Companies that produce or sell goods internationally need reliable transportation. Many businesses that historically managed shipping in-house have switched to third-party logistics providers, and nearly 90% of those already using 3PLs say these relationships are a success.
Learn more about the meaning of 3PL, how they compare to other logistics providers, the benefits of working with a 3PL and what to look for when choosing a new provider.
What Is a 3PL?
Logistics includes manufacturing or receiving goods, storing them, sending them to buyers and processing returns. When your company handles every aspect of logistics internally, you have first-party logistics, also called “in-house” or “self-managed” logistics.
A 3PL provider manages transportation and logistics for your company, including inventory, warehousing, order fulfillment, packaging, kitting and returns.
2PL vs. 3PL vs. 4PL vs. 5PL
You can outsource varying degrees of logistics functions to different providers.
- Second-party logistics: You only outsource transportation, such as hiring a trucking company.
- Third-party logistics: You outsource several logistics tasks, generally warehousing, fulfillment, shipping and customs for international freight. Some 3PL companies naturally become 4PLs as they add services.
- Fourth-party logistics: You outsource most of your supply chain management to a single point of contact. A 4PL oversees and coordinates all logistics activities, often working with multiple 3PLs to manage transportation planning, order tracking and sometimes financial services.
- Fifth-party logistics: You outsource your entire supply chain to a provider that designs, manages and optimizes complex logistics networks, often for multiple clients. 5PLs frequently have advanced tech and emphasize digitalization and automation.
3PL Benefits
Working with a 3PL company can provide many advantages.
Cost Savings
3PLs can reduce shipping, warehousing and labor costs. They let you take advantage of economies of scale by consolidating shipments and negotiating bulk rates with carriers, warehouses and suppliers. Their larger networks and increased buying power enable them to secure lower transportation and storage rates than your company could achieve independently. 3PLs pass these savings on to you, helping you control logistics expenses and improve your bottom line.
Operational Efficiency
Streamline your processes and optimize resource use with 3PLs. They have established systems and can help you implement best practices and automation in your supply chain. 3PLs can handle everything from order processing and inventory control to packaging and returns processing, reducing manual labor for your workers and minimizing errors. Digital workflows and automated paperwork speed up documentation, customs and billing, allowing your team to focus on high-value operational tasks.
Speed and Service Quality
Working with a 3PL brings faster fulfillment and improved on-time delivery. 3PLs have dedicated logistics teams, advanced tech and established shipping carrier relationships, so they can process orders and ship goods more quickly and reliably. Their experience in route optimization and inventory means faster delivery times and higher service levels, enhancing your customer satisfaction and competitive edge.
Scalability and Flexibility
3PLs can help you adapt to seasonality, growth or market changes by offering agile solutions that scale with your business. If you experience seasonal spikes, rapid growth or unexpected downturns, a 3PL can adjust warehouse space, transportation capacity and packaging to match your requirements. You don’t need to worry about maintaining the overhead of excess infrastructure or inventory all year.
Specialized Expertise
Partnering with a 3PL gives you access to logistics professionals. Their experts help you navigate the complex processes of international shipping regulations, customs requirements and carrier rules. 3PL professionals stay up to date on documentation needs, compliance regulations and best practices, reducing your risks of delays and other compliance issues. This benefit allows your team to focus on core operations.
Risk Mitigation and Resilience
Minimize disruptions and improve supply chain resilience with a 3PL. They can handle disruptions from natural disasters to geopolitical events. Their diversified networks, contingency plans and risk management procedures help you adapt to unexpected changes and maintain business continuity.
Enhanced Visibility and Control
Many 3PL platforms provide real-time tracking, reports and analytics. These tools help you monitor your supply chain, analyze performance and make informed decisions based on actual data so you can make predictions and adjust proactively rather than react reflexively.
Value-Added Services
Many 3PLs offer additional services, such as:
- Custom packaging
- Kitting or bundling
- Product assembly
- Returns processing
Challenges of Working With a 3PL
While 3PL services offer numerous advantages, you should also consider some potential disadvantages.
- Loss of control: Outsourcing automatically means you have less direct control or oversight. Transparent communication can make a 3PL provider feel like an extension of your company.
- Communication gaps: Conversely, inconsistent communication can cause misunderstandings and delays. Responsive communication and realistic expectations minimize gaps.
- Integration complexity: Integrating your processes and systems with a 3PL’s technology can take careful planning, but it’s worth the time investment.
- Hidden costs: If your service agreement isn’t specific enough, you could end up paying unexpected charges. Ensure you understand all fees, especially if you need special services, additional storage or your requirements change.
- Data security and confidentiality risks: Sharing sensitive information with a third party increases security risk. A reliable 3PL partner will have robust protocols to keep your and your customers’ data secure.
How to Pick a 3PL Provider
Avoid hidden fees, missed contract requirements and product damage by doing your homework. Here are some characteristics to look for when choosing a 3PL provider.
- Tech integration: Tracking tech should mesh with your e-commerce platform, warehouse management systems and enterprise resource planning systems.
- Warehouses: Are their warehouse locations in or near your target markets? Remember, coverage is more critical than having more or larger facilities.
- Modes of transportation: Do they offer multiple modes of transportation?
- Industry-specific experience: If you’re shipping electronics, medical devices or heat-sensitive products, you need a 3PL provider with experience keeping these goods safe.
- Customer support: Do you get a dedicated account manager? Does the contract include protocols for resolving issues? Evaluate their responsiveness — your provider should feel like an extension of your team.
Why Choose EMO Trans?
EMO Trans offers a robust global network and comprehensive, multimodal transportation options, allowing you to move your goods efficiently by air, sea or land. Our customs expertise and dedicated compliance support ensure your products stay on schedule, even across international borders. You can easily integrate our technology with your current tools, from e-commerce platforms and WMSs to ERP systems and EDI transactions.
Our advanced platform provides real-time visibility and data, while our service agreements ensure reliability and accountability. We understand the complexities of global logistics, and our experts will do everything possible to simplify your responsibilities. With hundreds of offices on six continents, we have the experience, network and infrastructure to deliver exceptional services to businesses of all sizes worldwide.
We’ll work closely with you to identify your goals and build a partnership that helps your business succeed. Request a quote today to start creating a more efficient and effective supply chain.