The enlistment of third-party logistics (3PL) providers is on the rise. Today, more than 90% of Fortune 500s and countless small-to-mid-sized enterprises (SMEs) in the U.S. regularly leverage the services of one or more 3PLs.
But when most people think of types of 3PLs, it’s natural to assume that they’re involved with the direct distribution of goods from A to B—the receiving, stocking, packing, and shipping parts.
But not all 3PLs provide the same services. The solutions rendered depend on their specialty.
To that end, today, we’ll discuss the three primary types of 3PL services.
#1 Distribution-Based 3PL Services
A distribution-based 3PL provider is tasked with processing, fulfillment, and shipping of orders.
Typically, a fulfillment center receives inventory from the company’s supplier or manufacturer and stores it until an order is placed. When that time comes, they pick it, pack it, and prepare it for shipping. Common 3PL services include:
- Procurement – Do you have the necessary inventory to meet demand? A 3PL company can source the required goods, be they production inventory or finished goods.
- Receiving – Goods have to move from manufacturers and suppliers to distribution centers. A 3PL provider receives inventory, which involves inspecting, verifying, and accepting shipments before moving them to inventory or operations.
- Picking – After a customer places an order, that item needs to be tracked down and prepared for shipping. The 3PL company picks items from wherever they’re organized and stored in the fulfillment warehouse to satisfy the order.
- Packing – Products must be safe and snug during shipping and transportation. The 3PL packs and labels the product, with some even offering customized, branded packaging.
- Kitting and assembly – Some 3PLs offer to package items that arrive as separate pieces into a single grouping (“assembly”) or to assemble separate pieces into a single offering (“kitting”) during order fulfillment.
- Shipping – The 3PL provider works with carriers to pick up and deliver the orders. Additionally, they relay tracking details to the customers and merchants’ online stores.
- Returns – Not all items will stay with the recipient. If a customer returns the order, the 3PL processes the return and restocks or disposes of the items.
#2 Financial-Based 3PL
Not all 3PLs are directly involved with supply chain management.
For instance, financial-based 3PLs, specialize in the fiscal side of ecommerce logistics. They act as an expanded finance and logistics accounting department to help a business optimize shipping costs, negotiate contracts, and implement value-add solutions.
Financial-based 3PL services are more analytical. Their chief goal is to optimize your supply chain logistics and shipping operation—it’s about reducing shipping costs and expediting transit times.
And what are the must-have solutions?
- Freight & Parcel Audit – Whether you contract with a local or national carrier, the best 3PL company will provide UPS audit software capable of scanning invoices for errors, bad charges, or late package delivery, then automatically handling refund claims.
- Parcel & LTL Contract Optimization – Many shippers overspend since the carrier tends to have all the leverage at the bargaining table. LTL consultants can analyze your shipping data, uncover areas of optimization within the contract, and propose more favorable rates and terms.
- 3PL Contract Optimization – If you work with other 3PL partners, a financial-based 3PL could determine whether your current provider aligns with your logistics needs and budget. Once a decision is made, they can help you shop for a new provider or renegotiate your existing contract.
- Modal optimization – Do you have the right carrier and service mix? Your 3PL partner can analyze your shipping data—weighing the current plan against alternatives—to find the best rates.
#3 Transportation-Based 3PL
Transportation-based 3PLs primarily focus on shuttling goods from one location to another. For example, they may move products or raw materials from a factory to a warehouse.
These courier and freight services are typically broken up into one of three categories:
- Parcel transportation carriers like USPS, UPS, and FedEx
- Same-day delivery via local courier services
- Transportation marketplaces
Although transportation-based 3PLs primary focus involves physically moving goods, they may also provide some warehousing and distribution services. That said, the more common 3PL services include:
- Transportation management – The 3PL assists customers with daily order fulfillment and securing capacity to meet volume surges. This typically involves various modes of transportation, including:
- Less-than-truckload (LTL)
- Air freight
- Last-mile delivery and logistic solutions – Final mile logistics involves transporting goods from a distribution hub to a customer’s home or office doorstep. The goal here is to deliver packages as quickly, cheaply, and securely as possible.
- Transportation optimization – Analysis and logistics services help you better understand your transportation costs and then take action to increase shipment accuracy, reduce transit times, and consolidate shipments.
- Tracking – Maintaining visibility over all of your shipments is an essential component of transportation management. Whether it’s track and trace or trend analytics, you need data to stay in control.
Shipware—Your Financial-Based Third Party Logistics Provider
Supply chain management and logistics is a massive undertaking—a juggling act. To move their products from A to B while staying free to focus on core competencies, most businesses must turn to 3PL service providers for help. But, as discussed, not all 3PL providers provide the same types of service.
At Shipware, our customers trust us to provide finance-based logistics outsourcing services. We offer contract negotiation, consultancy, and cutting-edge technology integrations to empower you to reduce your parcel & LTL shipping spend.
When it comes to finding cost-efficient shipping, there are no one-size-fits-all solutions. That’s why we work with each shipping client to design a custom solution that matches your needs.
Want to see why the average Shipware client saves an average of 21.5% on their shipping costs?
Book a demo today to start saving.
- Supply Chain Drive. Fortune 500 Companies Are Using 3pls More, Study Finds. https://www.supplychaindive.com/news/third-party-logistics-3pl-increase-large-companies-2017/443710/