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What Is a 3PL and Can Technology Transform the Future of Logistics?

what is 3pl

If you’re among the 1.8 million online retailers in the US, shipping logistics is likely a pain point for your organization. Directors of transportation need to find new ways to optimize shipments, streamline delivery, and keep costs low.

Businesses of all sizes often struggle to find space for inventory storage. Finding packing and shipping experts, technologies, and tools can also be challenging. 3PL services are the #1 way to resolve these issues and meet your shipping objectives. Here, we’re going to give you a run-down of 3PL services and why you should invest in shared off-site warehousing services. Read on for your complete guide to 3PL and maximizing customer satisfaction.

What Is 3PL?

3PL is an acronym for “third-party logistics.” These companies store inventory for eCommerce business off-site. They also pick up inventory, pack products, and ship them to consumers.

Essentially, they are outsourced multipurpose fulfilment services. Professionals trained in shipping logistics that work at the off-site warehouse will handle all of your concerns.

Transporting goods to post offices or directly to recipients ensures on-time delivery. Returns processing makes inventory easier.

3PL facilities are important because they’re an alternative to handling all of your shipping-related operations within your own facility. This means that you don’t need to store large inventory items in-house. It also means that you have more time to focus on marketing, customer satisfaction, developing core product, and market expansion.

Shared vs Dedicated Warehousing

3PL services are offered in two formats: shared and dedicated.

Shared warehousing means that your business is one of several that use a particular space. You will share the 3PL’s shipping professionals with other businesses. You will also share systems and equipment.

Dedicated warehousing means that your business rents exclusive use of particular warehouse space. It is also called “contract warehousing.” The 3PL will bring in the professionals, services, and equipment to handle only your operations.

In some cases, the 3PL service may still own a dedicated warehouse. However, in other instances, your business must own or rent the space. Experts and tools will simply move into your space and customize operations to meet your individual needs.

Why Do Shippers Use 3PLs?

In addition to increasing customer satisfaction and streamlining operations, there are many reasons that shippers may invest in 3PLs.

First, 3PLs let shippers operate in an asset-lite environment. They will not constantly be surrounded by inventory and clutter. This is important since cluttered environments can lead to a company losing the equivalent of 10% of a manager’s salary due to workers’ stress and distraction.

3PL services also allow higher business flexibility. It’s easy to scale up during peak seasons and scale down during less busy times. You won’t need to make a significant investment in order to scale your services.

3PLs also eliminate the hassle of needing to hire a full-time and contingent labor force for fulfilment operations. This lets you save money on on-site worker salaries. It also means less time and money dedicated to training and onboarding processes.

What Industries Can Use 3PL Services?

Retail and eCommerce delivery is one of the most important applications for 3PL. However, it’s important to note that this is a versatile technology. B2B services can also ship goods with 3PL facilities and professionals.

Some core industries that can use top 3rd party logistics software include:

  • Freight forwarders
  • Auto parts delivery services
  • Food/beverage companies delivering to restaurants and stores
  • Pharmaceutical and medical device suppliers delivering to individuals, hospitals, school campuses, and pharmacies
  • Furniture and appliance delivery
  • Lab sample collection logistics
  • Food logistics (both B2C and B2B)

Regardless of who is receiving a shipment, it’s important to streamline operations and get goods to the endpoint as quickly as possible. This ensures that you excel in whatever competitive market you’re looking to retain a strong foothold in.

eCommerce and Rising Customer Expectations

As online shopping becomes the new norm for both individual consumers and businesses, shipping and delivery experiences become more important. 

87% of people say that the shipping and delivery experience is a key decision factor when choosing to place a repeat order with a company. 83% are actively less likely to shop from a retailer again after an issue with a previous order’s shipping.

Additionally, if a company provides a poor shipping experience, 70% of people will no longer have a good impression of the brand. 1/3 will leave bad reviews online or post negative things on social media after a botched delivery.

One thing is certain: the rise of eCommerce platforms like Amazon has changed consumer expectations of order fulfilment.

Customers are no longer satisfied with knowing the expected day of their delivery.

Instead, they want to be able to track their order more specifically. They want to know the ETA of their orders to the hour.

Customers also want deliveries to be completed in the most flexible way possible. Some of them may request that it be dropped on their front porch. Others may want shippers to leave it in the leasing office or drop it off in a safe box.

Additionally, consumers now expect an easy return process. If they’re unsatisfied with the order, they want to know exactly how to return it to the vendor to get their money back.

The possibilities for delivery needs are nearly endless. This means that eCommerce companies must accommodate moving goalposts and shifting expectations.

All of the above along with rising fuel prices and driver shortages have made last-mile delivery one of the most expensive parts of the order process. Luckily, you can save money by investing in last-mile delivery as a shared service.

Last Mile Delivery as Shared Service

Shippers are beginning to warm up to the idea of outsourcing last-mile delivery. They are beginning to see the benefits of hiring a shared service to perform this important task.

For example, American Eagle Outfitters has revolutionized its shipping process with last-mile delivery as a shared service. At full capacity, the company will ship out about 3 billion packages. Company officials project that shared logistics will save them about $40 billion, decrease delivery distance by 49 million miles, and reduce their carbon footprint by 30%.

This makes sense. After all, why send multiple vehicles to the same address for deliveries from multiple different retailers? A common transportation provider can drop off items from different retailers together.

3PLs are already positioned as providers of outsourced fulfilment services. They are looking to augment their services to last-mile deliveries.

Shared Logistics Future

Shared logistics services enable the use of shared facilities for warehousing, shipping, trans-shipping, and delivery to end customers.

People can place orders from multiple retailers. Inventory for all of these retailers is stored in a common venue.

They can receive one simple and fast shipment from multiple sources. This means that they won’t need to track and wait for multiple packages.

The 3PL market is in high demand and is growing steadily. Its current worth is around $976.3 billion globally. By 2028, it is projected to reach $1701.3 billion.

This means that the annual projected growth rate is about 8.26%.  Shared logistics is likely the future of eCommerce shipping, so you should invest early to remain competitive.

Benefits of Shared Logistics

One core advantage of shared logistics is that it enables co-mingled delivery routes to customers. It is sent directly from 3PL storage/packing facilities to the destination. Delivery is therefore both faster and more predictable.

Efficient use of storage and dock space is another benefit of 3PL shared logistics. Experts know how to make the most of warehouse space. They also know how to load the maximum number of inventory pieces into trucks and other cargo-holding areas. This means fewer deliveries and quicker transit to the destination.

A sustained rethink of first and middle miles has a multiplier effect. When there is an increase in the number of orders, there will be an even greater increase in the number of returns. 

Ultimately, you will also be able to extend capabilities in reverse logistics as well as shipping. This means an easier returns handling process. Since 54% of people say that a good returns policy is a consideration when they shop online, it’s important to consider this when choosing a 3PL service.

Shared logistics are also an inexpensive alternative to on-site shipping or dedicated warehousing services. In fact, it can increase carrier profits by 20%. This makes it more financially viable than other shipping methods.

Finally, shared logistics uses fewer shipping vehicles to take goods to multiple destinations. This allows eCommerce businesses to adapt better to driver and vehicle shortages. This is true for both B2C eCommerce shops and B2B organizations.

However, this is not to say that businesses will not face any difficulties when implementing a shared service. It seems like a logical choice for everyone, but the reality can pose many difficulties.

Challenges in Enabling a Shared Service

One challenge of shared service enabling is the “dedicated sandbox.” Using a dedicated warehouse space and individual transportation network is comfortable. This appeal has never gone away since businesses tend to feel more in control.

Shipper-mandated systems are another challenge. Shippers ask that 3PL use specific systems to manage transportation or parts of operations. This is largely influenced by legacy systems or large ERPs.

This can be challenging when the 3PL provider does not have experience in the systems that you mandate. It can be especially problematic for those who need to comply with specific company regulations or local laws.

Siloed systems also pose another challenge. The advent of SaaS and Cloud offerings relieved IT from hardware and data center management. The silos have never really been dissolved.

None of the systems today are capable of maintaining multiple customer data and providing direct access to the information. This makes it difficult for 3PL businesses that do not have the right technologies to gain direct access to the information of those they’re shipping to.

Shippers may need unique handling of their merchandise at the pickup/drop-off point. Many shared services may not be equipped to do this because the different retailers that they’re shipping from may have varying needs. It is challenging for them to accommodate everyone.

Handling paperwork with bills of lading (BOLs), packing slips, and port of discharge (POD) documents often breaks down into a chaotic operational mess. 

All of the above issues add to the customer’s frustration when waiting for a shipment. They will not have timely information such as tracking data, delivery estimates, or control over the drop-off point. This could lead to a poor delivery experience.

Technology Capabilities Needed for Supporting a Shared Logistics Operation

Fortunately, shared logistics operations are sustainable with the right technology capabilities. You can reap the benefits of shared logistics services while minimizing the impact of common challenges.

Shared logistics systems must be able to provide a common data repository from multiple customers as well as multiple hubs. 

Every stakeholder must have direct visibility of information that pertains to them. They also must provide flexibility to handle variances in the workflows for each stakeholder. Shared logistics 3PLs work with many clients’ shipments, and they must have software that prioritizes each stakeholder’s needs.

They need to be able to handle multiple types of operations by terminal. Some businesses may require cross-dock and trans-shipment services. Others may prioritize distribution, freight forwarding, and last-mile delivery services.

Since shared logistics include multiple enterprises’ inventory in a single setting, that single hub must be able to handle many different operation types. They also must be able to provide multi-terminal or hub visibility via a control tower.

The technology used in shared logistics must be based on the traceability of operations. This will let your business know when the shipment has been processed and sent. You will know when to bill the customer for pre-orders and pay-after-processing shipments.

Your technology solutions also must control tower visibility to other stakeholders. These parties may include shippers, carriers, and 3rd party hubs that your shared 3PL service collaborates with. This ensures that shipping is a well-oiled machine where all involved organizations work in tandem to get inventory to its destination.

Finally, digitizing the POD’s needs is a must-have capability. This streamlines paperwork by reducing it and making it electronic. BOLs are easier to fill out, sign, and access.

More Details on Technology Capabilities

Our 3PL warehouse Solution meets all of these technological needs and more. The NuVizz integrated platform provides several solutions. They include:

  • Final mile delivery 
  • Real-time visibility
  • Customer experience tracking
  • Hyperlocal delivery
  • Route optimization
  • B2B delivery
  • Load planning and dispatch
  • Cross-dock distribution

Additionally, we provide true transaction-based network orchestration. This involves providing visibility to all stakeholders so that they can access their shipment information. Because of this visibility, the 3PL can operate at the global level.

You will therefore have a greater chance to expand and get ins with new markets that might be interested in your goods.

Every hub in the network ecosystem operates on the information visible to them in real-time. A true transaction orchestration can provide visibility to cost, operational efficiency, and inventory and logistic flows. 

This eliminates the need for ubiquitous versions of Excel spreadsheets. Everything exists within one integrated and accessible platform.

The Paperwork and Manifests

Many enterprises forget about or lose the signed manifests from shippers and end customers. This seems to vex collections and claims departments. This irritation makes sense since they do not have the appropriate paperwork to process financial information and shipping data.

Digitization of manifests, BOL, and signatures with real-time sign-on glass technologies is the proverbial grease to these engines of change. No one will need to chase down paperwork to comply with regulations. This saves time and resources while ensuring compliance and organization.

Some regulated industries require up to 7 years of paperwork retention to be compliant with FDA regulations. These industries include medical devices, pharmaceuticals, tobacco products, food services, and more.

Most of them have successfully migrated to digitized paperwork. This means that they can access their documents from anywhere at any time.

They’re more organized, which means that they are unlikely to be lost over time. They also can be recovered in the event of an emergency or disaster. This keeps these industries compliant and reduces the risk of hefty fines.

It also is far more sustainable. Over 1 in 3 customers are willing to pay more for sustainable services.

Companies that handle paperwork in a more sustainable way can make this a selling point and brand differentiator. People are more likely to come to a business in any industry if they save a forest every year with digitized documentation.

Traceability and Inventory

Co-mingling comes with the inherent challenges of missing or mishandled inventory. A real-time visibility solution can enforce scanning.

It can also enforce other digitized collection variants at various points of handling inventory. These points may include receiving items, trans-shipment timeframes, customer delivery, and warehousing.

Your team can see exactly where inventory is at any given time. This means that you’ll know how much of a specific product you have and where shipments are in the delivery process. You’ll have an easier time communicating delivery-related information to customers that make related inquiries.

You also will never need to worry about stocking enough products to meet consumer demand. You can trace what people purchase and in what quantities. This lets you figure out how to stock your 3PL warehouse for optimal efficiency.

Dynamic Transportation Vendors

A fragmented transportation ecosystem produces its own challenges. This is a problem with many businesses that use 3rd party logistics services, especially shared logistics. Technology needs to be able to enforce process in the last mile (and perhaps every mile).

With the advent of Uberization of human transportation and eCommerce, the industry is now more than a willing participant in the process. You now can use tools to enable standardized practices for managed fleet, contracted or dedicated fleet.

You can easily plan loads either centrally or at each shipment terminal. When combined with the ability to optimize routes, this creates a dynamic transportation environment.

Technology enforces these early-stage processes, but it also enforces the route up through final-mile delivery. You can see distribution processes, track shipments in real-time, and watch last-mile delivery once you reach that stage of the process.

Data-Driven Workflows

Data driven business approaches can help you identify any problems with shipment and delivery experiences. The right technologies can provide a platform that lets you automate repeated tasks based on data input.

Data driven workflows have the capability to change or modify delivery experiences in shared transportation deliveries. 

Every shipper on that truck may need a differentiated service. Data driven workflows can ease the training and compliance of these processes.

They can optimize every shipment on a load to ensure that inventory gets to its destination as efficiently as possible. This ultimately provides a more rewarding pocket for 3PL. 

Upgrade Your Delivery and Transportation Orchestration Methods

Regardless of your industry or target audience, 3PL services can transform the future of logistics management for your business. They can make you operate more quickly and efficiently.

When you fulfil orders on time and offer lower shipping rates, your customers will be happier with your service. It’s an ideal way to boost your reputation and profits.

Now that you know the ins and outs of 3rd party logistics, it’s time to invest in technology that manages your delivery network. NuVizz is committed to optimizing your business operations, keeping you competitive, and ensuring that your operation is as efficient as possible. Schedule a demo of our services to see the specific ways that we can assist you.

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