What is Third-Party Logistics or 3PL?

3PL or third-party logistics is when a business utilises the use of a third party business (like a fulfilment house) to outsource elements of its distribution, fulfilment and warehousing.

A 3PL provider may be a single service provider, such as a warehouse storage facility or transportation, or it can be a complete end to end service that encompasses the entire supply chain through seamless integration.

Now that you have an understanding of what a 3PL (third-party logistics) service is, let’s have a look at some of the types of services they provide.

Here is a list of common types of third-party logistics providers:

• Full-service 3PL like Keepspace
• Warehousing
• Transportation
• Distribution
• Shipping and receiving

Deciding to use a 3PL to outsource your e-commerce logistics is no easy decision to make. After all, you are outsourcing the entire operations side of your business to a third party, which in itself is a scary thing.

However, based on what we have seen at KeepSpace there are four scenarios where utilising a 3PL will be beneficial to your business.

Is fulfiling orders taking to much of your time?

As your e-commerce business grows you will slowly reach a point where fulfiling your orders will become more of a burden than a blessing. If you feel that fulfiling your orders is taking away from activities such as marketing, product development or family and personal commitments it may be time to consider your fulfilment options.

Are you running out of space?

When your business is growing faster than your warehouse/garage space. A 3PL that specialises in warehousing, as well as shipping and distribution, may be something worth looking into. 3PL companies scale up or down depending on your needs effectively giving you unlimited warehouse to grow your business.

Do you have the correct systems in place?

Is your inventory excel spreadsheet holding you back? Some 3PL providers have inbuilt 3PL platforms that will automate your inventory management by integrating directly into your e-commerce platform, giving your business the correct systems to reach the next level.

Does your current fulfilment set up prevent you from scaling?

This last scenario combines the first three into one. If you are looking at your fulfilment set up and you’re asking yourself how can my setup handle 2x my current order volume it may be time to either look at setting up your own in-house fulfilment team or outsourcing it to a 3PL provider.

There are many reasons why working with a 3PL service can be advantageous to your business. A big reason to consider is that you will be outsourcing your logistics to professionals with expertise in this field. The reason why they exist is to optimise the supply chain of their clients. They are experts in warehousing, fulfilment and shipping of goods.

Another reason is why partnering with a 3PL can be advantageous for your business is that it will limit your overheads. Maintaining and staffing your own warehouse is expensive and requires a large amount of capital to pull off as well as accurate forecasting to ensure your warehouse is not running overcapacity. Outsourcing to a 3PL eliminates the large setup cost of in-house fulfilment and opens the door to cheaper shipping rates that 3PLs have access to.