Blog What is third-party logistics (3PLs)?
Sep, 28.09.2021

What is third-party logistics (3PLs)?

 

If you have your own online business, you know how important it is to make a positive impression on the customer. And nothing makes customers happier than fast and high-quality delivery of their purchases.

The trick is to ensure that, with all the benefits to your customers, shipping remains cost effective for you. And this is where it is most profitable to work with a 3PL operator.

What is 3PL (third-party logistics)?

3PL (third-party logistics) are outsourcing companies that act as an intermediary between an online business and its customers. They are responsible for everything that happens after the customer has placed the order and before they receive it.

Why an online business needs a partnership with a 3PL provider

In short: by outsourcing fulfillment to a 3PL provider, you save nerves, time and money. With a professional 3PL operator, orders are delivered quickly and efficiently and you free up time to develop and scale your business.

Besides this obvious advantage, there are others:

Fast order processing

Customers want to receive their orders quickly. Best today, perhaps tomorrow, in a few days max. If this opportunity is not available in a particular online store, they start looking for an alternative and most often find it. It is difficult for a small online business to keep up with such a pace on its own while for a larger one without its own logistics department it is completely impossible. Unlike e-commerce, a 3PL provider has all the necessary knowledge and technical power. Therefore, each order is processed quickly and accurately and the risks of errors are minimized.

Opportunity to enter the international market

In theory, if your business is small, you can simply ship orders to another country by postal services. In practice, high transportation costs and delivery times make this option unprofitable for you and unattractive for the customer. In addition, the online store must have at its disposal a warehouse that is located as close to customers as possible, international certification of goods and a whole staff of employees. All this is very difficult and expensive to organize yourself. And it’s not necessary but much easier to conclude an agreement with a 3PL operator that has offices abroad and to focus only on marketing to attract foreign customers.

What is included in the 3PL service

Traditionally, 3PL services are the reception, storage, packaging and delivery of goods. But most operators go further and offer a variety of additional options – from processing orders through a call center to developing a corporate design for packaging materials.

First, let's talk about the main ones.

Reception of goods

Usually, the logistics provider picks up the goods from the online store or receives them through the distributor, but at the request of the customer, the employees of the online store can bring it on their own.

Responsible storage

Immediately after receipt, the goods are labeled, entered into the CRM system of the 3PL provider and sent to the warehouse where they are stored in compliance with all the necessary conditions.

Order processing

Order processing depends on the capabilities of the provider and your agreements with them. They can:

  •  automatically pull up into the CRM system of the 3PL provider (this requires integration with the e-commerce platform of the online store),
  •  be entered manually by employees of the online store,
  •  be collected through the contact center of the 3PL provider (this is an additional service). 

Packaging

Warehouse workers collect goods, assemble them into whole orders and then pack them in materials that reliably protect the goods during transportation.

Transportation

The next step is to transfer orders to the delivery service. Some 3PL providers cooperate with certain delivery services on an ongoing basis, others select a delivery service for a specific task and some transport orders with their own transportation service.

Returns processing

Not all, but most 3PL providers are ready to deal with returns, so we will classify this service as a major one. Sometimes customers abandon an item or cancel an order shortly before receiving it. In this case, the 3PL provider registers the reasons for the refusal, examines the returns for damage, and, if all goes well, returns the money to the customer. After that, the provider repackages the goods and, depending on the agreement with the seller, either sends it back to its warehouse, or returns it to the online store.

We sorted out the standard services. Now let's take a closer look at the most popular additional options:

Branding

Some providers have partnered with creative studios that, upon request, develop branding for the packaging materials and advertising inserts for the online store.

Inventory management

The provider prepares a detailed report on the balance of the goods which is then synchronized with the CRM system of the online store. This allows the seller at any time to assess the information about how much and what kind of goods were sold per day as well as understand when to replenish stocks.

Working with COD payments (cash on delivery)

Cash on delivery is especially popular among customers, so the availability of such a payment method is a big plus for an online store. The 3PL provider accepts the payments as a financial agent. After receiving the funds, the online store receives a notification about the completed order and the money is credited to its account.

When choosing a 3PL provider, focus on the best ones

Dropex is a 3PL provider with local warehouses in 4 European countries (Hungary, Poland, Italy and Greece).

Dropex's mission is to help its customers' businesses develop quickly and successfully. In addition to standard fulfillment services, Dropex offers useful additional services: work with COD payments, production of goods under the customer's brand, assistance in legalizing products in EU countries, tax consulting and much more.

To learn more about the conditions and cost of cooperation, visit  the Dropex website.

Olga Vasnetsova

For 6 years, she has been implementing software for companies, studying production and logistics processes, helping Dropex and other companies to develop their business. Olga's main passion is logistics optimization using 3pl. This is what she writes about in her blog.