up your team for other tasks.
Leveraging a 3PL warehouse company has incredible benefits. By handing over your inventory management to them, you won’t experience product surpluses or shortages frequently, and shelf organization will increase. The 3PL you hire can also manage code-compliant storage of products, especially perishable and temperature-controlled goods.
3PL Vs. 4PL
3PL services are valuable for outsourcing specific processes, but what if there was a way to outsource everything related to fulfillment? That’s what fourth-party logistics (4PL) is for. 4PL companies can harness numerous 3PLs to further integrate and optimize e-commerce delivery needs.
Where 3PL companies are designed to process day-to-day transactions for medium and small businesses, 4PL companies streamline the entire fulfillment ecosystem. Here is a detailed breakdown of 3PL vs. 4PL:
Advantages of 3PLs
- Decrease costs and free up time
- Offer responsiveness for higher or lower order volume (i.e. product seasonality)
- Allow businesses to scale affordably
Disadvantages of 3PLs
- Typically, apply only to small- or medium-sized businesses
- Offer less control over company inventory
- Less oversight for customer experience
Advantages of 4PLs
- Provide a singular point of contact for the entire supply chain
- Enterprise-scale logistical support
- Significant decrease in long-term operational costs
Disadvantages of 4PLs
- Can be too costly for small- to medium-sized businesses
- May require intensive client onboarding process
- Minimal control over fulfillment and operations
Wrapping It Up, Shipping It Out
As is evident in the comparisons above, there’s no such thing as universal applicability for 3PLs or 4PLs. Your business may need logistics help in only one area, or you may want to retain full oversight with your packaging, for example. Evaluating different types of 3PLs is a great place to start.
On the other hand, maybe you’re passionate about the product(s) you make but not the operational side of things. In this case, speaking with a 4PL could provide unprecedented time freedom and long-term financial growth for your business. It can also be the perfect transitional step from working with multiple 3PLs to working with one 4PL.
Understanding the world of 3PL providers and being able to identify the right type of 3PL for your business puts you at a massive advantage. Now you can answer “What does 3PL stand for?” for any coworker who asks, and you’re on your way to finding much-needed logistical support.