3pl Order Fulfillment Process and Benefits

The 3PL order fulfillment process is a game-changer for businesses looking to streamline their operations. By outsourcing logistics and fulfillment to a third-party logistics provider, companies can tap into a network of warehouses, transportation options, and inventory management expertise.

A well-executed 3PL order fulfillment process can reduce costs and improve customer satisfaction. This is especially true for businesses with complex or high-volume orders.

One of the key benefits of 3PL order fulfillment is increased efficiency. According to a study, 3PL providers can increase order fulfillment rates by up to 25% compared to in-house operations. This is because 3PL providers have the resources and expertise to optimize their workflows and minimize errors.

By outsourcing order fulfillment, businesses can also free up resources to focus on core competencies.

3PL order fulfillment is a model where you pay for inventory upfront, so it's yours to manage and ship to customers. This approach can be less expensive than drop shipping, especially when you purchase products in bulk and negotiate volume discounts.

You source products to sell in your ecommerce shop and invest capital to purchase raw materials and/or products before you make sales. Your merchandise ships to the order fulfillment warehouses managed by third-party logistics providers.

In a 3PL order fulfillment model, you put your available inventory in your online store or ecommerce platforms. Customers place orders online, and online orders flow from your sales platforms to your 3PL warehouses.

Experienced warehouse workers pick, pack, and ship your orders from the stock you own, which is stored at the warehouse. Delivery companies take orders to your customers, giving you more control over logistics and cost efficiency in fulfillment.

Here are some benefits of 3PL order fulfillment:

Order management is a crucial aspect of 3PL order fulfillment. It's the process of handling orders from start to finish, ensuring that customers receive their packages on time and in good condition.

A 3PL order management system can automatically import orders from an online store, check inventory levels, and assign orders to a picker. This helps streamline the logistics process, improving efficiency and reducing costs.

One of the key features of 3PL order management systems is real-time inventory management. This allows businesses to have clear visibility into inventory levels, making informed decisions about stock replenishment and order fulfillment.

Automated order processing, multi-channel integration, and customizable workflows are also essential features of 3PL order management systems. These enable businesses to optimize their logistics processes, improving efficiency and reducing costs.

Reporting and analytics tools are also included in 3PL order management systems, providing businesses with insights into their logistics operations. This helps identify areas for improvement, enabling businesses to make data-driven decisions.

Here are some key services provided by 3PLs:

When selecting a 3PL provider, it's essential to consider several key factors, including:

Warehouse operations are crucial for 3PL order fulfillment, ensuring that products are stored, picked, packed, and shipped efficiently. 3PL providers own or rent warehouses, equipped with specialized equipment like shelving, forklifts, and robotics.

Warehouse staff are hired, trained, and managed by 3PLs, who also implement protocols for specialized handling of products. Warehouse management software helps teams know where to put inventory or pick it from, keeping ecommerce websites up to date with real-time inventory availability.

Physical security measures include in-person and camera surveillance, while digital security measures include data encryption, access restrictions, and more. Upon receiving products, 3PL staff verify receipts against shipping documentation, inspect for damages, and ensure the right quantities of products are delivered.

Here are the security measures used by 3PLs:

This ensures that inventory and the inventory management system are protected and maintained.

Warehouse Storage is a crucial aspect of warehouse operations. Your 3PL provider owns or rents the warehouse where your products are stored.

A 3PL warehouse team is responsible for managing the storage of your inventory, which includes receiving, storing, and maintaining accurate inventory counts. Warehouse management software helps them know where to put inventory or pick it from.

Your 3PL provider will typically use a Warehouse Receiving Order (WRO) to ensure they receive the correct inventory and store it in the right location. This helps them stay organized and timely with receiving, allowing them to start fulfilling orders more quickly and efficiently.

Warehouse storage services are typically a key offering from your potential 3PL provider. This means they own and operate a warehouse where they store and manage their clients' inventory.

Here are some key features of warehouse storage services:

By choosing a 3PL provider with a reliable warehouse storage service, you can trust that your inventory is being handled and stored with care.

Warehouse labor shortages have forced 3PLs to get creative with staffing solutions.

Partnering with specialized staffing agencies can provide access to contingent workers, helping 3PLs fill labor gaps.

Increasing hourly wages and benefits packages is another strategy 3PLs are using to attract and retain talent in competitive labor markets.

Deploying collaborative robots and other advanced automation can assist with tasks while requiring less total staff, which is especially helpful during labor shortages.

Managing labor issues is imperative for 3PLs to continue meeting service commitments and maintaining their reputation.

By finding innovative solutions to labor challenges, 3PLs can ensure their warehouses continue to run smoothly and efficiently.

Picking and packing are the backbone of order fulfillment. Some 3PLs require manual order uploads, but others can integrate with your online store to automatically push orders to their system.

A picking team receives a list of items, quantities, and storage locations to collect ordered products from their respective locations. This process typically involves barcode scanning or other identification methods to ensure accuracy.

Packing materials can be a separate line item or included in the fulfillment services, depending on the 3PL provider. ShipBob, for example, includes standard packing materials like brown boxes and bubble mailers.

Automation and robotics can greatly reduce errors and increase efficiency in the picking and packing process. This means faster order delivery and lower shipping costs for you.

Pickers find the items for the order and package them, ensuring cost-efficient packing materials are used. Packers also apply the correct shipping label and hand off the parcel for final-mile delivery.

Shipping and tracking is a crucial part of the 3PL order fulfillment process. Most 3PL providers handle shipping and tracking, creating shipping labels and tracking packages.

This level of tracking and visibility can significantly boost customer satisfaction. By providing tracking information to customers, they can follow their package on its way to them.

In fact, this is often a major advantage of using a 3PL provider, as it offers customers a sense of control and transparency throughout the shipping process.

Third-party logistics order management systems offer a plethora of features that make them a popular choice for businesses looking to streamline their logistics and supply chain operations.

Real-time inventory management provides businesses with clear visibility into inventory levels, allowing them to make informed decisions.

Automated order processing, multi-channel integration, and customizable workflows enable businesses to optimize their logistics processes, improving efficiency and reducing costs.

Reporting and analytics tools are included to provide businesses with insights into their logistics operations, helping them identify areas for improvement.

Scalability is a key benefit of 3PL order management systems, adapting to the changing needs of the business, making them an ideal choice for businesses looking to scale up or down.

The traditional 3PL model has several financial benefits, including lower cost of goods sold, greater cost efficiency in fulfillment, and more control over logistics.

Lower cost of goods sold can be achieved by negotiating volume discounts, resulting in potentially increased profit margins.

Greater cost efficiency in fulfillment can be achieved by shipping orders in the same box, saving on shipping costs and improving customer experience.

More control over logistics allows businesses to choose their order fulfillment partner, resulting in cost control and improved customer satisfaction.

Operational benefits of the 3PL model include greater flexibility in sourcing, faster order fulfillment, and easier returns processing.

Greater flexibility in sourcing allows businesses to source products from multiple manufacturers and design their own custom goods.

Faster order fulfillment can be achieved by partnering with a 3PL provider that has warehouse locations to deliver orders quickly.

Easier returns processing can be achieved by partnering with a 3PL provider that can provide customer service and seamlessly process returns.

Outsourcing fulfillment and logistics operations to a 3PL provider has become a very popular strategy for modern retailers and brands.

Scalability is a major advantage of partnering with a 3PL fulfillment provider, allowing businesses to scale fulfillment operations up or down to match changes in order volume.

Operational efficiency can be achieved by consolidating inventory into fewer, larger warehouses, resulting in increased productivity and lower fulfillment costs per order.

Cost savings can be achieved by outsourcing to 3PLs, converting fixed costs into a variable expense model.

Improved customer service can be achieved by partnering with a 3PL provider that can enhance order accuracy, reduce damage, and improve the overall customer experience.

Faster time to market can be achieved by partnering with an established 3PL provider, allowing startups and smaller merchants to launch faster.

Here are the key benefits of 3PL order management:

By letting a 3PL provider manage orders, businesses can integrate their logistics operations with the rest of their supply chain, which can improve efficiency and reduce costs.

A robust IT infrastructure is crucial for seamless multichannel or omnichannel selling. Fulfillment warehouses typically use warehouse management system (WMS) software that seamlessly integrates with popular ecommerce platforms.

Implementing advanced technologies like WMS, warehouse control systems (WCS), and automated material handling technologies is crucial for third-party logistics providers to drive greater efficiency, speed, and accuracy.

Warehouse management system (WMS) software directs all fulfillment center activities from receiving inventory to shipping orders, using features like directed put-away, batch picking, and labor tracking to optimize workflows.

Custom APIs can link to your shopping carts, allowing for seamless integration with your ecommerce platform. This integration can also help to improve inventory management and forecasting.

Modern 3PLs leverage sophisticated software and automation solutions like warehouse execution systems, order management systems, and labor management systems to expertly manage today's complex, high-volume fulfillment centers.

Online commerce integrations are a must for 3PL order fulfillment, and WSI offers order fulfillment that integrates with all major ecommerce platforms from Shopify to WooCommerce.

A 3PL helps you store and manage inventory, as well as fulfill orders, allowing you to leverage cost-efficiencies of a centralized inventory and strategic distribution model.

They also provide transportation services, managing the movement of inventory between various points in the supply chain, including coordinating shipments from vendors and customers, optimizing delivery routes, and providing real-time updates.

Some 3PLs can even help with global supply chain matters, such as import, export, and customs procedures.

With a 3PL, you can get the best rates on transportation services by leveraging their relationships with major carriers, ensuring your customer gets the fastest shipping possible.

Reverse logistics is a crucial part of the logistics and transportation process, especially when it comes to handling returns. Returns already represent a loss, but you can mitigate it by working with an experienced 3PL.

A 3PL provider will typically receive the returned product and inspect it to make sure it is in good condition. If there is an issue with the product, they will contact the customer to resolve it. Once the return is approved, the 3PL provider will then process the return by updating the inventory, and if necessary, restocking the product.

Your return rate depends on several factors, including the type of merchandise you sell. A solid 3PL partner may be able to help reduce your rate by minimizing fulfillment errors and damage in the first place.

A 3PL fulfillment provider handles reverse logistics services such as returns, repairs, refunds, and product liquidations. They will also handle the process of disposing or refurbishing the products that can’t be sold again within the compliance of any relevant regulations.

Returns can be a significant loss, but working with an experienced 3PL can help mitigate this loss. By handling returns efficiently, a 3PL provider can help you resell undamaged items to someone else or take other steps as needed.

FTL and LTL freight shipping can be a cost-effective option for businesses with large orders in predictable cycles. FTL services can help you build volume-based cost-efficiencies.

You may benefit more from LTL services if you have urgent orders to meet demand spikes or need to split orders due to supplier timing. LTL is also a good option for securing delivery of oversized items to customers.

A 3PL can include FTL and LTL services in your agreements or act as a freight broker to find the best deals and correct service level for your needs. They can also offer residential LTL freight options.

Transportation is a crucial aspect of logistics, and 3PLs play a key role in managing the movement of inventory between various points in the supply chain.

3PLs coordinate shipments from vendors and customers, optimizing delivery routes to ensure timely and efficient transportation.

Effective transportation management can make or break a business, so it's essential to partner with a reliable 3PL that can provide real-time updates on shipments.

By leveraging relationships with major carriers, 3PLs can negotiate the best rates for their clients, resulting in cost savings and faster shipping times.

This win-win situation benefits both the business and its customers, who receive their orders quickly and efficiently.

A logistics provider plays a crucial role in managing the movement of goods, products, and supplies from one place to another. They handle the day-to-day operations of a company's supply chain, freeing up time for the business to focus on its core strengths.

Logistics providers offer a range of services, including warehousing and inventory management, where they store and manage inventory on behalf of the company. They also provide transportation services, coordinating shipments and optimizing delivery routes.

A key benefit of using a logistics provider is the cost-efficiency they can bring to a company's operations. By leveraging the economies of scale of a centralized inventory and strategic distribution model, businesses can reduce their costs and improve their bottom line.

In addition to transportation and warehousing, logistics providers often offer order management services, handling order processing, picking and packing, and shipping. They may also provide customer service support and handle reverse logistics services such as returns and refunds.

By outsourcing these critical functions to a logistics provider, businesses can improve their efficiency, reduce their costs, and enhance their customer experience.

Drop shipping is a model where you don't invest in inventory, instead, you integrate your store and your supplier's order fulfillment system, and the supplier ships directly to your customer.

You can profit more with drop shipping because you don't have to hold inventory, but it also means you have less control over the shipping process.

Drop shipping can lead to longer fulfillment times because the supplier is responsible for shipping the products, which can be out of your control.

Drop shipping is an ecommerce business model where you list SKUs for sale on your online store but only purchase inventory after a customer makes a purchase.

This model requires little or no upfront capital investment, making it a great way to jump-start a new venture on a shoestring.

The key advantage of drop shipping is that you don't need to hold any inventory, which means you can start selling products without having to worry about storage or shipping costs.

Drop shipping allows you to focus on marketing and sales, while leaving the inventory management and shipping to the supplier.

You can start a drop shipping business with minimal upfront costs, as you only need to pay for the products after they've been sold.

Drop shipping is a popular choice for entrepreneurs and small business owners who want to start an online store without a large initial investment.

With drop shipping, you don't invest in inventory, but instead, you integrate your store and your supplier's order fulfillment system, and the supplier ships directly to your customer.

This model can lead to differences in order fulfillment time, with drop shipping often taking longer than 3PL services.

The profit margin can also vary significantly between the two models, with 3PL services potentially offering more control over pricing and profit margins.

Drop shipping requires less upfront investment, but it can be more challenging to manage and scale your business.

Choosing a 3PL provider is a critical step in outsourcing your fulfillment, and it's essential to carefully evaluate several key factors.

To start, choose a 3PL operating warehouse in strategic proximity to your target markets and customer base, enabling rapid and cost-efficient delivery.

Consider the 3PL's staffing, training, and retention capabilities, including any reliance on staffing agencies, as persistent industry labor shortages can impact their ability to handle order volumes.

Research the 3PL's advanced Warehouse Management System (WMS), Transportation Management System (TMS), and automation technologies to ensure they can provide fast and accurate fulfillment.

Here are some key factors to scrutinize when selecting a 3PL provider:

Take ample time to thoroughly evaluate multiple 3PLs against your current and future fulfillment requirements to lay the critical foundation for a scalable and effective partnership.

A 3PL provider manages a wide range of critical supply chain operations on behalf of client companies.

Key services 3PLs handle include warehousing and inventory management, receiving and inspecting incoming inventory, stocking items, optimizing warehouse space, and managing overall inventory levels.

They also handle order processing and management, picking and packing orders accurately, and shipping the completed orders.

Some 3PLs provide customer service support related to orders and handle reverse logistics services such as returns, repairs, refunds, and product liquidations.

A 3PL may also integrate with client ecommerce platforms, ERP systems, and other technologies to enable smooth data exchange and order handoffs.

In addition, they can help with global supply chain matters, such as import, export, and customs procedures.

By outsourcing these critical functions, clients can stay focused on their core business strengths and improve their organization's efficiency.

You need a 3PL provider to reduce the operational burdens of running supply chains. This allows you to focus your resources on growth activities.

By letting a 3PL handle inventory and logistics, you can free up time and energy to focus on identifying new customer bases or developing new product lines.

A 3PL can lower your cost of goods sold by negotiating volume discounts and increasing your profit margins. This is because you pay the wholesale price upfront, and as you buy more, you may be able to receive cost savings.

You can also gain greater cost efficiency in fulfillment by shipping orders in the same box, saving on shipping costs and improving customer experience.

With a 3PL model, you choose your order fulfillment partner to provide the level of service your customers expect, giving you cost control and more control over logistics.

Choosing a 3PL provider can be a daunting task, but with the right approach, you can find a partner that meets your business needs. First, consider the provider's geographic positioning, ensuring they have warehouses in strategic proximity to your target markets and customer base.

A good 3PL provider should have sufficient warehouse capacity, throughput, and bandwidth to handle your current order volumes, with room to scale up as volumes grow.

Research the provider's staffing, training, and retention capabilities, including any reliance on staffing agencies to supplement the workforce. This is crucial in today's industry, where labor shortages are common.

Look for advanced Warehouse Management System (WMS), Transportation Management System (TMS), and automation technologies that the provider has already invested in or has planned on their technology roadmap. These cutting-edge solutions are essential for fast, accurate fulfillment.

Consider the provider's ability to offer end-to-end, integrated services both now and into the future as your needs evolve. This is particularly important for businesses with complex logistics operations.

Evaluate the provider's expertise and process engineering specifically suited to your vertical and product types. This will ensure they can handle your unique business needs.

Clearly delineate which tasks the 3PL provider will handle, such as customer support, and which tasks will remain with your company. This will help you avoid confusion and ensure a smooth partnership.

Assess the provider's inventory, order, and performance reporting capabilities to provide supply chain visibility. This will enable you to make informed decisions about your business.

Finally, scrutinize the proposed contract terms, pricing models, and service level agreements. Take ample time to thoroughly evaluate multiple 3PL providers against your current and future fulfillment requirements to ensure a scalable and effective partnership.

Here's a summary of key considerations to evaluate when selecting a 3PL provider:

The 3PL industry is evolving rapidly, driven by changing supply chain and technology trends. Three major trends shaping the 3PL industry include:

The 3PL industry will continue to innovate and expand its capabilities to meet these demands. Large 3PLs will grow through mergers and acquisitions, while niche players will emerge to serve focused customer segments and specialized services.

Automation will play a key role in the future of 3PL fulfillment, with tasks like picking, packing, and sorting shifting from human to automated machines. This will enable human workers to focus on solving exceptions and issues that require problem-solving skills.

Here are some key statistics on the growth of the 3PL industry:

To meet the increasing demands of the 3PL industry, leading providers will need to focus on innovation and automation. By leveraging big data analytics and machine learning, 3PLs can optimize planning and execution, and provide real-time tracking data to customers.