How to Start a Third-Party Logistics Company

Virginia Miller

June 24, 2024

In this article:

There's a lot that goes into starting a third-party logistics company. You must lease a space, buy all essential machinery, set up the area, and acquire specific technology solutions. For all of it, you need a hefty capital investment.

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Even though you have the right amount of capital to make the investments, there will be times you will have to scale your business. Thus, proper guidance and understanding of all involved parameters are essential for starting a 3PL company.

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This article gives you a clear insight into how to start a 3PL business without much hassle. Read along till the end.

What is a Third-Party Logistics (3PL) Company?

A third-party logistics (3PL) company is a service provider that handles supply chain management for ecommerce merchants. This allows merchants to focus on growing their business while the 3PL fulfills orders.

Common services offered by 3PLs include:

Warehouse storage and inventory management
Picking, packing, and shipping orders
Providing shipping labels and tracking info
Accepting and processing returns
Managing retail distribution

As a 3PL, merchants store their inventory in your warehouse. When an order comes in, it is fulfilled and shipped directly from your facility. This simplifies the process for both the merchant and customer.

With the continued growth of ecommerce, now is an excellent time to consider starting a 3PL business or warehousing company to capitalize on the opportunity.

Benefits of Using a 3PL Company

Here are some of the main reasons businesses choose to work with a 3PL provider:

Cost and Time Savings

Outsourcing to a 3PL eliminates expenses related to warehousing, staffing, and logistics management. This allows companies to focus resources on their core business. It also saves time as an expert 3PL can fulfill orders more efficiently.

Supply Chain Expertise

A good 3PL brings deep knowledge of logistics management best practices. They stay on top of the latest technologies and regulations. This expertise is invaluable, especially for smaller merchants lacking resources or experience.

Scalability and Growth

As your sales grow, a 3PL makes scaling your fulfillment easy since they handle all backend logistics. You simply send more inventory to the warehouse. The 3PL handles the rest, allowing you to expand with low risk.

How to Start a 3PL Company

Follow these key steps to launch your own successful 3PL business:

1. Research Market Demand

Assess if there are unmet needs for 3PL services in your region. Talk to local merchants to gauge interest and challenges. This will help validate the business opportunity.

2. Secure Warehousing

Whether you buy or lease, secure adequate warehouse space for client inventory storage and order processing.

3. Implement Technology

Invest in warehouse management software, barcode scanners, shipping integration, etc. Technology improves accuracy and efficiency.

4. Obtain Equipment

Purchase necessary equipment like forklifts, pallet racks, packaging stations, and workstations.

5. Hire Experienced Staff

Recruit warehouse managers with logistics experience. Also hire HR and operations management early on.

Key Things to Consider

When starting a 3PL business, be sure to also consider:

Types of services most in demand
Competitor landscape and rates
Options for specialization or unique offerings
Pricing structure and profit margins

Marketing Your 3PL Services

Once launched, focus on marketing to acquire new clients. Useful promotion strategies include:

Promote your most successful, established services
Create targeted content for inbound leads
Invest in SEO and online advertisements
Offer free quotes or consultations

In Summary

Launching a 3PL company allows you to capitalize on the fast-growing ecommerce industry. By specializing in outsourced logistics and order fulfillment, you can build a scalable, highly profitable business. Follow the steps outlined here for starting and marketing a successful 3PL company.

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Frequently Asked Questions

What services do 3PL companies provide?

3PL companies provide services like warehousing, inventory management, order fulfillment, shipping, returns processing, and more to help ecommerce merchants simplify their supply chain.

What are the benefits of using a 3PL?

Benefits include cost and time savings, supply chain expertise, easy business scaling, and more. 3PLs allow merchants to focus on their core business.

What technology should my 3PL business invest in?

Invest in technology for barcode scanning, inventory and order management systems, shipping software integrations, warehouse equipment like forklifts, and more.

How can I market my 3PL company?

Use inbound marketing content, paid ads, SEO, promote your key services, and leverage your market positioning to attract new 3PL clients.

What should I consider when starting a 3PL?

Consider warehousing needs, competition, adding unique services, properly pricing services, and understanding target customer needs in your area.

How did Simpl Fulfillment start?

Simpl Fulfillment began from a need for better order fulfillment solutions for small ecommerce businesses. They now provide easy, affordable 3PL services.

What are operational best practices for a 3PL?

Best practices include implementing technology, hiring the right staff, maintaining compliance, providing quality customer service, accurately fulfilling orders, and continuously improving.

Is the 3PL industry growing?

Yes, the global and US 3PL markets are experiencing strong expansion as more companies outsource supply chain activities to focus on core business.

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How to Start a Third-Party Logistics Company

Frequently Asked Questions

What services do 3PL companies provide?

What are the benefits of using a 3PL?

What technology should my 3PL business invest in?

How can I market my 3PL company?

What should I consider when starting a 3PL?

How did Simpl Fulfillment start?

What are operational best practices for a 3PL?

Is the 3PL industry growing?

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