ULTIMATE GUIDE TO THIRD PARTY LOGISTICS
From 3PL basics to ecommerce strategy: Everything you need to know about outsourced fulfillment through a third party logistics (3PL) provider.
A 3PL, or Third Party Logistics, is a term for an outsourced logistics provider that offers warehousing and fulfillment services.
Many businesses find that outsourcing fulfillment to a 3PL frees up time and capital to invest in their core competencies to expand their business. In fact a recent merchant survey revealed that 44% of merchants simplified their operations and management scope by outsourcing fulfillment. Outsourcing to a 3PL also cuts back on capital investments in warehouse management, labor, and equipment maintenance.
There are a number of services a 3PL or 4PL should offer as a comprehensive fulfillment and delivery solution. Those services include:
3PL partners will receive inbound shipments, reconcile the shipment to an Advance Shipment Notice (or ASN) to ensure accurate inventory reporting, and perform a basic quality control check before storing. Upon receiving, products will be scanned into the Warehouse Management System (WMS) and stored according to the merchant’s SOPs and product needs.
4PL, or Fourth Party Logistics, is essentially an interconnected network of 3PLs. A 4PL provider has relationships with multiple 3PLs across the country, providing a nationwide warehouse network of full-service 3PLs. 4PLs employ a cloud-based warehouse management system (WMS), that gives merchants visibility into operations, inventory levels, and service levels across their various facilities. These fulfillment softwares also integrate with e-commerce platforms like Shopify or BigCommerce and ERPs like Oracle or SAP for automated reporting on inventory levels and order and delivery statuses.
Many businesses looking to outsource will start with a regional 3PL close to their headquarters or manufacturer, but these regional 3PLs are limited in their geographic reach and often in their bandwidth and expertise to strategize with SMBs for long-term growth. When merchants begin to expand into new geographic markets, they often contract additional 3PLs to better serve customers in their new markets. This can result in a patchwork fulfillment process, difficult to manage, with multiple lines of communication and inconsistent service levels.
A 4PL acts as a strategic partner, negotiating the best rates and SLAs across the 3PL network and helping merchants decide where to forward stock inventory in order to best serve their customers. 4PLs aggregate the inventory and shipping volumes of multiple merchants to negotiate the best SLAs and eliminate peak season surcharges.
Learn more about 3PL vs 4PL partnerships here.
Ultimately, the very nature of a 4PL is flexible and scalable, which simplifies moving into new geographic markets. Access to 3PL locations across the country with varying storage capacity and capability enables SMBs to easily test into new markets and product categories, rather than being limited by the location and capabilities of a single 3PL partner. A qualified 4PL will have warehouses in their network that can handle product needs from big and bulky to temperature and humidity controls located in strategic zones closest to demand centers.
While the terms 3PL and 4PL may sometimes be used interchangeably, there are some key differences in service levels, technology, and network capabilities to note when looking for the right outsourced fulfillment solution. The main differentiators can be grouped into 4 categories: Storage Capacity, Geographic Footprint, Scalability, Technology, and Professional Support. Read our full 3PL vs 4PL analysis here.
Ware2Go is changing the traditional 3PL model to make 1 to 2-day delivery affordable for all merchants. A nationwide network of certified warehouses supported by technology to streamline fulfillment across all sales channels enables merchants to correctly position inventory to best serve ecommerce customers in key regions. Reaching all of your best customers with 2-day ground eliminates long-zone shipments and overnight air — ultimately lowering your overall cost to serve.
Our 3PL network is fully customizable and scalable to fit your business goals and customer profile. Our team of fulfillment experts use your historical sales and shipping data to build a 3PL network to increase service levels to your best customers and lower your overall cost to serve.
For a custom network analysis reach out to one of our in-house experts.
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3PL for ecommerce is a quickly-growing industry. The recent ecommerce boom led to shortages in warehouse space and surging fulfillment costs typically reserved for peak season. This has made negotiating with top-tier 3PLs particularly difficult for small to mid-sized merchants looking for competitive SLAs.
Additionally, ecommerce sellers especially need flexibility and scalability in their 3PL partnership. Digital sales channels allow ecommerce businesses to cast a wide net through targeted advertising, social media, and online marketplaces, but although ecommerce sales are not limited by geography or discoverability, they are subject to a growing consumer expectations for 1 to 2-day delivery regardless of the sales channel.
Consumer survey data shows that delivery experience actually drives customer satisfaction and brand preference on digital channels. 66% of merchants report higher cart conversion rates when fast shipping options are offered, and 84% of online shoppers reported that they would never purchase from a brand again after a single negative delivery experience. These standards may seem daunting for SMBs and certainly raise the stakes even higher in their search for a qualified 3PL partner for their ecommerce fulfillment needs.
When reviewing the SLAs, long-term contracts, and pricing structure of traditional 3PLs, small to mid-sized ecommerce sellers may begin to wonder if 3PL for ecommerce is actually the right fit for their fulfillment needs. In most cases a 4PL, or 3PL network will likely be a more flexible solution that offers the high service levels that ecommerce customers have come to expect.
eCommerce also requires a technology-first approach to supply chain and fulfillment with capability to integrate all sales channels through a single platform. A fully integrated ecommerce 3PL network gives sellers full visibility not only into order and delivery status across all sales channels but also inventory levels and fulfillment statuses across all 3PL locations.
Software and tech capabilities may be the biggest differentiators among 3PL services and between the 3PL and 4PL models. It seems that the rise of ecommerce has pushed digital sales channels to innovate quickly — prioritizing ease of use and accessibility for merchants of all sizes. From ecommerce shopping carts to growing online marketplaces, online sales have never been easier to launch or scale.
The 3PL industry, on the other hand, has struggled to keep pace with ecommerce sales channels, leaving a major gap in the 3PL software market. The task at hand for 3PL software developers is to simplify supply chain management by automating processes, integrating systems, and aggregating data.
The most innovative fulfillment providers are stepping up to the challenge with a data-first approach to developing new fulfillment technology beyond traditional 3PL software and addressing these 3 major needs:
Manual processes are hard to adapt quickly, and limit a merchant’s ability to respond to shifts in demand or promotional opportunities. The best new fulfillment technologies automate order and delivery tracking, inventory updates, and more.
The fulfillment industry has long been sitting on a gold-mine of data: between shopping cart (OMS), Warehouse Management (WMS) and Transportation Management (TMS) data sets, but has lacked the expertise to aggregate the data to produce high-level reporting and actionable insights. The future of 3PL software — or more appropriately, fulfillment software — is aggregating this data to determine ideal warehouse placement, inventory distribution, and automated re-order points. Ware2Go’s new platform, NetWorkVu, is a free, easy-to-use tool that uses merchants’ historical sales and shipping data (either manually uploaded or via a shopping cart integration) to custom recommendations for network placement and a cost-benefit analysis of multiple fulfillment scenarios. Click here to upload your own data or download the BigCommerce app.
Implementing cutting-edge 3PL software helps merchants transform their supply chain into a strategic revenue driver for their business. The data sets powered by emerging fulfillment technologies help merchants improve their bottom line by eliminating costly long-zone shipments and next day air and can even provide insights around sku profiles and new market opportunities.
3PL stands for Third Party Logistics. It’s a legacy fulfillment model whereby businesses outsource their fulfillment and delivery services to a third party vendor. 3PLs vary in their geographic delivery footprint, service offerings, and storage availability.
A 3PL warehouse is the physical location of a 3PL (Third Party Logistics) service provider. 3PL warehouses have widely diverse offerings in the way of product storage capabilities (cold storage, temperature-controlled, and big and bulky to name a few), SOPs, and technological capabilities.
3PL companies offer a variety of services including inbounding shipments, picking and packing orders, final mile delivery, product storage, kitting and bundling, and returns processing.
Ware2Go is a network of 3PL partners, commonly referred to as a 4PL (Fourth Party Logistics) company. As an integrated 3PL network, Ware2Go offers merchants the convenience of outsourced fulfillment associated with 3PL services on a national scale. Rather than contracting with multiple regional 3PLs, businesses of all sizes can achieve a nationwide 2-day delivery footprint through a single partnership with Ware2Go.
Ware2Go’s solution is fully scalable with nationwide 2-day delivery coverage and a variety of certified warehouse partners to meet virtually any product storage requirement. The network is supported by a single WMS platform that integrates all sales channels and warehouses to set work flows and automatically route orders to the best warehouse based on geographic location and requirements. This integrated system allows visibility into higher level supply chain and fulfillment functions that position Ware2Go as a strategic partner with the ability to consult merchants on inventory levels, network distribution, market opportunities, and more.
Outsourcing fulfillment to a 3PL or 4PL is usually a decision businesses make when their in-house fulfillment system is overwhelmed or they need to shift their business model to a greater reliance on variable rather than fixed costs. Partnering with a top-tier 3PL network like Ware2Go also gives merchants a strategic fulfillment partner that will recommend warehouse placement, inventory distribution, and new market opportunities.
