Third-party logistics (3PL) is a form of outsourcing in ecommerce, and it includes inventory management, warehousing, and fulfillment.

A third-party logistics provider (3PL) is a type of business that offers outsourced services to ecommerce retailers. In a 3PL, these services typically include providing warehouse space, managing your freight expenses, fulfilling your orders, and reverse logistics. 

Your 3PL will work as an extension of your brand. When they fulfill your orders, it will look as if your company prepared and sent the package. 

A 3PL charges a fee for its services. This fee might be based on every time they touch a product, or it could be based on the company’s overhead plus a margin. 

It’s a common myth that it’s cheaper to manage your fulfillment operations in-house. It can be true that in-house fulfillment is more cost-effective if your operation is either minimal and uses unpaid labor (think owner’s sweat equity) or enormous and operating efficiently. Most businesses will see cost savings over the long run with outsourcing to a 3PL. 

1. Save money on freight. A 3PL can save your company money on freight billing by bundling your shipping needs with other clients then negotiating rates with the carriers. You get economies of scale without the overhead. 
2. Reduced labor costs. When you outsource, your 3PL will handle staffing the warehouse and hiring workers to handle your specialized tasks. Because they have other clients, they can keep their staff busy working their entire shift. 
3. Industry experience and connections. Get best-in-class supply chain management when you partner with an experienced 3PL. Tap into their years of experience, connections, and highly specialized resources to make your business more efficient than ever. 
4. Improve accuracy and timeliness. Your customers want their orders received as soon as possible and 100 percent accurate. Using robust technology like Sigma Commerce, your 3PL can manage your entire supply chain quickly and accurately.
5. Professional returns processing and reviving. Often referred to as ‘reverse logistics’ in the industry, handling returns is integral to the fulfillment continuum. Expertise in reviving returns will save you money. Reviving might include inspection, repackaging, repairs, hygienic cleaning, and more. 

Your ecommerce business is growing. What are the signs you’re ready for a 3PL to step in and help?

1. You’re out of space. When you no longer have enough space to store your inventory and offer an adequate and safe environment for your staff to work, it’s time to look for a 3PL. If a lack of space is holding your business back from growth, it’s time to find a 3PL.
2. You’re shipping more orders than your staff and technology can keep up with. Some will say around 100 orders a month; for others, that might be 10,000 orders per month. Your business will greatly benefit from the technology solutions provided by a 3PL to ensure accurate and timely pick-pack-ship.
3. You want to offer your customers more! Your business is about your product. A 3PL may have several capabilities your facility (or home garage) may not have, such as options for product personalization, gift wrapping, custom/handwritten notes, or specialty product packaging. When you partner with the right 3PL, you’ll step up your fulfillment operations in ways you could have never done on your own.