3PL Made Simple: Eye-Opening Guide [Third-Party Logistics]

If you’re looking for an easy-to-understand and in-depth guide to the world of 3PL, you’ve found the best one on the web.

As an eCommerce business owner and digital marketer of over 10 years, I needed to hire a third-party logistics provider as my company kept growing.

And so, I will share my personal insights, tips, and simple explanations on this topic.

Here’s what you’ll learn in my article:

Let’s begin.

What Is 3PL?

What Is A 3PL?

Just like most startups, the vast majority of the business processes of my budding company were handled in-house.

This had a ton of advantages.

Stocks were easily monitored. I also knew my staff just like they were family.

However, as my business grew, it was getting hard to keep this up.

International orders flooded in, and if I’m being honest, the shipping fees paid for this type of customer were outrageous.

This was when I began considering seeking the help of a third-party logistics service.

By now, I believe you already have a general idea of what it is.

And so, to be perfectly clear, allow me to give you its definition.

A 3PL company is a fulfillment center that handles warehousing, inventory management, receiving, LTL and FTL shipping, packing, delivery, items returns, customizations, and kitting.

To be frank with you, I had doubts about hiring my first third-party logistics partner.

But, upon doing so, I was able to focus on other aspects of my business such as marketing strategies, customer satisfaction, and product improvements.

It also allowed me to have more time for myself and my recreational activities, as well as spend more quality moments with my family and friends.

What Are The Pros & Cons Of 3PL?

What Are The Pros & Cons Of 3PL?

Although partnering up with a 3PL company did wonders for my business, this isn’t the case for everyone.

That’s why in this part of my article, I’ll disclose the pros and cons of hiring a third-party logistics provider so that you can properly weigh them out yourself.

Pros Of Third-Party Logistics Providers

Pros Of Third-Party Logistics Providers

Here are four benefits to hiring a 3PL company for your business:

  • Easy Expansion: As much as there are upsides to growing your company, there are also unexpected downsides. Keeping up with the increased demand is one of these top drawbacks. That’s why teaming up with a 3PL company can help ease this process for you. You won’t have to stress about the processes involved.
  • Open For Growth: In the same way that you’re expanding now, being partners with a third-party logistics provider also ensures that in the future, should your company grow even bigger, you won’t have to deal with so much of the hassle. There’s a lot of room for it and you won’t have to worry about that moving forward.
  • Time-Saving: Now that you’ve handed over many business processes to a trusted 3PL company, your schedule is freed. You can relax or shift your attention to other important matters.
  • Cost-Efficiency: A 3PL company lets you save on overall costs of expansion. From making sure that they’re up-to-date with the latest logistics technology, warehouse upkeep, inventory management, transportation of goods, etc., they’ve got it handled for you.

Cons of 3PL Companies

Cons of 3PL Companies

As for the downsides, here are three that you need to be aware of:

  • Limited Control: If you’re used to being hands-on with your business, it’s going to be hard to let go of control. There are also so many factors to consider. How can you make sure that your chosen 3PL partner isn’t going to let you down (in terms of quality, security, customer satisfaction, etc.)? With so many to choose from, how do you select the one with the top services at reasonable prices? In the section How To Pick The Right 3PL Partner, I’ll help you with this.
  • Increasing Fees: Although it’s true that you’ll save more with a logistics provider, the fees that you pay can go up really fast. There are additional services that you can readily avail and if you’re not careful your costs can pile up.
  • Need For Customized Services: Now that we’re on the topic of costs, one particular area that can affect this is customized services. Although some products can be stored easily, there are those that need a specific temperature range, secure areas, etc.

So, what do you think of the pros and cons of 3PL companies?

Do you think it would be more beneficial for you to pursue it? Or, does it make more sense to handle everything in-house?

Hang on to that thought.

The next section of this article will give you more information regarding different services.

What Do Third-Party Logistics Companies Do?

What Do Third-Party Logistics Companies Do?

In the first section, I glossed over what a 3PL company can do for you. And in the one that followed, I helped you decide whether this is the right choice for your business.

Now that you’ve made it this far, it must mean you’re heavily leaning on acquiring the service of a 3PL company or at least gathering as much information as you can before you arrive at a firm decision.

Allow me to give you more details on this aspect.

As for this part, I’ll discuss what each one of said functions is so that you can get a better idea of these services.

I would also like to mention that not all third-party logistics providers are created equal. Each company may have a different set of assistance that they can offer you.

That’s why it’s important that you hop on a call with them to talk about what you need and what services are available.

Receiving Your Goods
  • Receiving Your Goods: The very first step that you’ll go through when partnering with a 3PL provider is sending them your inventory. This process can be handled in various ways but it’s pretty common that you’ll be asked to fill out forms about the number and type of goods you’re sending them. 
Warehouse Storage
  • Warehouse Storage: Once your products are received, they’re now stored in warehouses in pallets, bins, or shelves. Another thing that you should put into consideration is that if your goods have specialized needs such as perishable goods, medical-grade products, hazardous materials, and many more.
Labeling
  • Labeling: This is a service that’s not often offered in many third-party logistics companies. However, this is super important and if you don’t have the capacity to do this in-house, make sure your 3PL company offers it. Ensure that barcodes are provided and that best practices are observed (ex: paper used should withstand various temperatures and environments).
Order Processing
  • Order Processing: Now that your goods are received, stored, and labeled, they’re ready for orders. Once a customer hits the Buy button, the 3PL service provider processes it. There’s no need for you to hire extra staff (if this is offered) on-site or remotely. 
Picking Customer Orders
  • Picking Customer Orders: After receiving the order through 3PL software, they will look for the item that’s in storage and retrieve it for packing or any additional preparations needed.
Assembly
  • Assembly: Speaking of preparations, if your business requires assembly (ex: wooden desks, office chairs, etc.), make sure that your third-party logistics partner has this. It’s very efficient and convenient for you because you don’t have to assemble the items beforehand (unassembled products take up less space and damage during transport).
Kitting
  • Kitting: Kitting is when you put together different products as a bundle. Think of subscription packages such as makeup and beauty products. Although individually serve different purposes, if your business needs this service then your logistics company should also be offering it.
Packing
  • Packing: For many providers, a standard plain box is the usual go-to. But, if you want your goods to be packed using your special paper or with notes and other little details, you’re going to look for a 3PL company that caters to this. 
Shipping
  • Shipping: This one is my favorite among the services. The thing with fulfillment centers is that because of the bulk shipments that they have, shipping companies give them discounts. This means that you also pay less as a business owner. And that’s not exclusive for one company, they partner up with several so whichever you choose or need, you’ll surely save money.
Delivery
  • Delivery: There are so many businesses that neglect this part of the process and as a result, they get negative reviews. Don’t follow their example. Keep in mind that the delivery represents your company and so if it’s late or if the delivery person is being rude, that’s going to reflect on you as well. I have to say though that this is another service that I’ve noticed is only offered by huge 3PL companies.
Reverse Logistics
  • Reverse Logistics: Another cause of bad reviews is items that are damaged, malfunctioned, or are simply dubbed “not right” by customers. This can be such a hassle and not a lot of companies have this. That’s why it’s a real lifesaver if your 3PL partner has this as available assistance.
Inventory Management
  • Inventory Management: This one is another treasured service of mine. It’s handy when preventing products from being out of stock. Just when supplies are running low, the fulfillment center will notify you and order more products to be received.
Distributing Inventory
  • Distributing Inventory: Distributing your inventory in several warehouses is a wise choice that’s why it’s a bonus if your 3PL partner has strategic locations. It lets you deliver packages faster and at less cost (even calculate them in real-time for some providers). There’s even cool technology nowadays that allows data on what particular areas you’re getting more orders at and therefore putting a substantial amount of your inventory there.

As I already said, each 3PL company has different services offered.

That’s why it’s essential that you assess which are your must-haves and find the right provider that can attend to your specific needs.

This is exactly what we will discuss in the next section of this post.

How To Pick The Right 3PL Partner

How To Pick The Right 3PL Partner

So, what should you look for in a logistics provider?

Here are five extremely important things to take note of:

Products Specialization
  • Products Specialization: Every business is different in its own way. That is why, as you’re deciding which 3PL provider to choose, it’s vital that you ask them if they can handle the type of products that you’re selling. This is crucial because not all facilities specialize in all products, especially those that require specialized care and storage. There are those that are more experienced and capable of handling particular types of goods.
Good Reputation
  • Good Reputation: Aside from reading blogs, I advise you to take a look at reviews such as Trustpilot and Capterra. Ensure that you’re viewing the recent posts, at least one year old. Sometimes, what is advertised is different from the actual service. Newly opened 3PL companies won’t have a lot of these reviews but you can always head over to YouTube or even Facebook reviews to get more info.
Matching Needs & Services
  • Matching Needs & Services: The same case with the first item on this list, each company has a unique set of needs. There are those that need same-day or 2-day shipping. In this situation, they have to partner with a fulfillment center that boasts speedy delivery. Think of your priorities and distinct needs and make it a point that your provider can meet them.
Strategic Locations
  • Strategic Locations: You also have to put into consideration your customer base. Say, for example, if they’re mostly located in the US then you need to seek out a logistics provider that has many centers located in this area. This will make your deliveries faster and lower your shipping fees.
Up-To-Date Software
  • Up-To-Date Software: Another factor to look at when selecting a 3PL partner is the software they use. It should be secure, easy to implement and navigate, with a modern interface, and allows you to see real-time reports, updates, notifications, etc.

Top 3 Logistics Providers For 2021

Top 3PL Companies

Now that you know what to look for in a 3PL company, you’re probably thinking where you should start looking. 

With that, I believe you should always go with the best in the industry.

In this part, I’ll give you my three picks for the top logistics providers for 2021.

Here are my criteria for choosing them:

  • Top-Quality Service: All three 3PL companies in this list are multi-awarded and recognized in the world of order fulfillment. Not only that, I’ve tested them myself and they’re amazing. They’re also racked up praise by many users in various real customer reviews.
  • Transparent Pricing: If there’s something that puts me off whenever I’m looking at a service, it’s that there’s no pricing included on their website. That’s not the case with my top three. Every single one of them clearly indicated the prices of their services on their web pages.
  • Multiple Locations: As I talked about in picking a 3PL partner, having several warehouses is beneficial to you in many ways, not only locally but internationally as well.

So, without further ado, let me introduce you to the cream of the crop.

#1 ShipBob

ShipBob

ShipBob is a household name in terms of order fulfillment.

What you’ll love about them, among many other things, is their use of advanced technology.

From seamlessly integrating with your software through cloud-based tech, to processes involved in their warehouse such as verification, quality checks, etc., you can rest assured that your inventory is well taken care of.

All of the information regarding your products are visible in real-time.

Here are other notable features that ShipBob has:

  • Kitting services
  • Massive integrations 
  • Personalized packaging
  • Stress-free product returns
  • Amazing customer assistance
  • Offers same-day and 2-day shipping

“If your customer base is mostly located in the United States (they have more than 60 warehouses here), Canada (over 15 centers in this location), this 3PL provider is the best option for you. They also have a couple of locations in Europe and Australia.”

-Burkhard Berger

Learn more about their pricing and services using this link.

#2 Red Stag Fulfillment

Red Stag Fulfullment

If you’re a business owner who prefers quality service above all, look no further than Red Stag Fulfillment.

They’re so much more than just empty promises.

In fact, if they do make mistakes, they’ll even pay you.

They boast a 100% fulfillment accuracy. Any error committed in packing and shipping, you’ll be paid $50.

Not only that, let’s say your products incur damage upon transferring to their warehouses, you’ll also be reimbursed for it because they have a zero shrinkage policy.

Here are other things to love about Red Stag Fulfillment:

  • Vast integrations
  • Same-day delivery
  • Short-term contracts
  • Top-tier customer support

“Red Stag is among the multi-awarded 3PL services in this list. It’s a great fit for you if you’re a B2B or B2C merchant selling bulk and heavy shipments with customers situated in the US.”

-Burkhard Berger

If you want to see their pricing list and the other services that they offer, head over to their site.

#3 ShipMonk

ShipMonk

The last but definitely not the least item on this list is ShipMonk.

They’re a great pick if saving money is on top of your priorities. They’ve partnered up with all major carriers so you’ll surely get discounts on your shipping fees.

Just like Red Stag, they also pride themselves in giving only the best for their clients with their 99.99% picking accuracy.

And, in the same way that ShipBob utilizes the latest tech, ShipMonk also has beginner-friendly and cloud-based software. They also offer customized packaging for their customers.

Other amazing features of ShipMonk are the following:

  • 24/7 customer support
  • 65 API integrations
  • Inventory management

Convinced this is the 3PL company of your dreams? Visit their website to check out their detailed pricing guide.

“ShipMonk is a high-quality logistics service that’s perfect for US retailers with products that are small in size. If you’re into subscription boxes and crowdfunding, this is also a good fit for you.”

-Burkhard Berger

Best 3PL Services of 2021

Best 3PL Services of 2021

Looking for more 3PL company recommendations?

If you didn’t find one that fits your business, I’ve compiled a list of the best ones for 2021.

I highly suggest that you read it.

I’ve shared what type of companies they’re a good fit for, products that match their specialization, prices for their specific services, locations that they’re catering to, and so much more.

For example, if your company mostly deals with nutraceuticals, beauty products, and electronics, as well as has a seasonal order pattern, IDS Fulfillment is the one.

There are 17+ 3PL companies on this list. I’m sure that you’ll find a great pick in it.

So, if you want more info on this subject, please go to this article.

Conclusion

Hire a 3PL company if your business is scaling at a rate that you can’t handle (ex: you find that you need to hire a lot more people and seek bigger storage options).

Although they’re all different from one another, common 3PL services include receiving, storage, labeling, order processing, picking, packing, shipping, delivery, inventory management, distribution, assembly, kitting, and returns.

It will also allow you to expand easily and save your time and energy for other aspects of your business.

Additionally, when choosing which provider to go for, ensure that you’ve checked the locations of their warehouses to see if your customers are situated mostly in these areas. Look for recent reviews from existing customers, too.

It’s also crucial that you check in with them to see if they match your product’s needs with their specialization, as well as their top features and benefits.

3PL FAQs

Got more questions regarding third-party logistics? Here are four frequently asked ones in this industry:

Why Is 3PL Important?

3PL is important because it allows you to scale your business with ease. Although there are many benefits to a growing company, there are also drawbacks that come especially with the increase of tasks needed to be accomplished. 

When Should You Use A 3PL?

Partnering with a 3PL company is essential for business owners experiencing expansion. With the rise of orders and demands, they will find it hard to keep up since they’ve gotten used to taking care of these themselves or with the help of a couple of employees. In this case, 3PL offers the best and most cost-effective solution.

What Is 3PL Software?

A 3PL software is a program that allows you to monitor, schedule, and manage your business. This brings an added level of convenience because it syncs your inventory whether you have an online or physical store. It also allows you to calculate costs like shipping.

Is Amazon A 3pl?

Amazon is a third-party logistics provider. It is, in fact, one of the largest globally. It allows you to send your inventory to Amazon warehouses. Additionally, advertising through their platform, customer assistance, packing, picking, and delivery are also services offered. 

In This Article

Burkhard Berger

Burkhard Berger

Follow me on my journey from $0 to $100,000 per month. I'm sharing everything I've learned in my income reports here on Novum™ so you can pick up on my mistakes and wins.

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