Third Party Logistics (3PL)

If you have a growing company, you might be thinking of turning to third party logistics - 3PL - providers for help with managing some of your routine business processes like warehousing and distribution.

Getting the right 3PL partners on side can give your business room to expand, domestically and internationally, while protecting your service standards, and leaving you with time to focus on the more strategic side of business development. This handy guide will run through all you need to know about finding and choosing a 3PL partner which will work with your business and allow you to fulfil your ambitions.

We’ll also take a quick look at how a specialist business account such as the Wise borderless account for business can help you cut costs and admin when trading internationally. Let’s dive right in.

What is 3PL?

Third party logistics companies provide services such as warehousing, transportation and distribution to entrepreneurs involved in ecommerce and online selling. 3PL providers can do everything from picking, packing, gift wrapping, delivery, customer service and returns. In most cases, customers won’t even be aware that 3PL companies have been involved in their purchase - they’ll just know their goods arrived on time and without issue.

One major benefit of using a 3PL provider is that it allows your business to grow without hitting bottlenecks in your shipping and fulfilment processes. This can make all the difference if you want to expand nationally - and is especially useful if you intend to grow your business overseas.

If your business has the potential to connect with international customers, you’ll also need to make sure you have a global financial partner that will cut the costs of international payments, and help you manage your finances across currencies. One great option for businesses with global ambitions is the Wise borderless account for business. You’ll be able to get an account set up online for free, and can then send and receive fast, cheap and secure payments all over the world. More on how Wise can help you protect your profits when working globally, later.

What are the benefits of 3PL?

Not sure whether or not third party logistics will work for your business?Here are a few of the benefits of 3PL you may want to consider:

• Third party logistics companies complete the routine and repetitive work of order fulfilment, leaving you free to focus on the more creative and strategic aspects of your business
• 3PL companies may be able to offer better rates than you expect because of their size and buying power
• Because 3PL providers will pick up a range of activities, you may save in a number of areas, including admin time, warehousing costs, packing expenses and customer return management - weigh these diverse savings against the costs of third party partners
• Using third party logistics is the easiest way to expand internationally while maintaining good delivery costs and times

The difference between 4PL and 3PL

When you’re researching 3PL options you may come across another type of provider - fourth party logistics - or 4PL partners.

There’s a difference in the way these businesses operate, which is worth considering when selecting a partner. When you choose to work with a 3PL company, you can usually expect that they’re closely involved in all the services you’re buying from them. 4PL partners on the other hand, buy a range of services from other 3PL providers, creating another layer of intermediary in the service arrangement. This may mean a 4PL provider can offer a broader range of service, or even more competitive costs, but could also dilute or confuse the lines of accountability when it comes to giving your customers what they need.

3PL core functions

Some third party logistic partners work across all aspects of inventory management and shipping, while others are more niche and specialize in one or two areas only. The most common functions offered by 3PL providers are as follows:

Warehousing

Outsourcing warehousing to a 3PL gives you greater space to store your inventory as your business grows. However, there are additional advantages. Splitting your inventory across warehouses in different geographical locations can make fulfillment quicker, and help you access a broader marketplace - including international customers - while keeping delivery time and cost down.

Transportation

Transportation could involve moving your stock from your factory or port of arrival if you’re importing, to your warehouse ready for distribution, or from the warehouse to stores for sale. Depending on your business model, outsourcing your transportation to a 3PL might involve using a parcel delivery service like DHL or UPS, or a shipping and logistics company to move bigger volumes.

Distribution

Picking, packing and shipping goods is another activity commonly taken on by third party providers. If you’re considering outsourcing distribution it’s worth looking carefully at details such as the cut-off times for next day delivery, and the returns or damaged goods options offered by your 3PL provider.

Domestic and International Shipping

A final common area for 3PL partners is in shipping goods direct to customers at home and abroad. When picking your shipping partner, check out the costs and delivery times, to make sure they fit in with the service levels you’re committing to your customers.

Things to consider when selecting a 3PL provider

3PL is a big business, and as such you’ll find plenty of choice when you’re looking for the right partner for your company. Here are a few pointers on what to think about when selecting the best 3PL provider for you.

Which of the core functions to outsource

Before you even start to look at 3PL providers, it’s worth analyzing where your business is now, and where you’re looking to grow. Look at data on projected delivery volume growth, time and costs, customer satisfaction and common issues, to find bottlenecks and process problems. This will help you identify which functions should be outsourced, so you can streamline your operations without buying services you don’t need.

Technology

When selecting a 3PL provider you’ll need to make sure their systems can integrate with yours, to avoid unnecessary issues or costs. Depending on your current business process, you may need to find a 3PL which fits with your inventory and order management systems, as well as your order management software to make sure orders are efficiently processed, and your inventory records can be kept up to date.

To help keep your inventory records up to date, try our Excel inventory templates or our Google Sheets inventory templates to get you started.

Cost

Naturally you’ll want a 3PL company which offers competitive costs. Weigh up the costs you’re quoted by different providers, against your current outgoings, taking into account everything from the time spent processing orders and dealing with returns, to the costs of warehouse space, shipping and packaging materials. Don’t forget to get all costs agreed in writing, including add-on services like gift wrapping or bundling of orders if this is a service you may require.

Performance

The performance of your 3PL provider reflects directly on your business. In fact your customers may not even realise they’re dealing with a third party, so you need to make sure the performance of your chosen provider is top rated. If you can’t find reviews of the 3PL provider itself, find out which companies it currently works with, and look for reviews of them instead. This will quickly show if customers are complaining about late delivery, damaged goods, or poor issue resolution.

Location

If you’re outsourcing warehousing or distribution, location matters. Having warehouses and shipping providers in good geographic locations means you can keep down the costs and time of deliveries - and make sure your customers are happy every time.

3PL companies

Finding the right 3PL provider for your business will take a bit of research. Here are some of the biggest - and most highly rated - companies to consider:

• C. H. Robinson - Fortune 500 provider of 3PL solutions, offering global shipping and freight transport, and warehousing solutions¹
• XPO Logistics - one of the top 10 3PL in the world, with 30 years experience in a range of logistics and supply activities²
• UPS Supply Chain Solutions - industry specific contract solutions, global freight management and more³
• J B Hunt - trucking and transportation services, founded back in 1961⁴
• Expeditors- logistics and freight forwarding company with a global network of offices and service providers⁵

Reduce cost on global payments with Wise

Getting a great 3PL provider lined up could be the boost your business needs to go global. If you’re considering working with suppliers, customers, or employees based overseas, you also need a great way to manage your money and cut the costs of cross border payments.

Here’s how the Wise borderless account for business can help your business to grow.

Cost

Wise international payments are all made using the mid-market exchange rate and with low, transparent fees. This makes the service much cheaper than using a regular bank to send money internationally, and up to 19x cheaper than using an alternative like PayPal. You’ll also be able to receive payments for free in major currencies like US, Australian and New Zealand dollars, British pounds and euros - making it easier to connect with customers globally.

Convenience and Speed

Managing your money on the go is straightforward - and you’ll also find a range of business friendly features to reduce your admin. Integrate your borderless account with Xero for streamlined accounting, use the open API to automate payouts, and make batch payments to spend less time dealing with your finances, and more growing the business. Your payments will also often be received more quickly than a regular wire transfer placed with a traditional bank, so you won’t keep your suppliers waiting for payment.

Check out the Wise borderless account for business, and start saving time and money today.

Sources
1]C.H. Robinson
2]XPO Logistics
3]UPS
4]JB Hunt Transport
5]Expeditors