Running an eCommerce business is hard enough. Online shopping has been on the rise for years—subscription retail data in particular—but especially since the onset of the COVID-19 pandemic, we’ve seen a sharp rise in the total amount of online shopping and eCommerce-related shipping.
Just how much of an increase in online shopping have we seen this year?
In the quarter ending in September of 2020, eCommerce spending was up 37 percent from the same quarter last year, and this pattern is only expected to continue to grow after the risks of the pandemic subside. To keep up, many online retailers are looking to 3PL solutions. What is 3PL, exactly, and what can you do with this kind of assistance? We’re taking a look at what this service entails and if 3PL is a solution that makes sense for your online store?
What is 3PL?
3PL, which stands for third-party logistics, is a service that gives eCommerce businesses the power to focus on key aspects of their business by outsourcing operational logistics from warehousing through delivery.
With a 3PL, you get to focus more on your company’s core competencies, and less on the nitty-gritty of fulfillment and shipping. Because they handle the logistics, your time is freed up for more important matters.
Choosing 3PL services for your online store still gives you complete control. Unlike fourth-party logistics where someone else handles your 3PL services, you retain the power to manage everything so that your business still feels like a small operation; your customers will feel the personal difference while still receiving first-rate service and fast shipping times.
How Third-Party Logistics Work
What does a 3PL do for your online store? The answer is, “Whatever you need it to do.” Your 3PL can handle the storing, packing, and shipping of your online orders, including:
- Warehousing and warehouse management
- Picking and packing
- Inventory forecasting and inventory management
- Order fulfillment services
- Packing and freight forwarding
- Transportation services
- All the logistics operations of your supply chain
If you’ve been hit by a large influx of orders, 3PL services can help you meet customer expectations and ship on time. They handle the logistics operations for you so that you can place all your attention on growing your business and providing extraordinary service to your customers. Plus, with a 3PL you can increase profits and transfer cost savings to your customers through lower shipping costs.
The Benefits of Using a 3PL
Why do online retailers choose a 3PL? The benefits extend far beyond the time you’ll save packing up boxes to ship from your online store. Of course, 3PLs will help you save time, but here’s what you need to know about the perks of working with a 3PL.
- Gain knowledge about logistics from insiders: As your business grows, a 3PL will inform you about the intricacies of supply chain logistics, fulfillment center strategies, warehousing, and shipping. You’ll gain knowledge from experienced professionals, leverage a stronger resource network, and make industry connections to streamline your processes.
- Enjoy professional supply chain expertise: Don’t pay to store or manufacture more products than you need, or get stuck without enough product to meet demand. A 3PL will be knowledgeable in supply chain forecasting and can advise you on
- Time and cost savings: You can let go of investing in your own warehouse space, technology, transportation, and extra employees to carry out your logistics processes. 3PLs can also eliminate costly supply chain mistakes through ongoing supply chain management support. With inventory management services, a 3PL will help you optimize inventory levels which can result in lowered inventory holding costs, freeing up your valuable time and capital.
- Scale as needed: Your needs may fluctuate from season to season, or grow dramatically as your online store does. 3PLs are flexible and can help you scale space, labor, and transportation according to your current needs.
Essentially, a 3PL gives you all kinds of ways to continuously improve and optimize your supply chain. With more efficient practices and the support of an experienced 3PL provider, you can expand your market, offer exceptional customer service and low shipping costs, and build logistics operations processes that help your company grow.
What is a 3PL? What is the Difference Between a 3PL and 4PL?
Why choose a 3PL? What is the difference between fourth-party logistics (4PL) and working with a 3PL?
A fourth-party logistics provider takes 3PL services one step further. In addition to the duties of a 3PL like supply chain management and inventory management, a 4PL manages resources, technology, infrastructure, and external 3PL providers to create a one-stop-shop supply chain solution for online stores.
This may include services like:
- Logistics and strategy
- Analytics about transportation, capacity utilization, and carriers
- Freight sourcing
- Business planning and project management
- Coordinating a wide base of suppliers
Types of Third-Party Logistics Providers
Not all 3PL providers are the same. Each kind of provider serves different kinds of online stores and can focus on cost savings, improving customer experiences, monitoring inventory, and more. Here are the most common kinds of 3PLs you’ll encounter:
- Standard Providers: These 3PLs handle storage, fulfillment, inventory management, and transportation. Standard providers can handle many kinds of tasks.
- Niche Providers: Niche providers are focused on one area of the logistics processes, completing specific tasks for unique retailers who need services like refrigerated storage and transportation, handling of hazardous materials, certified spaces, and foreign trade zones
- Modern Providers: Modern 3PLs offer all the same services that a standard 3PL provider offers, plus the capability to incorporate technology to boost order and inventory accuracy, and optimize the fulfillment process.
- Freight Forwarders: Like a go-between, freight forwarders broker businesses to other logistics providers, and are sometimes considered to be more of a 4PL service
Advantages of 3PL
One of the biggest subscription eCommerce mistakes—especially for those who use a subscription model—is ramping up overhead too fast with their own warehouse management staff and logistics operations professionals.
What is 3PL’s biggest advantage? The time and cost savings online retailers enjoy. Gone are the days of worrying about inventory management or warehouse management or whether you’re paying for too much inventory or warehouse space. By design, a 3PL provider handles all of this for you.
When you work with a 3PL, you can channel all of your efforts into delivering remarkable customer experiences, not delivering packages. It’s no secret that subscription services rely on the psychology of subscription: curating positive, memorable customer experiences like:
- A sense of belonging and recognition
- Anticipation about the latest delivery
- Surprise and exclusivity
- Discovery and convenience
- Remarkable value
- The power of personalization
The biggest challenge in subscription retail isn’t getting new customers; subscription marketing success is all about keeping them. A 3PL gives you the power to focus on retaining customers because you aren’t diverting resources to managing shipments.
How to Choose a 3PL Provider in 3 Easy Steps
Whether you’re planning on scaling your subscription commerce business model or are just looking for some extra help with order fulfillment, how do you wade through the choices of 3PL services?
- Step 1: Identify what kind of 3PL you need. Do you need a freight forwarder? Do you require a niche 3PL because of the kinds of goods you sell?
- Step 2: Gather internal requirements. What are your business’s core competencies? How should a 3PL serve your business model? Do you offer a subscription service? Do you want a modern 3PL that’s fully integrated with your eCommerce selling platform?
- Step 3: Evaluate 3PLs. Which 3PLs fit your unique needs?
The key to a successful recurring revenue business can be a 3PL—if you choose the right one. Don’t be afraid to ask questions to be sure you’re really working with a company that will serve your individual needs.
How OceanX Can Help
For a modern 3PL that’s technology-focused for direct-to-consumer fulfillment and logistics, OceanX is here to help. With countless personalization options, subscription box service fulfillment, fast and affordable solutions, we’ll quickly become an integral part of your core team.
Want to learn more? Download our guide on our 3PL service options today!