Successful order fulfillment operations are key to a product-based business’s success. All order fulfillment services should be timely, cost-effective, and efficient. Companies that don’t have the resources to do so in-house should consider contracting the services of a 3PL provider. We’ll cover what 3PL is and what you can expect from a 3PL provider in this quick guide.
What does 3PL stand for?
3PL stands for “third-party logistics” which refers to order fulfillment via a third-party company acting as a mediator between two groups, in this case the manufacturer and the customer.
Businesses of all sizes often partner with third-party companies to provide services they need.
The term “third-party logistics” or “3PL” has been around since the 1970s and refers to a variety of outsourced logistics services including inventory picking, packing, and shipping.
What is a 3PL provider?
A 3PL provider is a company that provides logistics services such as product procurement and fulfillment to other businesses who contract with them. A third-party logistics company may assist clients with receiving, storing, packing, and shipping products.
Some 3PL providers also offer additional services (known as value added services) such as inventory management, product kitting / customization, returns, and even product assembly.
You may also see a 3PL provider described as a “fulfillment warehouse” or “fulfillment center”.
What are the benefits of 3PL?
The benefits of contracting a 3PL company to assist your product-based business with logistics are many.
Small businesses often struggle to keep up with managing all aspects of their operations in-house and being able to outsource some of these tasks to third-party companies can be extremely beneficial. Companies that may not have the space, the staff, or other resources needed to cover all of the bases when it comes to maintaining product inventory, storage, and shipping should consider using a 3PL provider to handle these services for them.
3PL companies handle all aspects of product shipping and order fulfillment for you, resulting in the best speed and efficiency and freeing up your resources to focus on other business aspects.
Since they are specialized in one area of focus, you get to benefit from the 3PL company’s years of experience and expertise, reducing both shipping costs and delivery times to your customers.
Types of 3PL providers
Before you integrate a 3PL provider into your small business’s operations, you’ll want to consider the different types of 3PL providers.
- Standard 3PL Providers – These companies provide only the most basic 3PL services such as packing and shipping. Since they only provide minimal services, they are often the lowest-cost option for product-based businesses looking to outsource their order fulfillment.
- 3PL Service Developers – 3PL service developers offer value-added services including IT infrastructure and management. This could include shipment tracking and product security. Service developers help ensure the safety and reliability of 3PL operations.
- 3PL Customer Adapters – 3PL customer adapters handle the entire logistics needs of their clients from start to finish. While they may enhance and improve upon their clients’ existing logistical infrastructure, they do not create their own operation.
- 3PL Customer Developers – These providers offer the highest level of service to their clients, essentially becoming a company’s logistics department. Like a customer adapter, customer developers take on their clients’ operations. However, there is more innovation and integration at this level of service than with a 3PL customer adapter.
Key differences between 3PL providers in United States
3PL Standard Providers offer the basic level of service to their clients at the lowest price. When you are just getting started, contracting with a standard provider can be a great way to get your feet wet and employ the services of an order fulfillment company. They offer inventory storage, transportation, and distribution for companies of all sizes. These providers may also offer other value-added services beyond logistics such as order returns and customer service.
3PL Service Developers exist to help product-based companies ensure the secure shipment of their products through the addition of value-added services such as product tracking and product security. They take the basic level of services provided by a standard provider and elevate them to the next level. The cost associated with a service developer is higher as well.
3PL Customer Adapters are the next level of service available to product-based businesses. As such, they are more costly than 3PL standard providers or service developers. This type of company handles pretty much all of the logistics services for each of their clients, from the beginning of the shipping process to the very end. As a full-service provider, they essentially adapt your existing logistics operations to be more efficient without entirely taking over and replacing all of the existing infrastructure. Clients may work with the company to oversee the process and step in where needed but remain mostly hands-off.
3PL Customer Developers typically take on a smaller client base of larger companies. This allows them to focus on running the logistics activities of each company individually. Customer developers take over the entire logistics services for each client, which means they are basically considered their logistics department. Contracting a 3PL customer developer is the most expensive option for logistics services since it requires a great deal of personnel, space, and other resources to carry out all of the necessary tasks. They essentially develop each company’s operations to reach maximum efficiency, while clients remain almost entirely hands-off.
No matter which type of provider you select, utilizing the services of a 3PL company can help you grow your business and take your operations to the next level.
How Kickfurther can help grow your business
When you use a 3PL company, your supply chain will look something like this:
- Your company finds and purchases the products you wish to sell –> Your merchandise ships to the 3PL warehouse who holds your inventory –> You list your available inventory online –> Customer places an order –> Orders are fulfilled from the 3PL warehouse.
With this model, you still have a need for a large influx of capital to purchase your inventory and keep it stocked. This is where an inventory financing company like Kickfurther comes in.
Kickfurther exists to help small businesses grow. The Kickfurther platform gives product-based companies a way to fund the inventory they need without having to have the cash or even the purchase orders upfront. A community of investors provides the capital your business needs, which is then paid back as you receive and fulfill your orders.
When you need an influx of capital to fund your product-based business’s inventory, consider Kickfurther to cover your expenses. Join more than 800+ inventory financing success stories and get started today with a free business account.