What is a 3PL Warehouse?
What is a 3PL warehouse? A 3PL is a third-party logistics company that helps other companies manage their supply chain by handling the storage and delivery of items. This can include warehousing, distribution, and transportation services. They are often located near ports or major highway systems to provide easy access for the companies they serve. Outsourcing operations to a 3PL warehouse can consolidate costs and increase savings and efficiency. Learn more about the 3PL warehouse meaning and how to get the most out of using a third-party logistics company.
Understanding the 3PL Warehouse Meaning
Understanding what is a 3PL warehouse makes more sense when you look at who benefits most from these third-party services.
Small Business
Self-fulfilling orders when first starting an ecommerce business is manageable. However, when business starts to “boom,” you may find you’re spending too much time packing and fulfilling orders. That can slow your business’s growth and hold it back from scaling. Running out of space in your home, apartment, or small office can also create problems, but a 3PL provides storage and shipping solutions.
Medium-Sized Business
Businesses that have grown to the next level often also outgrow their space. Finding a new warehouse requires hiring more staff or getting outside help. Neither is easy or cheap, but working with the right 3PL can save time and money. A third-party warehouse helps identify your customers’ location, develop a demand forecast, and scale quickly and effortlessly.
Large Business
Large and publicly traded businesses utilize 3PL warehouses to track inventory across multiple channels in one place. Larger businesses enable a 3PL company to do what they do best–store and ship your products at lower costs, resulting in increased revenue.
What is a 3PL Warehouse, and Why Should They Be Used?
When asking, “What is a 3PL warehouse?” it's essential to look at why a company might use one to understand the 3PL warehouse meaning.
- Save Time and Money - Eliminate the need for warehousing, hiring additional labor, transportation, and installing various operating systems.
- Market Expansion - Establish a supply chain in markets where you are not present. 3PLs often have warehouses in various regions.
- Resource Network - A 3PL has access to a provider network. Supply chains can be expanded quickly and effortlessly, making operations more cost-effective.
- Scalability and Flexibility - A 3PL can increase space, labor, and transportation based on inventory needs.
- Continuous Improvement - A 3PL works with manufacturers to ensure the satisfaction of their customers by offering fast and accurate delivery times.
Where Does a 3PL Warehouse Operate?
Although small to medium-sized businesses may reside in one space or a limited area, a 3PL may not. 3PLs typically have numerous locations, which enables smaller companies to scale faster with the help of an outsourcing company. Due to a 3PL’s supply chain in several markets, small to medium-sized businesses can meet their customers’ needs much faster than without a 3PL. On the other hand, large and publicly traded enterprises have customers worldwide, and partnering with a 3PL enables them to serve their customers regardless of their location.
When to Use a 3PL Warehouse?
To know when to use a 3PL warehouse, you must know all the costs associated with handling, storing, and delivering your products. A 3PL is most useful when…
- Your business ships over 100 orders per month. With 100 orders comes a lot of responsibility. Consider the costs of storing, picking, packing, and shipping those orders. You may find it's more cost-effective to use a 3PL.
- You run out of inventory space. If your crowded room is creating stress or leading to errors, you may find it's more practical to use a 3PL.
- You offer 2-day shipping. You may need to offer quicker shipping to compete with the big brands. If you want to provide faster shipping to your customers, consider working with a 3PL.
Now that you know the 3PL warehouse meaning and the best use cases for businesses when it comes to outsourcing, you can decide whether or not working with a shipping and fulfillment company is right for you.