3PL Warehousing Explained: Understanding 3PL Warehousing for Your Business

Handling the storage of goods, maintenance of inventory, receiving order requests, packaging and the dispatching of products, etc., will surely become challenging with the expansion of your business. By employing a Third Party Logistics or 3PL warehousing service, you can outsource such activities of logistics everyday running to a well-versed supplier. Rather than a business having to operate its own warehouse, it can get services from an outside provider for the storage and handling of orders. Multitasking is what Prime 3PL does in a smooth manner when it comes to important areas of logistics without disturbing other departments like sales, customers, and business growth. 

What is 3PL Warehousing? 

3PL Warehousing refers to outsourcing your logistics needs for inventory management, storage, and transportation to a third-party logistics firm. They may handle services such as receiving your inventory, storing it in the warehouse, managing your inventory, handling orders, packing your inventory and shipping. This kind of logistics service is very helpful to e-commerce businesses, retail firms, manufacturing companies and any emerging business brand that prefers not to have its own warehouse.

Types of 3PL Warehousing 

There are different models in which organizations may adopt when it comes to 3PL warehousing. Organizations may undertake all the processes by themselves, while there are some organisations that outsource all of the logistics processes. It is important to note that it all depends on the level of control an organization requires and the level of warehousing support. Examples of some models include: do-it-yourself model, contract or dedicated 3PL and Shared 3PL model.

The DIY method

This approach implies that the organization is in charge of storing the inventory, its control and packaging. The organization has full control over the processes but needs to provide warehouses, staff and equipment. This approach can be suitable for small companies.

The dedicated or Contract 3PL model

A dedicated/contract model would provide logistics and warehousing facilities that would be exclusive to a particular company. It would have more control and flexibility compared to the shared facility model. This kind of model would suit firms that have order fulfillment needs on a regular basis.

The Shared 3PL model

A common 3PL arrangement lets more than one business share warehouse facilities. This can be done in terms of cost and space sharing based on their usage. It may help brands that wish to have warehouse storage without having a complete facility for themselves.

How Does 3PL Warehousing Work?

3PL warehousing is done through a sequential process in which the incoming of the items is associated with their storing, picking and delivering to customers. This sequence is typically:

• Receiving Goods: Goods are checked and counted against their shipment description once they arrive at the warehouse.
• Storing: Inventories are physically put in storage locations that are most fitting for their sizes, types and frequencies of retrieval.
• Tracking Stock: Whenever there is a movement of goods, their coming in, going out, or moving around, the inventory records are updated.
• Receiving and processing customer orders: They are done digitally and the systems used have the capability to interconnect.
• Picking and packing: Warehouse workers fetch the items required, prepare them and pack them for delivery.
• Shipping: Packaged goods that are customer orders are handed over to the transport or courier partners that have been chosen.
• Returns handling: The goods that are returned are received, checked and handled based on the set-up of the business.

What Services Are Included in 3PL Warehousing?

It is possible for a modern 3PL warehouse to offer far more than storage of products. The services offered can include the entire process involved in the transportation of goods, starting from the point of reception to their final delivery and even return. Based on the particular 3PL company, businesses can opt for one or all the services offered. Prime 3PL can serve those companies that require efficient warehouse services.

Inventory Storage

Inventories are stored in a systematic manner till they are required. This process may involve using racks, shelves, bins, and even pallets in the warehouses depending on the nature of the product.

Inventory Management

Inventory control assists companies in monitoring their stock levels, incoming stock, and outgoing orders. Keeping accurate accounts will lead to reduced stockouts, overstocking, and mistakes while handling the orders.

Order Fulfillment

Order fulfillment includes the steps of accepting customer orders, finding the items, getting them ready for shipment, and finally, delivering them to the appropriate destination.

Pick and Pack Services

Pick and Pack Services  involves pickers are workers who take products from the shelves, while others who do the packing are responsible for ensuring each package is correctly labelled and adequately sealed. 

Shipping and Distribution

Shipping and distribution is responsible for the transportation of inventory and goods from the warehouse to the final destination through stores, customers, or other warehouses as per the delivery plan. 

Returns Management

Returns management process involves identifying the reason for return, handling the return of goods, and making a decision to recondition, repackage, resell, or return the items depending on the company's return policy.

Kitting and Assembly

You can use kitting and assembly services when you need to combine several components into a single unit that is immediately marketable or deliverable. For example, it could help to bundle related products, create sets for a sale, or make subscription boxes.

Labeling and Repackaging

Labeling together with repackaging is a process that adjusts products to fit the requirements of the company, retail or shipping. The activity can involve attaching labels, replacing packaging or preparing products for a specific sales channel.

Cross-Docking

Cross-docking is a technique that brings goods in and out, minimizing the time of storage. With no or minimal warehousing, incoming goods are immediately sent out. This can be beneficial as it greatly reduces the amount of handling time for those products and supply chains where it is appropriate.

Value-Added Warehouse Services

Services like inspecting for quality, doing assembly, putting together in a pack, printing labels, and doing special packaging are categorized under value-added warehouse services. Through such added activities, businesses are allowed to get additional work done at the warehouse level alone.

3PL in Supply Chain Management

Management of the third-party logistics supply chain entails several logistics services within one management system. The services managed by the logistics company can include receiving, storing, inventory, shipping and returns. This makes it possible for the firm to have an umbrella management of all the logistics functions rather than managing each function individually. This is particularly helpful for growing firms. A good 3PL will be able to cope with any changes in order volume and distribution needs of the expanding firm.

What is 3PL Inventory Management Software?

3PL inventory management software is a computer-based system designed for tracking inventory and movements in the warehouse. The software is capable of recording incoming stock, stock availability of the stocks, orders, and deliveries. There is also software that supports barcodes and warehouse and business integration services. The real-time data makes it easier for companies to know where the products are kept and the quantity of stock.

3PL Warehousing vs In-House Warehousing

Although the two types of warehousing require storage and management of the companies' goods, there are differences in the roles played by each. In 3PL warehousing, the logistic company undertakes the tasks within the warehouse that have been set earlier. The business, on its part, manages the in-house activities.

3PL vs. 4PL

Typically, the third-party logistics (3PL) will mainly concentrate on the physical activities of logistics like warehousing, fulfillment, and transportation, while the fourth-party logistics (4PL) will mainly emphasize the logistics network management.

3PL vs. Dropshipping vs. Freight Forwarding

These three models play different roles. The 3PL logistics model typically entails storing the company’s inventory until it is time for order delivery. Dropshipping involves shipping the order directly to the consumer from the supplier, whereas freight forwarding is concerned with the movement of goods only.

Asset-Based vs. Non-Asset-Based 3PLs

The main difference is in whether the service provider has physical assets related to logistics. For the case of an asset-based third-party logistics company, the service provider may own warehouses, trucks, or equipment. The non-asset-based third-party logistics company manages logistics using external partners.

What Are the Benefits of 3PL Warehousing?

The advantages of using a 3PL warehouse service will enable the logistics process for companies that are not willing to have an internal warehouse. Advantages include:

• Less need for infrastructure: Companies are not always obliged to have their own warehouses.
• Ability to adapt capacity: Capacity in storage can be adapted to business demands.
• Reduced effort: Tasks related to the operation of a warehouse can be taken care of by experts.
• Effective delivery: Process-driven management will ensure effective order delivery.
• Greater coverage: Companies will be able to use warehouses located closer to consumers.
• Access to technology: Technology used in the warehouse may also be provided by the provider.
• Business Focus: More focus on core business activities.

Are There Any Disadvantages of 3PL Warehousing?

Although 3PL warehousing options can provide logistics advantages to businesses, there are some considerations that the business should know about. For example:

• Less control: The supplier will make certain decisions on how the warehouse will operate.
• Cost of service: Cost associated with storage, handling, and fulfillment might become higher.
• Integration effort: Integration with the business system would require some effort.
• Dependency on supplier: Warehouse performance is dependent on the service provider.
• Good communication: Good instructions and proper updates are required.
• Minimum cost: Companies should be aware of minimum and extra costs.

Who Should Use 3PL Warehousing?

3PL Warehousing can be beneficial for companies having increased inventory or order quantities. Examples of 3PL warehouse users include:

• Ecommerce and D2C brands
• Retail firms
• Manufacturers
• Importers and Exporters
• Online retailers
• Subscription firms
• Companies entering into new cities or markets
• Companies with insufficient warehouse capacity
• Companies wishing to decrease their logistics work

The selection of the model may depend on the product type, order quantity, storage needs, and future growth plans of the business.

When Should a Business Move to a 3PL Warehouse?

There comes a point in time when a business should consider using 3PL logistics solutions for its warehousing operations. It is when:

• The warehouse space is running out.
• Orders are increasing at an alarming rate.
• Employees are wasting their time packaging and shipping the orders.
• The number of errors in stock management has grown.
• The company is entering new markets.
• There is seasonal demand, which requires temporary storage space.
• Too much time is wasted in carrier management and returns.
• It is not possible to build another warehouse because of the high costs involved.

3PL Warehousing for Ecommerce and Online Businesses

Ecommerce companies face a lot of small customer orders on a daily basis. Ecommerce 3PL solutions can take care of warehousing, picking, packing, shipping, and returns in such a way that the company does not have to worry about all orders individually. The warehouse facility may also be able to get connected with the online store or marketplace to fetch order details. This is how a streamlined process from order generation to shipment becomes possible.

How to Choose the Right 3PL Warehousing Provider?

When considering 3PL providers who may suit your business, it will be essential to look at their services and operational factors. Some considerations are:

• Location of warehouses: Whether the locations of the warehouses are convenient for reaching out to your customers’ markets.
• Inventory capability: Their ability to store your current and future inventory.
• Technology: Availability of technology such as inventory management software and e-commerce technology.
• Order Fulfillment Time: Order fulfillment time is the time taken for order processing.
• Cost: Cost incurred in activities such as storage, receiving, packaging and shipping, etc.
• Scalability: How scalable their service is, especially during peak seasons.
• Return policy: Understand their return policy for products.
• Communication: Communication methods employed.

How Technology Improves 3PL Warehouse Operations

Technology is a significant factor in modern 3PL warehouses. Some technologies make it easier to trace inventory and order information. The main technologies are:

• Warehouse Management System
• Barcode scanning
• Real-time inventory tracking
• Order integration
• Automatic reports
• Dashboard
• Data system

3PL Warehousing vs 3PL Fulfillment: What Is the Difference?

Third-party logistics fulfillment is mostly included within the broader category of warehousing services. While warehousing involves mainly storage and inventory management, fulfillment is about order preparation and delivery.

What is the Difference Between 2PL, 3PL and 4PL?

Real-World Example of How 3PL Warehousing Works

3PL warehousing process may be explained using the example of an ecommerce company selling its products in India:

• Manufacturer delivers products to the 3PL warehouse.
• Products are received by the warehouse staff.
• The products are put into inventory.
• Products are stored in appropriate locations.
• A customer orders a product online.
• The order comes to the warehouse.
• Products are selected from the inventory by the staff.
• The products are packed and labelled.
• Products are delivered to the chosen carrier.
• The customer gets his/her order.
• In case of the return of the product, it is returned to the warehouse.

This helps the seller to concentrate on his/her business development with logistics being done at the well-organized warehouse level.

Is 3PL Warehousing Right for Your Business?

The appropriateness of 3PL warehousing is determined by how the business handles, sells, and distributes its goods. Businesses must look at the volume of orders, the size of the goods, storage needs, distribution destinations, technology needs, and the anticipated growth in the business. It is imperative for businesses to evaluate the costs of operating their own warehouses against the cost of services provided by the provider. This can go a long way in making a practical decision for businesses.

Final Thoughts on 3PL Warehousing

3PL warehousing offers companies a solution to outsourcing the processes of warehousing, inventory, and logistics. Whether it is the process of receiving goods, stock management, or fulfillment, delivery and returns, the appropriate 3PL company can undertake various processes within the supply chain. This largely depends on the size of the firm, nature of products, order frequency, and expansion strategy. Prime 3PL assists companies in identifying their logistics needs and the services offered. Inquiries for its services can be made at 1300477463.

FAQs: 3PL Warehousing Explained

Q. What is 3PL warehousing?

A. 3PL warehousing means hiring an outside logistics company to store, manage and move your products. It can handle storage, inventory, packing, shipping and returns for your business.

Q. How does a 3PL warehouse work?

A. A 3PL warehouse receives and stores your products, tracks inventory, processes orders, packs items and arranges shipping. It helps businesses manage daily warehouse and delivery work more easily.

Q. What services does a 3PL warehouse provide?

A. A 3PL warehouse can provide storage, inventory management, order fulfillment, picking, packing, shipping, returns, labeling, kitting and repackaging services based on your business requirements.

Q. What is the difference between 3PL and traditional warehousing?

A. Traditional warehousing is managed by the business itself, while 3PL warehousing uses an outside provider. The 3PL company handles agreed storage and logistics tasks on your behalf.

Q. How much does 3PL warehousing cost?

A. 3PL warehousing costs depend on storage, inventory, order volume and selected services. Prime 3PL has a starting fare of Rs. 12 per km, while final pricing depends on requirements.

Q. Is 3PL warehousing suitable for small businesses?

A. Yes, 3PL warehousing can help small businesses access storage and fulfillment support without managing their own warehouse. It can also make logistics easier as order volumes increase.

Q. What products can be stored in a 3PL warehouse?

A. A 3PL warehouse can store many suitable products, including ecommerce goods, retail items and packaged products. Storage and handling requirements depend on the type and nature of the products.

Q. What is the difference between 3PL warehousing and fulfillment?

A. 3PL warehousing mainly covers product storage and inventory management. Fulfillment includes picking, packing and shipping customer orders, along with other services such as returns handling.

Q. How does a 3PL manage inventory?

A. A 3PL tracks incoming, stored and outgoing products using inventory systems. Barcode scanning and warehouse software can help maintain accurate stock records and reduce inventory errors.

Q. How do I choose a 3PL warehousing provider?

A. Check warehouse locations, pricing, storage capacity, services, technology, shipping options and customer support. Prime 3PL can help you understand available logistics services based on your business needs.