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3PL Logistics Explained – Definition, Services and Benefits

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Logistics is a vast industry that encompasses various services and operations, so when you hear about 3PL logistics, what comes to your mind? 3PL logistics is a short-term for third-party logistics and is a vital part of the logistics industry, even though some people may not fully understand what it entails.

Logistics companies are categorised into 1PL, 2PL, 3PL, 4PL and 5PL.

3PL logistics

When considering the level of logistics services that best suits your business needs, it is better to understand the basics of logistics and the services you can get at every level. So this guide discusses everything you need to know about logistics at the third-party level.

What is 3PL Logistics?

Third-party logistics is a specialised storage and transportation service that can be customised to suit customers’ and business needs.

These services are integrated to meet businesses’ demand and supply requirements so that when demand is low, you can reduce your requested services, and when you have high demand, you can also increase the services you need. 3PL logistics gives you complete control over your shipments or goods with real-time monitoring, response and visibility.

How Third-Party Logistics Work

Handling bulk shipments, deliveries, and warehousing inventory management can be complicated and time-consuming for a regular business owner, especially when dealing with products that are in high demand. So how do you handle these aspects of your business efficiently? This is where 3PL logistics comes in. 

3pL logistics providers can pick, store, pack, transport and deliver your products safely; they are the ultimate link between manufacturers and customers. These functions can ensure the smooth running of your business and make your customers happy.  

Third-Party Logistics Services

There are four main categories of 3PL logistics services, which can vary depending on the third-party logistics company you choose. 

  • Procurement.
  • Warehousing
  • Fulfilment.
  • Transportation.

3PL logistics services

Procurement

3PL logistics providers offer procurement services, which is one of the most time-consuming tasks for businesses. As a business owner, if an external body handles every aspect of procuring goods for your business, your business operations will improve significantly and become more efficient. 

Procurement covers everything that involves ordering your products from the manufacturers, receiving them, and organising them for proper storage and distribution. 3PL logistics providers offer the following services under this category.

  • Inventory management: this involves identifying various levels of stocks and when to buy more from the manufacturer or supplier. A 3PL logistics provider can do this accurately on behalf of the client.
  • Order placement: after identifying a shortage in any stock or products, the 3PL logistics provider can place orders for the products directly.
  • Transport of goods: this procurement stage involves organising the movement of the goods from the manufacturer or supplier to their warehouse.
  • Receiving and organising the goods: when goods arrive at the warehouse, they can also receive the goods on behalf of their clients and organise them for easy storage.
  • Record keeping: after every purchase, the 3PL providers will make appropriate documentation to keep records of all purchases and to aid inventory management.
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Warehousing

Businesses that do not have enough storage space can easily hire a 3pl logistics provider to safely store all their products or goods. One of the benefits of this service, if provided by a reputable logistics company, is that you won’t have to worry about the safety of your products as they will be delivered in the same condition they were received in.

Also, if there are any damages to your goods, the logistics company will be responsible for the replacements. 3PL warehousing services may include.

  • Inventory management to ensure accurate distribution of goods and stock level records.
  • Tracking and well-organised arrangement of goods for easy identification and retrieval.
  • Specialised storage for different product categories.
  • Highly secure storage for valuable, volatile, or fragile products.
  • Public warehousing that allows customers to have general access to the facility.
  • Private warehousing that is assigned to a specific customer or client; houses only products and goods from the assigned customer. 

Fulfilment

3PL logistics providers offer outsourced order fulfilments where they take care of everything from receiving orders for goods to processing them and delivering them to various customers. It is one of the main services 3PL logistics companies provide. They offer this service in the following steps.

  • Receive orders from clients or customers.
  • Manage inventory, organise the orders and deduct them from stock levels. 
  • Package the requested products.
  • Organise loading and distribution of the products to their destinations. 

Transportation

Without a well-developed and organised transportation system, you won’t be able to maximise the full benefits of logistics.

This 3PL logistics service deals with the movement of goods from one location to another; it may be from the manufacturer’s facility to the warehouse, wholesalers, retailers or other parts of the supply chain. 3PL transportation services may include.

  • Consolidation and deconsolidation of goods: consolidation is the process of combining small shipments into one so that they can be transported together to save cost and time. Deconsolidation is the opposite of consolidation, where a large shipment is separated into smaller parts for easy distribution.
  • Fleet optimisation: this has to do with maximising all the potential and productivity of fleets to improve efficiency and reduce cost.
  • Tracking of goods: these are measures used to track goods or resources while moving and storing them.
  • Distribution of goods: this oversees everything that has to do with the movement of goods until it reaches the endpoint. Distribution can be done through cross-docking, drop deck and lowboy transport, drayage, intermodal transport, truckload (LC), full container load (FCL), and less than truckload (LTL). 
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Though these are the main services offered by third-party logistics companies, they still provide some services that were not discussed under these four categories, such as reverse logistics, kitting & customisation and specialised transportation. 

Reverse Logistics

Reverse logistics allows third-party logistics companies or providers to provide all their regular services but reversely. They handle the return of goods and move goods from customers back to the manufacturers. This can occur when there is an oversupply of products or when the products are not fit for purpose.

kitting and Customisation

This service involves compiling multiple or similar products into a single kit to be transported to the requesting customer; this can help reduce cost and ease the movement of goods to their various destinations.

Some logistics companies can also customise the packaging of your product with decorative and appealing designs, which may include your logo or any other customisations you prefer.

Specialised Transport

Some products require special environments for transportation, such as controlled light levels, humidity, temperature, and other factors that may affect the state of the products. 3PL logistics companies can provide specialised transport for your goods to keep them in the best condition until they reach their destinations. 

Benefits of 3PL Logistics for Businesses

If you now understand what third-party logistics providers do, you must already know that they have a lot they can do for your business, big or small. So here are some of the most significant benefits of third-party logistics for your business.

benefits of 3PL logistics

Saves Time and Money

If you own a business, you will understand that it takes a lot of time and effort to monitor shipments, manage inventories, transport goods from one location to another and also do all the paperwork. Hiring a third-party logistics company can save you from all these burdens and time-consuming tasks. 

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In addition, third-party logistics services can help you save money since you can get many services grouped at an affordable price instead of paying individually for everything or hiring people to do them. 

Customer Satisfaction

Operating and maintaining a supply chain requires expertise and attention to detail, and in today’s world, customers expect fast and efficient services from companies. However, with the high level of competence and expertise 3PL companies offer, you won’t have to worry about satisfying your customers because they will experience first-hand better services than they ever imagined.

Flexibility and Scalability

Another amazing benefit of third-party logistics is that it gives businesses the freedom to utilise logistics resources based on their current business needs or demand. So when sales are down, you can reduce the services you need, and when sales or demand is high, you can increase the services your business needs; there won’t be any unutilised resources or investments.

Resources 

Storing or moving goods from one place to another may seem like a simple task, but when you get involved, you will discover that you need a lot of resources to do it efficiently. Third-party logistics has all the necessary resources required for all your business logistics needs, no matter how big or expensive, so you can comfortably focus on other important aspects of your business.

Business and Network Expansion

Third-party logistics can aid in the rapid growth of your business and give you the networking you normally will not have. In addition, 3PL logistics can help you access markets where you do not have any recognition. You can purchase products according to demand without worrying about labour, storage, equipment and transportation. 

Read also: how to start a successful logistics in Nigeria – 12 steps

Understanding what 3PL logistics is all about and identifying the best one for your business is key to enjoying its numerous benefits. Logistics maybe not be the most important aspect of your business, but it is at the centre of everything your business entails. 

So now, when you hear about 3PL logistics, you know what it means and what services they provide; you too can utilise their services to enhance efficiency, retain customers and grow your business.

 

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