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The Importance of Third Party Logistics
Author: James Han



Introduction

 

As your business scales, you’ll see that fulfilling orders in-house or with a small team will quickly become inefficient and not worth your time. Plus, it might get quite expensive, excluding the extra personnel you'll have to hire and pay. With these added responsibilities on your plate, running your core business will become exponentially harder. Not to mention storage and warehouse space expenses associated with the nonessential duties for your core business operations. Plus, in most cases, you probably won't get the best shipping rates compared to 3PL companies who import, export, and ship in large quantities.

 

At this point, most will rethink their fulfillment workflow. For numerous businesses, that would mean looking to outsource this component of their business to a third-party logistics provider (3PL).

 

What is Third Party Logistics (3PL)?

 

The core competitive advantage of third party logistics (3PL) is outsourcing your shipping, which is most commonly associated with e-commerce due to its automated order fulfillment processes. This is important since not many businesses have the infrastructure, capital nor personnel to maintain complex logistical operations, which means increased costs associated with non-essential duties associated with the business, that can be outsourced. Basically, you have more time on money making decisions, than being bogged down in the minutia of decisions that don't move that proverbial needle.

 

So, when should you start thinking of using a 3PL business instead of doing it yourself or keeping it in-house?

 

TLDR;

 

▪ When things get too costly (besides shipping costs) to do it in-house

▪ You're overwhelmed with the orders coming in

▪ You're running out of space

▪ You want to follow standard shipping standards

▪ Expand your reach from local to global

 

1. Too Costly

Understanding when to outsource is as important as knowing when to do it yourself. You should first start thinking of outsourcing to 3PL companies, when it becomes obvious that you are not saving time and money. Doing it yourself might be more affordable in the beginning, but when expenses such as warehousing space, industry specific equipment and software such as forklifts, and warehouse management software (WMS) add up, it will be quite expensive. Not to mention, expenses involving labor and liabilities. It isn't something to scoff at. PNPLINE handles and has all these under its umbrella of other services.

 

2. Too much to handle by yourself

But, way before that happens, you should really consider using a 3PL company's fulfillment service(s) when you're shipping exceeds 100 orders per month. It might not be 100 orders, but this will start to be apparent when you can't keep up with the orders, in which you'll reach out for help from your friends, and family. To further get my point across, this will be further evident when you are spending the majority of your time on low dollar activities, and it becomes harder to scale your business.

 

3. Inventory exceeds available storage space

This might be the turning point for many, since you can always hire people to speed up the process or even use manufacturing facilities to do 85% of the work. Heard of Alibaba, a B2B platform where businesses can connect with manufacturers and suppliers, or Kickstarter, a very popular crowdfunding platform? Well, most likely, those individuals will be storing their merchandise at home, since the nature of these platforms is either to fund a project or to get something for cheaper at a wholesale price point. Regardless, at some point your house/apartment will not be sufficient for your storage space needs. Which would be another reason to start looking for 3PL companies. PNPLINE has multiple warehouse facilities throughout the USA, and Korea. PNPLINE is further continuously expanding its locations globally.

 

4. Creating Better Customer Experience by Faster Shipping

There's a reason why we call UPS snail mail. We are so accustomed to Amazon's 2-Day delivery, we forget that it has multiple warehouses throughout the world. If an individual were to attempt to replicate Amazon's unbeatable shipping speeds, it would undoubtedly put a dent in that individual's bottom line.

 

5. Local to Global Markets

With customer demand increasing, the faster you can deliver their items, the more your customer service team can focus on more important issues. With that being said, the further you can quickly scale.

 

Just like 3 and 4, we talk about warehousing as a way to facilitate storage space, as well as, transit time for orders, and reduce the shipping costs. Just the same, to become a global player, you have to have your merchandise accessible in or near multiple locations. Take into account where the warehousing facilities are located for the 3PL company. They should be close to where your customers live, as well as, suppliers, producers, and the local markets are being served, which may include environmental factors.

 

Where are your 3PL fulfillment centers located?

 

At PNPLINE we have warehouses in Ontario, California, which is just an hour drive from Los Angeles, and a 7-hour drive to San Francisco, as well as, locations in Northvale, NJ which is less than an hour away from NYC 28 miles (ca. 45 km) and 115 miles (ca. 185 km) away from Philadelphia. In addition, we have locations in Gunpo, South Korea, which is 14 miles (ca. 23 km) away from Seoul and Incheon which is only 11 miles (ca. 23 km) away from Gunpo. PNPLINE also intends to further expand into other regions of the world.

 

What are the main services offered by a third-party logistics provider?

 

The core services of any 3PL or third-party logistics company should include receiving, storing, packing, and shipping services. Some 3PL companies also provide additional logistics services, also known as value added services. For instance, at PNPLINE provides IT Centralizing services or One Stop Solutions, which we provide real time API connections to major ecommerce platforms such as Amazon, eBay, and Shopify, we also provide inventory management, and clearance duty which is a part of the overall customs clearance. We also provide customs clearance in the US, which involves a broker or a licensed customs agent. In terms of importing and exporting internationally, we make it super simple for our clients to concentrate on moving the needle forward for their business growth. For more information and services, you can always call or email PNPLINE. We strive to have the best customer satisfaction no matter if you choose to go elsewhere.

 

How does the 3PL fulfillment process work?

 

There are processes in every step, but they may vary in complexity depending on each step. Such as, if we were talking about a 4PL, it would have many more steps since a 4PL would be the entire supply chain. That would mean that the supply chain management would begin from obtaining the raw materials, manufacturing, packaging, to shipping, and finally, distributing the merchandise to the right destination.

 

Let's start with the order fulfillment process.

 

3PL Order Fulfillment Process

 

If you are new to the world of 3PL companies, or to outsourcing shipping, it might be like opening Pandora's Box, but it really doesn't have to be overly complex and convoluted. On the contrary, it is quite a simple workflow, but everything within it, might be difficult to replicate, especially when it's all new to you. There are 5 main duties during the fulfillment process.

 

First, a 3PL company cannot proceed further without the initial delivery of inventory, which is why receiving, the process of accepting and storing incoming inventory is very important. Each company has its own process, since available storage space, and inventory are major factors.

 

For example, at PNPLINE, we keep everything organized. We ask our clients to fill out a Warehouse Receiving Order form so that we know what product and how many units we'll be receiving. Knowing this information, we can start fulfilling orders as soon as possible.

 

After receiving your inventory stock, we then store, and label the units in our fulfillment center. In order to prevent shipping the incorrect items, we separate them into dedicated storage locations.

 

Summary

 

We receive your items, and then store them in our fulfillment centers.

 

Most likely, you've probably heard of the phrase pick and pack, it's catchy, and we'll be discussing the first part, which is picking the items. After a customer places an order, the 3PL company will then have a team go out and find the items in the order.

 

But, even before that, there are 2 common ways that your 3PL will receive orders. Either, manually uploading the orders, or automatically pushing the customer's orders immediately after they order. It will integrate directly with your e-commerce platform. This would involve, picking orders, shipments, inventory tracking, and stock levels, which makes the whole process further automated.

 

So, before we ship and label them for delivery, we must pack the items. The packing material would depend on your specific preference (material, branding, and tape which will also depend on the material, and branding), as well as, the 3PL's ability to accommodate your requests. The weight and size are also deciding factors in determining the type of packaging.

 

The most common packaging include:

▪ Unbranded boxes

▪ Bubble mailer (Paper with bubble wrap lining)

▪ Poly bags (Plastic with bubble wrap lining)

▪ Dunnage (Keeps the product from damage due to the size and weight. Usually, this is wood)

▪ Paper-based dunnage (Same goal as dunnage, but is made from quite sturdy paper based materials)

 

Depending on your third party logistics company, they might include or charge separately for the packaging material. As you may know, every retailer or business has their own packaging requirements, so it is important that they allow customizable packaging. But, the best 3PL companies, not only try to meet the clients' needs via cost and quality, but also consider the dimensional weight associated with it. It's apparent that customer experience is key to succeeding and scaling. So, the 3PL should accommodate certain customizations so that the first impressions can be the best.

 

The next step in the order fulfillment process is shipping! One of the core competencies of a 3PL company. In regard to shipping, there are two ways a 3PL can ship your products, either by their own partner carriers, or by comparing costs from a directory of carriers.

 

There are pros and cons to both, but the most obvious is that if the 3PL uses the directory, you will get the most affordable shipping costs compared to the partnership. On the other hand, if they use the partner carriers, the carriers will come to them, meaning their warehouses. So, depending on the partnership and agreement, it might be faster. As the parcel is delivered to the customer, integrated technology will automatically notify the customer that their parcel has been delivered.

 

Conclusion

 

Whether you think that 3PL is worth it for you, there's no denying the fact that it will definitely give you more time to think about things that will move that proverbial needle forward. Once you reach a certain point, you will reap the benefits of 3PL, from its order fulfillment processing to global reach, and speedy delivery. For more information, reach out to us at info@PNPLINE.com.


 

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