What is a 3PL and Why Is It Beneficial to Your E-commerce Business?
Updated: 2 days ago
In the e-commerce industry, third-party logistics warehouses (3PLs) have proven to be an invaluable resource for any commerce-related organization. According to our partner, 3PL Central, 3PL's are defined as "an outsourced business that takes care of a company's supply chain and logistics operations. Simply put, 3PLs are used for the outsourcing of warehouse and distribution needs for their customer's inventory and fulfillment."
3PLs are not limited to the services they offer. Third-party logistics providers can be local or international. They can serve a specific niche, or they can fill the needs of almost any retail industry. Further, a retailer may choose to sell all inventory through a 3PL or sell only part of it through them.
Due to the rapid expansion in e-commerce in recent months, 3PL services have seen explosive growth. The Global 3PL market was valued at around 1 trillion USD in 2020. On top of that, they are expected to reach more than 1.75 trillion USD by 2026. In just five years, that amounts to a growth rate of 8%. The increase in e-commerce demand has caused 3PLs to adjust their offerings to meet consumer and business needs. According to Statista, in 2020, e-commerce was valued at 4.28 trillion USD. However, despite the rapid growth of 3PL services in the U.S., this industry has previously dominated the Asia-Pacific market. Approximately 10,000 third-party logistic companies currently operate in China, which is considered the largest and fastest-growing market in the world for 3PL services.
Why Is a 3PL Necessary?
A seller in e-commerce knows just how many hats they need to wear and how many moving parts are involved with running their business. 3PL warehouses help lighten that load, and there is no question that 3PLs, particularly in the e-commerce and small parcel shipping areas, are logistic experts. Their services are intended for companies of all sizes who wish to perform the following tasks:
Streamline shipping processes
Worry-free inventory and warehouse management
Reduce overhead costs because they don't need to employ or train a workforce
Reduce shipping costs
As one can see, 3PLs are assisting many e-commerce companies in exceeding consumers' expectations. There are many reasons why e-commerce businesses of all sizes can benefit from a third-party logistics provider.
A 3PL’s job is to:
Schedule and manage inventory orders to the warehouse
Sort, manage and account for all inventory
Negotiate shipping rates
Pick and Pack orders
Manage and maintain specialty inventory in the appropriate way
Upon receiving the inventory, they are also responsible for cycle counts, labeling, SKU management, reporting inventory turnovers, and sending shipping notifications to customers. These are only a few of the basic services offered by a 3PL. 3PLs that provide services to niche industries tend to offer cold storage and shipping, hazard control, and any other service a particular industry might require.
3PL warehouses provide multiple benefits to e-commerce shippers. When you work with small parcel shipping experts, you are sure to help you succeed in your e-commerce business. When you succeed as an e-commerce business, then a 3PL can succeed. If you're looking to grow and flourish in your online retail business, then 3PLs might be the way to go!