What is a 3PL Company? Tips to Select the Best 3PL

Continuing reading, wondering what exactly a "3PL" company is and how they can help your business grow. Learn the benefits of hiring a 3PL and how to select one.

What is a 3PL Company? Tips to Select the Best 3PL

Fulfilling customer orders is a crucial element for any eCommerce business. With business growth, managing the logistics for fulfilling customer orders becomes difficult for the company's in-house staff. This is where 3PL services come into the picture. 3PL stands for 3rd Party Logistics. 3PL enables eCommerce companies to outsource their logistical operations to a third-party logistics company and become free to focus on other aspects of the business such as growth, customer support, marketing, etc. 

What is the Function of a 3PL Company?

The fundamental question is, what is a 3pl company? A 3pl company picks and packs the goods of an eCommerce company, stores them in its warehouse, manages the inventory, ships, and delivers the goods to the customers. Altogether, the 3pl company runs the entire operational logistics till the delivery of the goods to the customers. These are professional companies with expertise in customer orders fulfilments on behalf of eCommerce companies.

A 3rd party fulfillment company can operate its warehouse or lease a warehouse to store its clients' goods. The 3pl company is responsible for stocking, maintaining, and monitoring its client's products in the warehouse. The 3pl company itself designs the inventory management system. 

3pl companies offer a much larger scope of services concerning shipping than freight forwarders. Freight forwarders act as a link between eCommerce companies and shipping companies. 3rd party shipping is a part of the multiple logistical services provided by a 3pl company. Warehousing, packing, picking, and shipping make up the bulk of the services. A 3pl company usually works with professional carriers for freight shipping and does not have its fleet of transport vehicles.

There are many specialized third-party logistics services as well. These include 3pl companies for storing, packing, and oversized shipping goods, hazardous materials, or frozen food products. 

What is the process?

To get a clear understanding of what a 3pl does, you need to know about the process of third-party logistics operations.

1. The eCommerce company receives the products from the manufacturers and ships them to the designated third-party warehouse managed by the partner 3pl company.

2. The 3pl company receives the inventory and stores it in the warehouse. The company logs the incoming list into the stock. The process of receiving and storing the merchandise and the capacity to store the goods varies from one 3pl company to another.

3. When a customer orders a product, the 3pl company starts the order fulfillment process. Nowadays, most 3pl companies use sophisticated order fulfillment software which integrates directly with the eCommerce platform of the client company. As a result, the order details, customer's shipping details, and other information are automatically shared with the 3pl company. The client company can monitor additional information such as stock levels, inventory tracking, and shipment tracking through a dashboard. Modern technology has made the process highly streamlined.

4. Once the order is received, the product is picked up by the warehouse picking team of the 3pl company. Multiple items are picked as per the orders placed by the customers. 

5. The 3pl company itself packs the product. Common packing materials used by the 3pl companies include boxes, bubble mailers, dunnage, packing tapes, poly bags, and thermocol sheets. The packing material to be used depends upon the type of product, brand preference of the e-commerce company, and the lowest dimensional weight required to cut shipping costs.

6. 3pl companies usually provide multiple options of carriers to their clients. The shipping costs depend upon the client company's speed and type of shipping. The designated carrier picks up the entire product. The tracking details are automatically forwarded to the eCommerce platform through the integrated software. Most 3pl companies offer same-day shipping for most orders, provided the product is present in the inventory.

7. The product is shipped to the 3pl distribution center closest to the customer's address. After that, it is delivered to the customer. 

8. Many 3pl companies also handle the return or reverse logistics. When a customer returns an order for any reason, the 3pl company picks up the product from the customer, assesses any damage to the product, and re-stocks or disposes of it as per the client company's policies.

What Are The Benefits Of Using The Services Of A 3pl Company?

Reasonable Shipping Costs

3pl companies work on behalf of multiple eCommerce companies and have links with many freight companies. As a result, they can negotiate reasonable shipping costs depending upon volumes of the goods and frequency of orders. Thus, eCommerce companies can save costs on shipping and use the savings to invest in other areas of the business.

Wide Distribution Networks

3pl companies have wide distribution networks. Moreover, many 3pl companies operate multiple warehouses in many geographical locations, enabling e-commerce companies to distribute their inventories to place them close to various shipping locations. These two factors ensure swift shipping of products to the customers. Customers appreciate Swift delivery.

Warehouse Storage

3pl companies eliminate the need for eCommerce companies to spend a lot of money on logistics even when the demand is down because the inventory levels can be optimized depending upon the market. There is also no need for eCommerce companies to maintain warehouses and logistics staff. 

Potential to Sell Internationally

3pl companies enable eCommerce companies to sell their products internationally. This is because customs, duties, and other rules and regulations for shipping goods to various countries are managed by the 3pl companies. 

How to Choose a 3PL Company?

The third-party warehousing provided by the 3pl company should not only be enough to handle the current stock volume of your company. Still, it should also take increased importance and even sudden spikes in the future. The 3pl company should use high-end fulfillment software that automatically gets order details from your eCommerce platform and provides stock level and other information in real-time.  You must assess reviews from existing customers and the performance of the 3pl company based on various parameters such as frequency of on-time deliveries, frequency of delays, and compensation in case of loss or damage. 


 3PL companies are an excellent option for businesses that need help with shipping, warehousing, and distribution. You can find many benefits to working with a 3rd party logistics company like Simpl. They'll take the burden off of your team by handling all of these tasks so you can focus on what matters most – running your business! To make sure you choose the right one, consider factors such as their experience in e-commerce fulfillment, customer service quality, and cost-efficiency.

Simpl is a growing 3PL company in Austin Texas, contact us today. We will answer all of your questions about what it means to be a third-party logistics provider and how we can help you grow your business!

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