Thu, 07 Dec 2023

What is a 3PL - The Complete Guide for Businesses

15 Sep 2023, 19:51 GMT+10

A 3PL or Third-Party Logistics provider offers outsourced logistics and supply chain services to e-commerce, retail businesses, and even manufacturers. 3PLs professionally manage various aspects of transportation, warehousing, and distribution and thus relieve the company from all their day-to-day headaches.

How 3PL Helps Boost Business Growth

Let us dig deeper into why a business needs 3PL services and how a 3PL works for different types of businesses with scalability, time & cost savings, efficient supply chain, and automated inventory management systems:

1.  3PL services for E-commerce & Online Businesses

For an entrepreneur running an E-commerce, Amazon FBA, or Dropshipping business and looking after all the aspects themselves, much of the time is spent sorting out orders and packing the items.

Apart from this, the entrepreneur must take care of administrative as well as fluctuating space requirements as per seasonal demands. Further, warehousing operations involve heavy fixed investment as well as operative costs.

In addition to this, dealing with e-commerce logistics (inbound, and outbound logistics, and returns) takes the rest of their time. The net result is the entrepreneur has no time left for the core business objectives ie. the sales and the customers.

This is where the advantage of 3PL kicks in. A 3PL provides different types of services like inbound logistics, warehousing, pick & pack services, labelling, delivery of goods to customers (outbound logistics), and handling returns.

Thus, the 3PLs free the e-commerce companies not only from heavy investments but also from all the headaches of day-to-day operations. Hence, the companies can focus on the important aspects and scale up/down their operations as per the seasonal or market demands without getting goosebumps over the resultant fluctuating warehousing requirements.

2.  3PL services for Retail businesses

Similarly, 3PL can help retailers in streamlining their supply chain operations. This involves handling the inbound logistics, storage of excess inventories at their

warehouse, and incorporating it into the Warehouse management software.

Thus, the items are replenished regularly as per requirement and save costly prime

location space for the retailers. Further, if the retail business has an online store as well, 3PL will be able to handle all their operations as mentioned above in point 1.

3.  3PL services for manufacturers

Some 3PLs provide logistics and warehouse solutions to manufacturers for their different legs of activities. These services range from inbound logistics of raw materials from suppliers to plant, and outbound logistics of finished goods to wholesalers or dealers.

How does a 3PL Company operate?

a)   Sharing the requirements with the 3PL

It starts with the e-commerce or retail company sharing their requirements with the 3PL, to decide which part of operations are to be handed over to 3PL - the inbound logistics part, the warehousing services, outbound logistics, returns, etc.

A reliable 3PL provider, like CSG 3PL, will be able to tailor their services to specifically fit each business perfectly, as all businesses are unique and will require different needs.

b)   Bringing the goods to the 3PL warehouse

The routine operation of a 3PL begins with storing the products in a 3PL warehouse facility. The products can be brought to the 3PL warehouse either directly from the manufacturer or from the wholesaler, after applying the barcode.

c)    Warehouse management system (WMS)

WMS is one of the most important systems within warehousing operations. Here, all the products will be incorporated into the Warehouse management system software and this software will be connected with the hiring company's e-commerce or retail software.

Now, space will be allocated for every company inside the warehouse to store their goods separately. With the online integration of WMS with the company's software, companies remain aware of their stock position all the time.

d)   Order fulfillment process

Whenever an order is received at the connected E-commerce store, it is forwarded to the 3PL for fulfilment, either automatically or manually. This is often known as the 3PL fulfilment process.

Similarly, in the case of retail business, stock replenishment requirements can be sent to 3PL either in an automated way to maintain minimum stock levels or manually.

e)   Picking & Packing

When the order reaches the 3PL, the software generates a packing list. Then the items are picked from the racks, packed with packing materials, and sealed in boxes or bags as per the client's specifications. Then the packed consignment is sent to the shipping area.

In the case of retail stores, bulk items are picked from racks as per the list and sent to respective outlets.

f)     Delivery & Handling of Returns

Then these consignments are handed over to the suitable carriers, who load them on cargo trucks for delivery to the end customer. The 3PLs take care of customer services and returns, if any.

Benefits of using a 3PL (Third-party logistics)

So, by now you have got a broad idea about which businesses can avail of the 3PL services and how a 3PL operates. Now, let's summarise the benefits of partnering with a 3PL. Apart from boosting profitability by streamlining operations and manpower reduction, operating with a 3PL offers a lot of other benefits:

1.   Saves heavy infrastructure expenditure.

A 3PL facility saves companies from making a heavy expenditure in purchasing or hiring a warehouse for their stock at a hefty monthly rent. Further, the 3PL frees the companies from the administrative and labor headaches of running & maintaining that warehouse.

Similarly, retail companies can successfully run the store with less space, as the retail stores are usually at costly prime locations and save cost by storing their excess stock at a 3PL.

2.   Increases business efficiency.

A 3PL can do warehouse management, fulfilment, and logistics processes more professionally, quickly, and efficiently with their expertise and trained staff. On the other hand, the e-commerce or retail company gets relieved of these responsibilities and can easily focus on sales, advertisement, and marketing.

3.   Inventory Automation and Real-Time Tracking

Technologically advanced WMS allows real-time tracking and streamlines the order management process. So, the e-commerce company can track inventory and manage orders more efficiently, even when they are stored in multiple warehouses at different locations.

4.   Cost and timesaving

Businesses will be surprised to find that 3PL providers have extremely competitive delivery rates because of their connections & relationships with the carriers. 3PLs get bulk deals and discounts and hence can always save costs for the companies.

Further, customer services and goods return require a lot of time and regular attention. 3PL takes care of all these responsibilities very smoothly with their trained professionals.


With an efficient 3PL company like CSG 3PL, an entrepreneur can start an eCommerce or retail business with minimum investment, and existing ones can reduce business operating costs. Overall, the companies get rid of mental worries and can focus on their core competencies to take their business to new heights.

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