Outsourcing your logistics through a third-party logistics (3PL) provider might seem like a bold move, but it can be a strategic decision that unlocks significant benefits for your business.
By entrusting the storage, picking, packing, and dispatching of your goods to an expert provider, you gain a valuable asset: time. This freed-up time allows you to focus your energy and resources on your core competencies – building a strong brand identity and driving sales.
3PL stands for third-party logistics. It is a term used to describe the outsourcing of logistics operations to a third-party provider. This can include a wide range of services, such as warehousing, transportation, order fulfilment, and inventory management.
Working with a 3PL company unlocks time, capital and physical resources that can be used to help your business grow, as well as giving you a competitive edge against your competitors, as fast, convenient delivery is now an important factor in consumer decision making.
1. As customer demand grows, is our fulfilment capacity struggling to meet the increase?
2. Have we run out of warehousing space?
3. Would our current infrastructure have difficulty meeting a sudden surge in demand?
4. Are our employees required to work overtime regularly to meet order fulfilment requirements?
5. Do order volumes fluctuate significantly throughout the year, hindering our ability to manage warehouse space and staffing needs effectively?
6. Has there been a noticeable rise in product returns?
7. Has the frequency of errors by our in-house fulfilment team increased?
8. Are we facing challenges in delivering orders to customers on time?
9. Have our shipping and warehousing expenses increased?
10. Do we have plans to expand into new international markets?
3PLs do not have a one size fits all approach. To ensure they are offering a good service that is financially sustainable for both the 3PL and the seller, some 3PLs will have specialisms for particular industries or size of goods. For example, fashion fulfilment may require large amounts of hanging storage which can be more effectively managed for specialised centres, others may need 2 man delivery for heavy items, or refrigerated storage. You can save yourselves a lot of time comparing providers if you can identify this early on, as the pricing may reflect this or they may simply not be able to accommodate your business needs.
The important things to identify before beginning your research are:
1. Where do you need to fulfil from – The UK? EU? US? Specific countries for domestic delivery?
2. What type of fulfilment do you need? – B2B, DTC or a mix?
3. What integrations do you need? – Sales channels, ERPs, particular couriers?
4. Do you have special requirements? – Dangerous goods, cold storage, hanging storage
5. Do you need returns handled?
There are many ways to differentiate 3PL companies, which is why its important to do some research to discover which is the best for for your business.
Some are quite obvious such as their specialism for cold storage or fashion etc, or whether they more of a transport focused 3pl or fulfilment focused 3pl. Other differences are more complex, referring to the ownership of the process and assets required to provide the service. Huboo for example can be referred to as full stack, as we own the warehouses, the custom-built software, the staff and all other resources within our service. Other 3PLs may use a different model where they rent space within another company’s warehouse and use their staff to fulfil locally. This ownership ensures our clients orders are treated as the priority and communication is as clear and quick as possible.
Another key differentiator for 3PL fulfilment is their multi-channel offering. Many sellers will initially set up to sell on one channel such as Amazon, eBay or Shopify. These channels have their own fulfilment network including Amazon Logistics or the Shopify Fulfilment Network. These centres are created primarily to fulfil orders from these channels but often offer fulfilment for other channels as an additional service, charged at a premium, as their priority is to provide a great service for shoppers on their own sales channel.
3PLs not associated with a sales channel will treat orders coming from any sales channel equally unless indicated otherwise, for example FBM (Amazon fulfilled by merchant) orders for prime. Proving a more consistent service for all end customers.
Are you searching for a 3PL company with excellent reviews to fulfil your eCommerce orders in the UK & European Union?
Huboo can take your stock, store it, pick, pack and dispatch it for you from our 3PL warehouses in the UK, Netherlands, Spain and Germany.
Second party logistics (2PL) would be when a seller uses another party such as a courier or transport specialist to deliver the products on their behalf to the end customer. A typical example of this would be an eCommerce seller doing their own fulfilment and shipping with Royal Mail Click & Drop or Evri.
Third-party logistics (3PL) takes this another step further, outsourcing the storage and fulfilment aspect of the logistics process as well as the delivery. This is typically the next step for ecommerce sellers becoming overwhelmed with the volume of orders needing to be dispatched or looking to expand geographically and outsource the complexity.
Fourth party logistics (4PL) partners take a more strategic approach to the supply chain, managing 3PLs, negotiating contracts and focusing on using their expertise to optimise the process on behalf of these larger merchants with complex needs.
Overhead costs for warehousing can be huge barriers to sellers’ growth when they are no longer capable of operating from their spare room or garage. You need to take into consideration:
⇒ Lease lengths
⇒ Rent costs
⇒ Fitting out costs – for racking, benches, etc
⇒ Maintenance/ service charges
Costs that are expected to increase by 10% in the next 12 months, and that’s before you have even begun to consider the cost of hiring, training and retaining staff in an industry with high staff churn, and buying the tools they need to do their job such as forklifts and fulfilment software, all the way down to printers and tape dispensers.
Using a 3PL removes these barriers and reduces costs (and complexity) by leveraging their expertise, economies of scale and networks to negotiate better rates to pass onto their customers and enable them to offer more flexible solutions that better fit the needs of eCommerce sellers.
3PLs stay at the forefront of logistics trends, technologies, and best practices, providing businesses with access to cutting-edge solutions and innovative approaches. They continuously invest in advanced technology, such as warehouse management systems, transportation management systems, and data analytics tools, to optimise operations and gain a competitive edge.
3PL partnerships provide businesses with the flexibility and scalability to adapt to changing market demands and business growth. 3PLs can seamlessly adjust their services and resources to accommodate fluctuating order volumes, expansion into new markets, new sales channels or seasonal variations in demand. This flexibility eliminates the need for businesses to invest in additional infrastructure or personnel during peak periods when these resources may be at a premium or come at a delay.
With more carrier connections your business is able to limit the impact of factors such as industrial action and backlogs by working with a 3PL to quickly and easily switch to alternative methods and carriers. For example, Royal mail had previously gone on strike and Huboo was able to switch sellers over to Evri services with no disruption to dispatch and delivery times for the end customers.
Similarly, a 3PL may enable you to place larger orders with suppliers, having a more flexible storage solution, therefore reducing the number of freight shipments that can be impacted by price hikes and global challenges.
Many marketplaces and sales channels including those using the Mirakl platform and TikTok Shop UK will require sellers to have a domestic fulfilment centre to ensure their customers receive a quick and convenient delivery. Working with a 3PL will ensure you are operational in a new territory as quickly as possible, especially if you can expand using an existing 3PL such as Huboo that has locations in the new market.
Check out some of our main integrations: