What is a 3PL company?

Every Friday, we answer a common question about fulfillment, shipping, or business. This week’s question comes from a reply to one of our weekly emails. Today we will answer the following question: “what is a 3PL company?”

What is a 3PL Company?

As a 3PL company, this is a question we hear quite a bit. To answer it, we need to provide a little additional context.

Supply chain management encompasses everything from the acquisition of raw material to manufacturing to shipping to order fulfillment. Basically, it covers everything that has to do with creating a physical product and getting it into a customer’s hands. A 3PL company can take one or more supply chain management responsibilities off your hands.

Responsibilities that 3PL companies typically take care of include:

  • Receiving inventory
  • Warehousing inventory
  • Picking and packing (retrieving inventory and preparing to ship it to customers)
  • Inventory control
  • Shipping / order fulfillment
  • Returns management

Why Are 3PL Companies Useful?

As you can imagine, outsourcing any of the responsibilities listed above can make your life a lot easier. Many companies prefer to focus on creating products, but not necessarily shipping them. That way, their staff can focus on doing what they’re good at!

It doesn’t always make sense to outsource parts of your supply chain management. Here are a few signs that it is time to consider calling a 3PL:

  1. Your customer base is growing extremely quickly.
  2. Order fulfillment is becoming slow or inaccurate.
  3. Your employees are working too much.
  4. The business is getting complciated.
  5. Shipping costs are through the roof.
  6. You no longer have room to store your inventory.

When Are 3PL Companies Cost-Efficient?

While outsourcing to a 3PL will cost money, many businesses that choose to do so breakeven or sometimes even save money! There are several reasons for this:

  1. Your workers spend their time more wisely.
  2. Overtime and training costs associated with shipping your own orders are reduced.
  3. Shipping supply costs go way down.
  4. Warehouses can store your items for cheaper than you can on your own.
  5. Simpler businesses cost less money to run.
  6. Better shipping can increase customer retention.

Like we said, not every business can benefit from outsourcing to a 3PL, but many can!

Final Thoughts

The purpose of 3PL companies is to take care of supply chain operations so that other companies can specialize in what they do best. Once a business grows to a certain point, outsourcing to a 3PL company makes sense. Doing so streamlines business processes and can sometimes even save money!

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