A 3PL warehouse is a facility owned and used by a third-party logistics company to store different stocks for a short or long time. Aside from storage and inventory management, this facility may also work as a fulfilment and distribution centre, where orders can be packed and shipped to customers.
For years, 3PLs have been valuable to many businesses, particularly e-commerce ones. With their warehousing and other services, company owners can outsource their logistics needs while improving their supply chain operations and saving money.
In this article, we explain further what 3PL warehouses are and their functions and benefits. Moreover, we highlight which industries should consider 3PL warehousing and how much this service costs.
What is a 3PL Warehouse and How Does It Work?
The team managing a 3PL warehouse receives and stocks fresh inventory that arrives. This third-party logistics provider also completes any order that may come in, picking items from the shelf and packing them for delivery.
A 3PL warehouse works like any commercial storage facility. The only difference is that the business owner does not own or operate it. Instead, they look for a 3PL partner with warehousing services and entrust their inventory management and order fulfilment needs to them.
What are the Services Offered by a 3PL Warehouse?
The services of a 3PL warehouse include:
- Inventory Exchange: the 3PL provider receives stocks from businesses and suppliers.
- Inventory Management: the warehouse staff stores received goods in pallets, racks, shelves, or bins.
- Order Processing: business partners send orders to the 3PL team for picking, packing, and shipping.
- Shipping: warehouse staff ships orders to customers.
Value-added warehousing services
Aside from the traditional functions, 3PL warehouses also offer value-added services. There are usually solutions to meet the specific supply chain needs of clients. Here are some examples:
- Kitting and assembly service bundles individual items into one package or kit, allowing businesses to customise their product offerings, meet market demands, and respond to trends.
- Green or custom packaging solutions protect goods in sustainable materials to enhance branding and overall customer experience.
- Returns management helps handle product returns to minimise operational impact and financial losses.
- Quality control implements testing or inspections to ensure products leaving the warehouse meet the standards or industry regulations.
What are the Benefits of a 3PL Warehouse?
There are several ways how a 3PL warehouse can help your business operations. Cost saving is one of its primary benefits. Access to a third-party warehouse reduces your need for infrastructure, transport, packaging, and labour investments.
Most 3PLs also have a warehouse management system, reducing your need to spend on expensive technology.
A 3PL warehouse also improves shipping efficiency. When delivery is on time, customer experience improves, too. Then, once your small business grows, expansion is faster since you only need to lease a bigger warehouse space.
With a 3PL warehouse, your staff does not have to worry about inventory storage and movement and can focus on other business functions.
What Businesses Should Consider Using 3PL Warehouses?
Major retailers, suppliers, distributors, and similar industries making or handling goods at scale can benefit from 3PL warehouses.
Businesses in food and beverage, pharmaceutical, and other operations with perishable items should also consider third-party providers.
However, aside from business type, 3PL warehouses may also help clients who need to address the following:
- increased inventory volume
- distribution network expansion or upgrade
- long-term production and cost optimization
How Much Do 3PL Warehousing Services Cost?
Warehousing service fees vary, depending on the pricing model of your chosen 3PL provider. A considerable portion of the cost usually goes to storage and order fulfilment. The size of your product and inventory and the handling time needed can also affect the service price.
So, be sure to understand the costs associated with 3PL warehousing. Then, align them with your actual business needs to make the most of your investment.
Remember that low-priced 3PL warehouse services are not always the best. It’s better to balance the cost with service quality when choosing your 3PL partner.
Solve Logistics Hurdles with a 3PL Warehouse Provider
With the sudden surge in e-commerce operations, 3PL warehousing services have been in demand more than ever. Companies now see these as an effective solution for efficient delivery of goods, inventory management, cost control, and business growth.
Despite the benefits, outsourcing your warehousing needs is still an investment. Working with the wrong 3PL company will only do more harm than good.
So, choose wisely. Pick a flexible warehouse partner that listens and understands your business needs.
If you are looking for one, Effective Logistics can help. Our team has the expertise, connections, and years of experience to help manage your warehousing operations. Call us on 03 8376 3300 so we can start tailoring logistics arrangements that fit your business.
