How Third-Party Logistics are Creating Smart Warehouses
You understand how your products make the transition from raw materials to finished goods, but how do you get those goods into the hands of paying customers undamaged and in a timely manner? If you’re one of the millions of e-commerce companies popping up around the world, you may have started out doing everything in your home. Maybe you were lucky enough to start out with a small office space.
Eventually, something exciting happened. Your sales increased. You outgrew that starter space. Doing it all on your own became too time consuming.
Business growth makes it more difficult to receive, store, pick, pack, and ship every order on your own. The next step is often hiring a small team and finding even more space for operations, but you now have a more efficient option: third-party logistics, also known as 3PL.
What are 3PL Services?
3PL services are contracted to handle all aspects of logistics on behalf of businesses selling and shipping goods. The business handles product development, sales, and order taking. Once an order is placed, the 3PL company handles order fulfillment and tracks inventory to prevent shortages.
The first step to any 3PL service is getting your product to a warehouse for efficient distribution. A 3PL company will handle safe, efficient transportation of goods and then will track inventory to ensure additional product is secured as needed.
Products are stored in a warehouse until ordered by a customer. Most warehouses are co-shared, which means all technology and human resources are shared by all businesses using the warehouse.
Once an order is placed, the 3PL company picks and packages the product and handles all shipping.
· Significantly more cost-effective than operating a private fulfillment center
· Faster and more efficient order processing for businesses with high sales volumes
· Improves consistency and accuracy over in-home order preparation and shipping
· Frees e-commerce and small business owners to focus on product development, sales, and other aspects of a thriving business
· Smart warehousing access – take advantage of advanced technology at affordable cost
· Less control over the order fulfillment process
· Mistakes made by the 3PL company may reflect on your business
· Requires consistent and effective communication and coordination
Costs Associated with Third-Party Logistics
3PL companies have their own pricing systems, but there are some costs that you can anticipate covering in some manner:
· Pick and pack
· Kitting fees
· Shipping expenses
You may also encounter onboarding expenses that are necessary to get established with a 3PL company. These expenses are paid upfront, but many businesses earn that back in savings as they continue to use third-party logistics.