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What is 3PL? Checklist for Choosing Best Third Party logistics for Ecommerce

November 20, 2018

5 Min Read
3PL third party logistics for ecommerce
Reading Time: 5 minutes

This blog covers everything about third party logistics including what is 3PL, how it is different from dropshipping and how to select a reliable ecommerce logistics provider for your business? Let’s get started.

Hundreds? Thousands? No. The loss is unimaginable!

When you are not able to deliver products to your customers on time, the loss is unimaginable. Period.

Exactly what happened with Mike Brown, the owner of Death Wish Coffee, one of the best coffee suppliers on Amazon. The company was number one on Amazon for a whole year. But, not only was his account banned but he was also suspended from carrying any other activities on Amazon or its related services.

And guess what was his only wish when he appeared on Good Morning America show?

‘If only I had someone to manage logistics’

Take note. As an ecommerce store, you shouldn’t make the same mistakes especially when you are aware of the consequences and when you have better alternatives available.

Here’s a glimpse of what you will find in this blog.

 

What Is 3Pl? Why Is It Important?

Third party logistics (3PL) is a term given to businesses that handle the procurement, logistics, and fulfillment of products of an ecommerce store.

In the last century, the product selling process involved two parties, manufacturers and suppliers. But now, in this digital economy, a third party has emerged that manages and ships the inventory.

They are necessary because most ecommerce stores simply can’t manage all aspects of the business from product manufacturing (sometimes retailing) to marketing, sales, inventory management, and shipping. The 3PL providers help them take half of these services off their hands, allowing them to work on expanding their business.
If you are still confused about the whole concept of 3PL, simply watch this video.

Third Party Logistics (3PL) vs Dropshipping

Both of these processes differ in concepts. In Dropshipping, you have an ecommerce store and not the actual product from the supplier. Instead, you tend to keep a commission for selling someone else’s products. In short, you never store these products in your store. You simply act as a broker. That’s why this concept is also called as arbitrage.

You don’t have to worry about logistics or procurement because it is the wholesale supplier who handles these operations. You just have to market your ecommerce store and when you get an order, you forward it to a supplier.

In 3PL, you are doing the total opposite. You are managing the inventory of an ecommerce store. When someone orders a product from your client’s ecommerce store, you ship it. You don’t handle marketing or sales, or customer service as it is the duty of the e-commerce store team. Think of yourself as half-owner of the ecommerce store.
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Things to Check While Finding a 3PL Provider

Finding a reliable third party logistics firm that matches your estore is difficult. We have curated a checklist of factors that you should double-check before settling for a 3PL provider.

1. Scalability

Think about your ecommerce store and where it will be in next one year. Will the 3PL provider that you choose today, be able to provide the same level of service for maximum profit in a year? This question is often neglected by most ecommerce suppliers, but it is a crucial one. Down the lane, you don’t want to know that you made the wrong decision.

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2. Expertise

While most ecommerce store owners think that if a company is in business it will have experienced people on board. But that is not always the case. Many times new 3PL providers emerge promising they have expertise in ecommerce logistics and procurement but in reality, they don’t have.

What you should do is to verify the information of managers of the company to make sure your products are going in safe hands.

3. Credibility

One way to cross check the credibility of a 3PL company is to keep an eye for the company reviews. But that is not always the case because most new 3PL providers don’t have any reviews. So, how do you check if they are credible? Simply ask their past clients. You can call them and ask how is the service they offer.

4. Site-Visit

Another way to verify the credibility of a company is by visiting its on-ground site. Many phoney companies exist online. By visiting the physical site, you not only decrease the risk of getting scammed, but it will also help you decide if you want to hire the company for your ecommerce store. Do ensure to check the warehouse and their shipping trucks just to familiarize yourself about their shipping procedure.

5. Culture-Fit

Assessing if a company will be a good cultural-fit is highly difficult if you have not hired it for your service for some time. But you can send a request for proposal (RFP) document to understand what it has to offer.

Tips to Assess Culture Fit:

  • Can it handle the burden of products during peak season?
  • How does the staff behave when customers show anger?
  • Do they communicate honestly?
  • Is the whole process of logistics management transparent?

Remember your customers may place the order on your estore, but it is the 3PL provider that will deliver it. And, that’s why finding the cultural-fitness of the provider is crucial to your business’ success.

6. Pricing

Usually, a 3PL provider will offer a single quote for all the services it renders. However, it is always a good idea to ask them to break down the costs so that you can determine if you are getting the best price for the services offered.

A 3PL provider will usually take care of all the services including picking, warehousing, packaging, and shipping. When you ask multiple providers about the price breakdown, you will be in a better position to find the one that fits your needs.

  • Picking: It is the responsibility of the 3PL provider to pick goods from ecommerce store owners, warehouse or production site and take it to their warehouse.
  • Warehousing: The warehouse team must categorize the products, label them and store them in warehouses.
  • Packaging: Packaging the product is the responsibility of the warehouse team. They must also make it ready for shipping.
  • Shipping: You can pick the products from the 3PL’s warehouse and deliver it to customers.

7. Track Record

The best way to find if a third party logistics provider has a good is to check with their old clients. If it has clients already associated with it for a long time, then you can be sure that the company offers quality services. The reputation of a 3PL provider will speak volumes about the quality of service it offers and how reliable and efficient it is in processes.
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Final Words!

While finding a partner for managing your ecommerce logistics, make sure you understand and follow all the steps we have offered in this checklist. Another thing that you need to ensure is to bring all your stakeholders on the same page, otherwise, it can lead to a waste of time and resources and a swarm of order backlog. Moreover, this can also lead to bad reviews and angry customers because of the shipping delays.

Have we missed anything that can help make the 3PL checklist even better? Why don’t you comment below and let us know about it?

Share your opinion in the comment section. COMMENT NOW

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Sharjeel Ashraf

Sharjeel loves to write about startups and ecommerce. In his free time, he is on the road or working on some cool project in his den.

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