Any conventional brick-and-mortar store engaged in retail, handles an array of activities, such as arranging items and maintaining them and managing their eventual sales. Now, as we step into the modern times marked by blazing e-commerce trend, which flourishes at the lightning speed around the world and people are shepharded to place orders online, make payments across the network and get the required items delivered at their doorstep in the following days.
Now, on monitoring the flow-chart closely, we are able to spot an entity which has flown into our sight from nowhere, which is 3PL (3rd Party Logistics) whose market share is on the steep rise during the past two years across the world. Such are indispensable to such online trading activities and e-Commerce businesses have to stick onto these in order to stick to progress.
In fact, numerous e-commerce businesses have witnessed greater operational expansion even though they functioned on shoestring initially. Clearly, the third party logistics allow us to unleash greater sophistication before our customers on the deals made through the e-commerce mode.
For instance, any third party logistics company can take care of our inventory storage only to pick, pack and to ship items ordered online and in this way, such is the crucial bridge between the manufacturing operations and the customers, as inventory, warehousing and delivery are very well taken care of.
Undoubtedly, customer satisfaction leads to business growth but such virtues stem from order fulfillment based operations.
What on earth are Third Party Logistics?
Amid the ongoing e-commerce revolution, 3PL (third Party Logistics) has attracted great sheen. Such are also regarded as fulfillment warehouse or fulfillment centre, which function like order fulfillment companies, such as:
- Warehousing,
- Inventory Management,
- Shipping and Receiving,
- FTL and LTL Freight shipping,
- Picking and Packing,
- Kitting and Customization,
- Reverse Logistics,
Truly, warehousing and fulfillment vary at length and such 3PL company services enjoy exclusive mastery in a range of such services (one or multiple types).
The warehouses are points where food products are stored and shipped from, which would need refrigeration or freezing.
In the same spirit of logistics game, for maintaining and shipping hazardous material, it calls for exclusive 3PL companies and as we talk and discuss about 3PL agencies, Red Stag Fulfillment is the prominent group in the field catering to ponderous and high-worth product range in US.
3PL (3rd Party Logistics) is the term which is sometimes used to mean order fulfillment and a comprehensively embellished third party warehouse will have professional expertise needed for an array of eCommerce fulfillment services including (but not limited to) warehousing, order processing, shipping and receiving. In addition to this, other services are also offered by other 3PL warehouses such as customer support, handling returns and customization.
Such 3PL based business model is mostly encountered as outsourced logistics company.
Then, there exist 4PL and 5PL versions too but many companies, it is seen, choose 3PL form only.
Fundamentals of Third Party Logistics:
Companies hire 3PL providers who carry out inbound and outbound transportation and handle warehousing too. Also, they don’t maintain their own fleet of trucks generally, but fashion robust professional ties with other carriers for freight and shipping.
By third party, we simply mean that fulfillment tasks are outsourced for 1st party (i.e. the e-Commerce company which doesn’t own a sprawling warehouse. Instead they borrow some space on rent for their products in a warehouse and such a large warehouse houses products for multiple companies for subsequent distribution.
Now, the warehouse staff get our products and keep them as inventory and when the orders are placed, they pick, pack and ship the items in skillful way which they become used to. The 3PL players collaborate with many carriers to help with the deliveries and to keep customers happy.
Third party warehouses are strategically manoevred with scalability. That is, as the business expands resulting in more sales, extra volume can be handled and companies can tap upon their capability without needing the staff additionally.
Besides, 3PL can bring your shipping costs down alongside shrinking the delivery time cycle. Truly, a 3PL company marshals fulfillment skills and when we hire such a service, we get the benefit of experience and field devotion.
Outsourced fulfillment serves our business in tremendous way, let’s delve into its specifics below:
When we align a fulfillment agency, our products are transported from our manufacturing facility to 3PL warehouse. Once such inventory is had, our 3PL associate renders an array of services, such as:
Integrating eCommerce Platform:
Many of the eCommerce businesses (play their bet) on multichannel selling to survive the race. To keep you up and running, your fulfillment warehouse adheres to robust IT framework. Prolific fulfillment companies embed cutting-edge technologies with multiple sales platforms. Our fulfillment should support all of our sales channels and there should be a custom API. Then, the eCommerce companies should access a devoted dashboard to view and track our orders and their development online in reliable way.
FTL and LTL Freight Shipping And Receiving:
Now, when it comes to save money on freight, FTL and LTL methods have been conceptualized as useful tools. Such are productive when we have to deal with huge ship orders to end customers or to retailers. Besides, freight services can also be utilized to relocate our products from warehouses to distribution points closer to customers. The logistics company which we have associated (outsourced our tasks to) can provide the favourable guideline.
It can install the system for FTL and LTL loads and handle the stream of truckload freight. Then, the 3PL can also be useful to get the best deals coupled with the appropriate service range to manage our freight shipping.
Managing Inventory:
When we rope in a third party logistics company, we reap the benefit of treasured experience in inventory management. We get a devoted account representative who invests his experience and skills learned from many other eCommerce companies and we get our stocks managed in the most distilled manner.
Picking, Packing And Shipping:
Picking, Packing and Shipping services remain at the heart of order fulfillment. When customers place an order utilizing any of the sales channels, such orders are received at the warehouse we connect with. A picker processes the order, locates the item on the shelves and gives it to a packer, who selects a box and packages the order. The packer also sticks the shipping label and in the final lap, the role of shipper comes into light who assigns the box to the right carrier.
There are third-party logistics which may unlock the same day shipping facility also, wherein the customer orders are picked, packed and shipped on the same day as such are received. But there is usually a time limit for same day shipping and there are companies that provide two levels under this service. For instance, 3PM cut-off and the other scenario is when orders are recorded as late as 5pm on a day. No doubt, such is the fastest way of distributing items among the customers which eventually ends in winning hearts and helps in branding too.
Reverse Logistics:
Returns are just a part of the game in eCommerce industry which is identified by the colourful business term reverse logistics and there are many factors determining the return rate, such as the type of merchandise we deal in and the experience shows that higher returns rate is registered for items that are sold in specific sizes, such as shoes and clothing. Now, when we have eCommerce fulfillment agency, it would handle and process the returns too. The items which are returned, are examined for any damage, so such could be put to shelf again.
Besides, the reverse logistics can also narrow down on time within which, the damaged goods are put on sale again.
3PL Services Compared With Drop Shipping:
To outsource our order fulfillment there are many ways. For instance, a drop shipping eCommerce business model is one where our order fulfillment is managed by a third party. But there are big differences between drop shipping and 3rd party logistics. To uncover the best option for our business, we need to delve upon the following:
Is order fulfillment same as 3PL?
Yes, order fulfillment or eCommerce fulfillment can also be regarded as third-party fulfillment. Such is the occupational framework where we have upfront costs to purchase and store products but the cost incurred on selling goods is always lower than the one in the drop shipping model.
Nevertheless, when using 3PL, our supply chain will take this form:
- You set-up an e-Commerce online store and source the items to be sold there,
- You purchase the products and our merchandise is stationed at order fulfillment warehouses which we have associated with as 3PL,
- We get sales order online,
- Online orders are channeled through sales platform to our warehouses that are managed by 3PL,
- Ordered items are picked, packed and shipped at the warehouse, for which e-Commerce companies pay in advance,
- The ordered products are delivered to end customers/ buyers,
3PL Benefits Galore:
Such operational model unpacks numerous benefits, such as:
- Good Costs Are Lower: When a business purchases big bunch of goods the cost is pretty affordable as it is based upon wholesale price. Clearly the more products are purchased, it will result in low costs which would inversely mean higher profit.
- Flexibility Is Enhanced In Sourcing Products: When we rely upon e-Commerce fulfillment business model, we can source products from multiple manufacturers. The same location houses our whole range of items therefore products manufactured by different companies can be shipped in the same box, which save us hugely in shipping costs.
- We enjoy More Control Over Logistics Operations: The companies have to select an order fulfillment associate agency which unrolls the services at par with our customers’ wishes.
- Order Fulfillment Gets Quicker: A 3PL service can have multiple warehouses at different locations which will help delivering orders quickly.
- Easier Returns Processing: The 3rd Party Logistics warehouse that dispatched products can render us customer service and can also handle any returns. This occupational alacrity results in customer satisfaction and help us in our inventory too.
What does drop shipping actually means?
This is the business model where little capital investment is needed and is recommended way to launch a new venture on a small-scale. Many e-Commerce players begin with this and later switch to conventional order fulfillment once they comprehend the market fully.
The only drawback is that companies have to invest a huge capital for products and thus profit margins will be smaller.
Under a drop shipping supply chain, the following structure is enabled:
- Enterprises don’t own/ control the inventory,
- They contract with a manufacturer to accomplish drop shipping,
- Then they display the items on sale on our e-Commerce portal,
- Customers place their orders on such platform,
- We re-direct these orders to the manufacturers and pay those manufacturers for the products that our customers order,
- Finally, the manufacturers dispatch the items to customers.
Drop shipping brings forth many benefits:
- Pocket Friendly: A new venture can be started with minimal investment. We only have to pay for setting-up our e-Commerce portal,
- Minimal Risk Involved: we manage the inventory that is wanted and required by our customers and nothing useless,
- Low Operating Cost: Businesses are saved from spending for warehouses space to position our inventory. The products remain with the manufacturer until such are sold away by us.
Well, dear readers, amid all such operational nitty-gritty of the e-Commerce network, the force that binds all such entities together, is that of premium technology and there are phenomenal logistics trends which every year froths forth.
