What is 3PL?
3PL or Third-party Logistics (or TPL) refers to the fulfillment services encompassing several crucial operations of e-commerce, including order processing, inventory management, warehousing, transportation, shipping, retail distribution, and so on.
3PL providers excel in supply chain management by catering to the specific requirements of e-commerce merchants based on market conditions. This outsourcing model allows businesses to scale up and flourish. Partnering with the right 3PL provider helps avert a supply chain crisis.
Significance of 3PL in E-commerce
Third-party logistics relieves the burden of shipping, customs, and order fulfillment, and enables an e-commerce firm to focus on business expansion.
Let’s look deeper at some specific benefits:
- It cuts down money and time significantly
Since third-party logistics providers take care of every function, starting from inventory management to transportation and distribution, a lot of extra expenses are saved.
- Market expansion
With 3PL, your distribution channel no longer remains saturated. The distribution centers and warehouses are spread across a wider region, offering greater customer reach.
Scaling up transportation, space, and labor is easier with 3PL as it accommodates the needs of the business depending on its inventory fluctuations. For instance, 3PLs ensure the optimization of resources in both busy and slack seasons.
- Broad resource network
3PL providers offer a broad resource network that helps to expand the supply chains in a more effective way.
Prerequisites for 3PL Providers
Choosing the right 3PL partner is crucial. Here are the requirements:
- Evaluate the track record of the 3PL partner to know if it’s reliable. Information like client feedback helps to ascertain the performance of the service provider.
- Choose a strategically located provider to ensure scalability and flexibility. The top-most 3PL partners have a wider customer reach.
- Opt for a partner that offers customized solutions according to the needs of the business.
- The 3PL provider must embrace innovation and technology to stay on par with the ever-changing market.
Use Case with 3PL
Suppose a fashion retailer wants to launch a new range of sports apparel and expand its area of operation. Opening new stores or warehousing in different areas can be cumbersome and expensive. 3PL partners eliminate these unnecessary hassles. By partnering with a 3PL provider, the retailer can utilize its supply chains and deliver goods more conveniently. Warehousing, transportation, and distribution costs are drastically reduced.