The pinnacle of a manufacturing firm’s operations is during its ‘order fulfilment’ phase, but having in-house procurement and order fulfilment systems can be very expensive. The expenses incurred in a company to procure and ship or deliver orders are typically very hefty. Warehouse rentals, insurances, utility service charges, labour expenses, and many other expenses accumulate to a huge investment. Therefore, 3PL service enablers, or third-party logistics service enablers, act as a service delivering company to outsource your company’s logistics services and take the responsibility of any managerial activity encompassing from your corporate procurement procedures to end-to-end order fulfilment activities. 3PL centres can also manage a network of services specialised in handling all activities in supply chain management. Such services can be packaging, freight forwarding, cross-docking, warehousing, inventory managing and transportation. To elaborate, 3PL can be introduced as a supply chain model where it plays an intermediary role between the client company and other entities like the carriers and the end consumers. It displays commercial chemistry between three parties:
- The Business who wishes for 3PL services,
- The 3PL service enabler that usually handles the packaging, inventory management, warehousing and transportation for the client company and,
- The Carrier
However, apprehending the services of third-party logistics is mandatory to make the most out of your corporate fulfilment strategy; therefore, today, we will be focusing on learning about 3PL service inside out.
What does Third-party Logistics mean to your company?
If you are a manufacturing or engineering firm, order fulfilment is one of the main sectors that is integrated with your business operations. Naturally, your company is striving in a very dynamic era where e-commerce is disrupting the market conditions constantly, and it can make you understand that meeting customer demands using inbound logistics, transportation and supply chain management systems can be overwhelming. This is where your company must apprehend the advantages of harnessing the services of a 3PL service enabling company. You can assess how critically you would need third-party logistics services in situations like:
- Market Exemplification: If your company is planning to reach new markets and position its supply chains in new areas in the marketplace; 3PL fulfilment and distribution centres can immensely influence in serving you for better customer service and demand meeting.
- Market Fluctuations: During peak times and seasons, the market demands will be disruptive for it can fluctuate in a way that your on-prem workforce could not catch up. In occasions like this, outsourcing 3PL companies is significant to keep the orders filling into your company.
- Professional guide: When your company needs to expand supply chains efficiently, cost-effectively and quickly, you can contact your 3PL partners to create relationships to gain advantages like volume discounts, timelier services and more since they are comprehensively aware of tertiary service enablers and other entities.
- Limited Warehouse capabilities: If your company is suffering from storage limitations in its warehouses, 3PL service companies are a must contact to keep your inventories in a good state and properly stored.
- Loss of focus: Maintaining a business, especially if you are an e-commerce business needs extra multi-managerial skills. Corporate optimisation needs a lot of focus, so if you feel like you are losing focus on continuous optimisation, hiring a 3PL company would give you extra time to realign your focus as needed.
The five core functions of third-party Logistics Centres
If we are to learn about the functions of 3PL centres under a magnifying lens, we can see that there are five main functions that they will perform for their client companies, as explained below.
Receiving Inventory
3PL centres will move inventory from the client companies’ warehouses or manufacturing plants to their distribution centres. This is the initial step for any 3PL centre. The distribution centres of a competent 3PL service centre would always house a Warehouse Management System to make the warehousing and freight forwarding processes easier.
Picking job order based on client demands
Secondly, when a client places an order, the 3PL centre will proactively initiate the fulfilment process. These orders can be variant based on the complexity of the order or the quantity. Therefore, based on the demands they will pick off the order from the storages and move it to the packaging area to do the finishing touches to deliver the products in a good and healthy condition to the customer.
Packaging Inventory for delivering
The client company will initially help the 3PL centre to organise the packaging procedures and set up the preparation for inventory packaging as needed. The 3PL centre will have to use their facilities to pack and make sure the picked inventories of the client company is presentable and well-sorted to be delivered. This function must especially be fully-functional and streamlining during peak seasons.
Shipping
This function can be defined as one of the most costly and complicated functions that 3PL centres will manage. They will have to stay updated about all shipping options of multiple carriers and shippers, the cutoff time of ships, the shipping routes and locations, the level of performances, the vacancies available for shipment and more. To get the optimal benefit in this function, the 3PL centres are well-versed about the options they have via adopting clear shipping strategies. Shipping strategies will allow them to understand the budgetary data on available carriers services, the speed of deliveries, and the experience such carriers have in delivering products in good condition to the customers. This stage may include activities like transloading, cross-docking and drayage.
Managing Reverse Logistics
Another occasion where the 3PL services play a massive role is during reverse logistics. When the client returns excess inventory or damaged goods, the 3PL services must be comprehensive to not to hinder pleasant customer experience and harness a smooth process to receive the returned products.
The differences between 3PL and 4PL services
4PL is a term for fourth-party logistics; it refers to companies that complete the same activities of a 3PL centre but hire more utility services to complete the contracted services entrusted by the client company. Thus, making 4PL companies to oversee the services they have to complete in the entire supply chain, unlike a 3PL fulfilment centre. 4PL centres are also referred to as LLP centres (Lead Logistics Providers) since they can be addressed as a single lead for attributing several services to streamline the client company’s supply chain.
The differences between 3PL services and Freight Forwarding
Freight Forwarding means the activity of moving the warehoused goods from the 3PL centre to the shipper. If the route is complicated the freight forwarder would contract with more than one carrier or shipper. However, Freight forwarding even though it is commonly misinterpreted to be the same as 3PL services, is actually an integral function that 3PL centres will have to carry out. 3PL services, as explained above, take up a plethora of responsibilities including freight forwarding, where they would usually contract with a freight forwarder to clear the path between the carriers(usually the 3PL carriers) and the shippers.
How can technology drive streamlined 3PL processes?
Modern technology’s importance in logistics cannot be emphasised enough at any point. 3PL centres in the digital age will hardly survive in their industry if they do not exploit the advantages of technology to stay updated and fully-functional to attract their client companies. When technological advancements are disrupted by the inventions of innovators and IT specialists, the 3PL service enablers will too have to upgrade to remain competitive, efficient and customer-friendly. Given below are some technologies, devices and solutions that can be housed to make 3PL streamline when operating.
- Smart warehouse robots that are prewired to work with their human counterparts
- Web portals and KPI tracking platforms to capture real-time 3PL process’ data
- Reliable and updated Transport Management Systems
- Highly scalable and flexible Inventory Management Systems
- AGVs (Automated Guided Vehicles) to smartly move inventories from one place to another
- Competent cybersecurity systems to keep client company details safe
- RFID tags to keep tracking of the moving shipments or cargos
- Barcode systems to gain advanced data retrievals
- Drones and Driverless Cars to distribute packages without human intervention
- The utilisation of Big Data Analytics to collect insights to improve 3PL activities
