Third-party logistics (3PL) providers offer transportation, storage, and distribution services. Dealing with these supply chain operations in-house is too expensive. The good news? 3PL providers can manage them for you at an affordable fee.
3PL partners have specialized expertise. Letting them handle your logistics means working with reliable professionals. Also, instead of worrying about supply chain operations, you focus on growing your business. This could mean getting more time to innovate better products or improve your marketing.
However, you'll find many types of 3PL providers in the market. Each offers different services and is best for particular businesses. Choosing the wrong provider makes your logistics operations ineffective or more expensive.
So, how do you select the right 3PL company?
Understanding Different Types of 3PL Providers
When looking for a 3PL provider, you can choose from four options:
Transportation Providers
Transportation 3PL firms move goods internationally or domestically. They handle your shipping needs to ensure your package reaches its destination on time:
- Core Services: International shipping, trucking, freight forwarding
- Best For: Businesses that transport goods countrywide or across the border
- Examples: Ocean carriers, trucking companies, and freight brokers
Warehouse Providers
A warehousing 3PL company provides storage facilities where you can safely keep your products before selling or shipping them out. They have advanced warehouse technologies that improve inventory control and order fulfillment.
If your business can't afford to own warehouses, these 3PL providers suit you best:
- Core Services: Storage, pick and pack, inventory management, order fulfillment, returns processing
- Best For: Manufacturing, e-commerce, or retail companies that need secure storage and reliable fulfillment services
- Examples: Fulfillment centers that manage online orders and usually have optimized locations for quick delivery
Distribution Providers
Distribution 3PL providers move a product to its final destination. In other words, they transport goods to retailers or end consumers (last-mile delivery). Powerful logistics technology enables them to optimize transportation routes and get real-time insights into the transportation process.
As a result, they stay on top of delays and deliver your products quickly and efficiently.
- Core Services: Warehousing; inventory management; receiving, preparing, and shipping orders; last-mile delivery, returns management
- Best For: E-commerce, manufacturing, and direct-to-consumer brands
- Examples: Regional fulfillment centers, direct-to-consumer distributors
Forwarder Providers
Forwarders are intermediaries between logistics companies and businesses that move goods across borders. They make arrangements with warehouse 3PL providers, find suitable carriers, and plan the shipping process on your behalf.
Forwarder providers also prepare documents for importing or exporting products.
- Core Services: Coordinating global shipments, managing custom clearance, negotiating freight charges for clients, filing insurance claims when necessary
- Best For: Businesses that trade internationally and want an expert to handle the complexities of cross-border logistics
- Example: Freight forwarders, custom brokerage agencies, import and export service providers
The Role of 3PL Providers in Supply Chain Management
Logistics management can overwhelm companies with small teams and tight budgets. Operations such as inventory management, warehousing, and shipping are all on your shoulders. At the same time, you must keep the rest of your business running.
3PL organizations take logistics operations off your plate so you can focus on profitable activities. Plus, their fees are more affordable than setting up your own logistics processes.
Making Your Supply Chain More Efficient
3PL providers certify your products reach their destination on time and at the lowest possible cost.
With robust warehouse management systems, for example, 3PL companies can instantly locate customer orders in their storage facilities. This speeds up picking and packing. In return, products leave the warehouse quickly, and delivery begins as soon as possible.
Additionally, transportation providers use route optimization software to find the cheapest, quickest, and most efficient way to move your goods. As a result, you reduce transportation costs while customers get their orders on time.
Teaming up with 3PL companies improves supply chain efficiency, which can be a competitive advantage.
Using Data to Predict Demand
3PL providers can forecast how much of your product people will want in the future. They use predictive analytics tools to analyze past customer orders and spot hidden patterns that may not be readily visible to the human eye. The insights reveal trends you can use to predict demand accurately.
You spend extra on storage by holding excess inventory. On the other hand, understocking means missed sales opportunities. Accurate forecasts ensure you sit in the Goldilocks zone with just enough stock to meet current and future demand.
Promoting Sustainable Logistics
According to McKinsey, customers and regulators are pressuring logistics companies to make their operations eco-friendly. Analysts expect the market for green logistics to be worth $50 billion by 2025 and roughly $350 billion by 2030.
Here's what 3PL firms are doing to improve sustainability in the supply chain:
- Using biodegradable, recyclable packaging material
- Optimizing transportation routes so shipments travel the shortest possible distance to reduce fuel consumption
- Streamlining logistics operations to reduce waste
- Recycling materials like cardboard, plastic, and paper to reduce the waste that end up in landfills
If your business prioritizes protecting the environment, these eco-friendly practices by third-party logistics providers support your sustainability efforts.
Providing Value-Added Services
Basic 3PL services include:
- Warehousing
- Transportation
- Order fulfillment
- Inventory management
Third-party logistics providers like QuickBox offer additional services that enhance supply chain management, including:
- Custom packaging and labeling: These services are tailored to your product's specifications. Such personalization protects cargo while in transit and enhances branding.
- Subscription fulfillment: 3PL providers can quickly process and ship monthly orders for brands that run on a subscription-based business model.
- Product assembly: 3PL companies can handle the difficult part of preparing your products for sale. For example, they can bundle items you want to sell as a single set or add educational materials to a cargo. In other words, third-party logistics companies do the heavy work, so you don't have to do it yourself. That way, you get more time for core business functions.
- Temperature-controlled storage: If your products go bad quickly or are sensitive to temperature, some 3PL providers offer special storage solutions that meet your needs.
- Real-time reporting: With powerful analytics tools, logistics companies can provide insights into supply chain performance, inventory management, and order tracking. As a result, you make data-driven supply chain decisions instead of relying on gut feeling or guesswork.
- Compliance: Logistics involves complex rules, especially if you ship goods across borders. Some 3PL providers have expertise in international, domestic, and industry-specific regulations to help you comply.
Factors for Selecting the Right 3PL Provider
3PL providers are more affordable than handling logistics in-house. Plus, they manage all logistics operations for you. This is a huge advantage for small businesses with overwhelmed teams.
However, with multiple 3PL providers in the market, choosing the most suitable can be tricky. The following factors will help you select the right third-party logistics provider for your business:
Understand Your Business Needs
Which logistics services are you interested in?
If it's storage, a warehousing provider is the best fit.
Meanwhile, a transportation 3PL is suitable for shipping locally or internationally.
If it's last-mile delivery you need, distribution 3PL providers are there so orders reach retailers or end consumers quickly and safely.
A third-party logistic company like QuickBox offers all these services, so you don't have to partner with multiple providers.
In addition to your logistics needs, consider the size of your operations. Do you ship hundreds of packages daily or just a few? A 3PL provider perfect for small logistic operations might not have the resources to handle massive orders.
When assessing your business needs, determine how complex your logistics operations are. For example, some items might require special packaging and storage. Others may need to be shipped on the same day or within 48 hours to meet customer expectations of fast delivery.
If you ship locally and internationally, you may need multiple means of transport to fulfill customer orders in different regions. The right 3PL provider must have the capacity to handle all this complexity for your logistics operations to be effective.
Check the Provider's Geographic Reach
You already know where your customers are. Choose a 3PL with strong logistics networks in those areas. When a provider has fulfillment centers closer to your geographically diverse buyers, the distance orders have to travel before reaching customers reduces.
In other words, you deliver products quickly, which keeps your customers happy.
You probably think businesses with a local audience don't need a 3PL company with a global reach. But that's only true if you're not planning to scale any time soon. If you expect to expand, a 3PL operating domestically and internationally makes it easy to grow without changing your logistics setup.
Consider Technology Integration
A 3PL provider's technology is a big deal because it can streamline logistics. The right partner has tech solutions with at least the following features:
- Real-time tracking: You can monitor goods in transit and provide customers with live delivery updates every step of the way. You can also track inventory levels to ensure you always have enough stock to meet customer demand.
- Data analytics: Reporting tools can reveal customer order trends, delivery times, and inventory levels. With that insight, you make smart supply chain decisions instead of relying on guesswork.
What kind of technology 3PL providers offer is a crucial consideration. But confirming how well it works with your current systems is essential, too. If you already use software to manage inventory, orders, or any other supply chain operations, your provider's technology should easily integrate with your existing tools. Connected systems mean you can access all your logistics information in one place.
Balance Cost With Service Quality
A cheap 3PL company might not be your best option. If a provider's fee is too low to be true, it strongly suggests low-quality services. Even so, an expensive 3PL provider doesn't guarantee perfection. Rather than gauging a provider based on the bottom line, look for one that hits the sweet spot between services provided, reputation, and budget compatibility.
Here's what you can do (step by step) to achieve that:
- Note down your logistics needs.
- Determine how much you want to spend on a 3PL provider.
- Select at least five logistics companies offering services you're interested in and get a quote from each.
- Compare their prices for those services to see which 3PL providers are within your budget.
Be careful when evaluating their fees. Some 3PL providers have hidden charges. If you don't consider these extra costs when selecting a third-party logistics provider, you'll pay more than expected later. Make sure you understand the total cost breakdown of basic and value-added services.
Besides affordability, consider reliability. The right 3PL partner processes orders quickly and accurately. That way, your products get to their destinations on time.
Benefits of Partnering With the Right 3PL
Why team up with a third-party logistics company?
Reduce Costs
To fulfill customer orders without involving a third party, you spend money on hiring logistics staff, building warehouses, or buying a distribution vehicle fleet. With 3PL providers, you avoid all these costs. You only pay for services rendered.
Additionally, third-party logistics providers have numerous clients. As a result, they distribute logistics costs across multiple businesses, reducing how much each pays for a service.
Enjoy Scalable Logistics Solutions
3PL providers can tailor their services to your needs. For example, warehouse providers usually have multiple storage facilities. So, it's easy to scale your storage needs up or down based on stock levels.
Transportation 3PL providers, on the other hand, have well-established shipping networks, making it simple to expand your delivery from local to international.
Take Advantage of Logistics Expertise and Advanced Technology
3PL providers are supply chain experts who can help you stay on top of logistics trends and regulatory changes. They also have powerful software systems, eliminating the need to invest in logistics technology. The solutions can provide real-time insights to help you make informed supply chain decisions.
Improve Customer Satisfaction
Logistics companies have the knowledge and technology to ensure products ship via the fastest route so orders reach customers quickly. Some 3PL companies also provide 24-hour or two-day shipping. This delivery timeline meets today's customer expectations for speed.
Additionally, 3PL companies use modern warehouse management systems that improve order picking, packing, and shipping accuracy. Increased precision minimizes returns and customer disappointments.
Evaluating 3PL Providers' Flexibility, Scalability, and Technology
Assess a 3PL provider's ability to adapt to seasonal spikes or sudden demand shifts. For example, if your business sells more during holidays, check whether the logistics company has enough storage or transportation resources to handle the extra load effectively and efficiently.
You should also consider a logistics provider's technology. Do they have software solutions for tracking, forecasting, and optimizing logistics? With these tools, a provider can improve inventory management and make logistics operations faster and cheaper.
Improve Logistics Efficiency With a 3PL Provider
Partnering with a 3PL partner is cheaper than setting up logistics operations in-house. You only pay for the services you need — no costs of hiring staff, buying technology, running storage facilities, or managing transportation fleets.
However, with different types of 3PL providers in the industry, carefully evaluate your logistics needs to choose the most suitable for your business.
A third-party logistics company like QuickBox provides flexible, tailored services that grow and scale with your business. Our supply chain technologies give you real-time insights into your logistics operations so you'll always know what's happening.
Since we serve multiple clients, we use economies of scale to reduce fulfillment, postage, and delivery costs. Request a quote today to see how we can personalize our 3PL services to meet your needs and improve logistics efficiency.