Consumer expectations and the popularity of e-commerce is not slowing down anytime soon. Global data shows that 20.1% of retail purchases will happen online in 2025, and the pressure to streamline supply chains and deliver products quickly and accurately continues rising.
It goes without saying that an efficient order fulfilment process plays an integral role for a retail business’ success.
This is where third party logistics (3PL) providers enter the picture.
3PL companies take care of various logistics processes, and by outsourcing a critical operation like this to a third party, retailers can focus on more important things instead.
As third party logistics handle the bulk of the shipping demands across the UK and the world, it’s quite essential to understand just how these providers work and what are the strategic advances they bring.
This article will cover everything you need to know about 3PL logistics and if hiring one is the right decision for your business.
What is Third Party Logistics (3PL)?
Third party logistics companies manage the inventory and storage, picking, packing, returns, and distribution of products on behalf of other businesses. It’s the go-to strategy of many e-commerce businesses and retailers if they want to maximise their growth potential.
These 3PL logistics companies act like the middle men between retailers and their customers, and they’re in charge of making sure that products move smoothly from the warehouse to the customer’s doorstep.
The Benefits of 3PL Services for Retailers
When you’re working with a 3PL, what do you, the retailer, get out of it? Different 3PL companies have different capabilities, but all of them offer solutions that involve managing inventory, packaging, and shipping.
Ultimately, the goal is to provide reliable logistics systems that maximise profitability, but what are the main benefits?
1. Working with logistics experts
A lot of considerations go into the tiniest details of logistics operations. As a retailer or an e-commerce business owner, you have bigger things to worry about than trying to figure out all the nuts and bolts of how your products move from storage to people’s houses.
This is where 3PLs can help!
Third party logistics providers are primarily staffed by logistics professionals. 3PLs comprise teams that are knowledgeable and up-to-date with the latest industry trends and complexities.
3PL companies also have the right technologies and various connections to other marketing agencies, packaging providers, shipping companies, etc. This wealth of connections let them improve efficiency throughout their operations.
2. Expanding your reach to new markets
If you’re only selling in one part of the UK, partnering up with a 3PL easily gives you access to other regions.
Third party logistics companies have a wide network of fulfilment centres, unlike in-house fulfilment. 3PL fulfilment centres located across the country can help lessen the cost of shipping. It also means less transit time for orders.
3. Saving time and money
As your business grows, taking care of order fulfilment by yourself can easily become more expensive. You have to think about warehouse space, the equipment, the technology you need, staff training, labour costs, and liability insurance.
By partnering with a 3PL company, you don’t need to worry about buying or renting warehouse space anymore. Your business’ entire logistics operations, labour, and the technology you need can be taken care of by third party logistics services.
And instead of needing to make time for packing boxes and shipping out orders by yourself at a post office, you can save more time by entrusting that task to a 3PL.
In that way, you can make more time for the strategic side of your business.
Top 3 Signs You Need a Third Party Logistics Provider
Any online retailer, no matter the e-commerce platform, industry, or product category, has something to gain from outsourcing their order fulfilment operations. But how do you know if your business really needs one?
1. You’re running out of storage space.
As more and more people order your products, you’re going to inevitably need more inventory on hand at any given time. If you’re fulfilling customers’ orders from home, finding the storage space to keep all the products can be difficult.
A 3PL warehouse can save you from trouble. Outsourcing warehousing space and order fulfilment can help you stay organised and manage inventory in more efficient ways. And because you don’t have to worry about inventory storage limitations anymore, that means you can feel much freer about expanding your product line.
2. You want to offer faster shipping.
If you’re self-fulfilling customer orders, 2-3-day shipping can be a little expensive — especially if you’re offering expedited 2-3-day shipping by air instead of ground shipping.
When you’re working with a 3PL, expedited shipping can be more feasible and affordable, thanks to most 3PLs’ vast connections to different shipping companies.
3. You’re shipping out over 100 orders in a month.
This number is just a general rule of thumb, but if you have observed an increase in order volume and you can’t seem to keep up, that’s a sure sign that it’s time to outsource your logistics processes.
Now why would that be such a problem? Handling 3-digit orders and shipping them yourself is not generating more revenue for you. It’s just holding you back from truly growing your business. And as your business continues to grow, you’ll have to spend more time doing fulfilment and less time running your business.
Each minute spent processing new orders yourself — packing them, printing labels, heading to the post office, waiting in line to ship — is a missed opportunity to reach out to more customers, create new products, expand your offerings, or launch marketing campaigns.
How to Choose the Right 3PL Company for Your Retail Business
In choosing a 3PL company to handle your business’ order fulfilment, you need a company that you can trust wholly with your inventory. You also need to find a third party logistics service that is known for their positive customer experience, providing high customer satisfaction, and will help you grow your business.
Here are some questions you’ll want to ask.
1. Can you meet my business’ shipping requirements?
A lot of e-commerce companies today aim to offer products that “sell everywhere your customers shop.” Your business needs to meet the shipping requirements of various sales channels and should be able to cater to national and international orders.
Ask if the 3PL can meet the delivery speeds that your customers want. Do they offer nationwide shipping? Do they offer a service where they can bundle your items during a special sale? Are they willing to label items according to your marketplace’s standards?
Look for 3PLs that meet your criteria for shipping speed and locations.
2. What is your pricing structure?
Many 3PLs have complex pricing models and some also have hidden fees. It’s risky if you don’t know how much the actual fulfilment process costs. It won’t allow you to predict revenue and set aside an accurate budget.
Look for a third party logistics service with a clear and transparent pricing model. Ask about additional charges for services like inspection, receiving, work orders, and other fees that are commonly overlooked.
3. Do you have the capacity my business needs?
Review where your business is and where you want it to be. Look at how quickly your business is growing too.
As your business grows, you need a fulfilment partner that can handle your current inventory capacity and your future capacity. The 3PL you choose needs to be able to support your growth as your business scales upward.
4. Where are your warehouses located?
You need to gauge how well a 3PL can serve your customer base. A 3PL with a vast warehouse network across the country and even abroad can help you fulfil orders affordably, quickly, and on time.
5. Do you have the technology and expertise that I need?
Your business has its unique needs. Before working with a third party logistics provider, you need to understand whether their expertise can accommodate your unique products.
Do they have the right and up-to-date technology to handle your business? Do they have experience catering to products similar to yours?
6. How do you manage my business’ information and data?
Real-time data and insights is crucial to the success of your business and how well you handle inventory and order fulfilment.
When thinking about working with a 3PL service provider, you need to find out if they can provide you with a dashboard of reports that you can monitor, and if they have a dedicated system that combines data from the order fulfilment process with your sales data and your partner manufacturers.
4 Common Challenges Retail Businesses Face with 3PL Services
Eventually deciding to work with 3PLs is not without its challenges. As a retailer, there are issues that will arise when you’re outsourcing logistics, and you need to be prepared to address each of these challenges.
What exactly are these common challenges that you’ll encounter when working with third party logistics providers?
1. Lack of control on the logistics operations
Outsourcing the order fulfilment process to a 3PL means relinquishing some control over how your products are stored, handled, and shipped. If you’re used to doing these processes by yourself, this loss of control the first time around can feel unsettling, and there will be understandable concerns about the speed, quality, and proper brand representation.
To address this, make sure to choose a 3PL provider that aligns with your business’ values and quality standards. Do your due diligence through the selection process.
Visit the 3PL site and personally assess how they are handling order fulfilment. You can also talk to 3PL providers and see if you can get a service-level agreement that checks performance metrics like order accuracy, delivery times, and handling processes.
2. Communication issues
Miscommunications can happen, and when it does, it results in delayed shipments, incorrect order fulfilment, and misunderstanding about inventory levels. It can lead to customer dissatisfaction and even revenue loss down the road.
This is why clear and consistent communication is integral at all times. Set up a dedicated point of contact between your business and the 3PL provider’s team. Schedule regular meetings and check ins to make sure that both parties are still working toward the same goals, timelines, and performance expectations.
Or better yet, work with a third party logistics service provider, like Green Fulfilment, that assigns you a dedicated account manager who will give you real-time updates on order status and help you with the technology that the 3PL uses to manage your order fulfilment process efficiently.
3. Difficulties with technology and other system integrations
One of the biggest hurdles you’ll encounter is the integrating of existing systems (inventory management, e-commerce platforms, customer database, etc.) with the 3PL’s software. Lack of proper integration leads to difficulty in monitoring inventory, tracking orders, and ensuring a smooth workflow between the retailer and the 3PL.
Ask about the 3PL’s IT capabilities before working with them. Make sure that their systems are compatible with your current software infrastructure.
For instance, Green Fulfilment has a fulfilment software, called Green Portal, that serves as the retailer’s command centre. It streamlines the entire order fulfilment and warehousing operation and integrates with the retailer’s existing systems, so that it can serve as the business’ centralised product management tool.
Work closely with the 3PL’s IT team and do some thorough testing before all operations go live.
4. Handling returns management.
Taking care of product returns, exchange, or repairs can get complicated, especially for products that need special handling, disposal, or refurbishment. If it’s not managed effectively, returns can quickly cost you money and negatively affect your reputation as a seller.
Work with a 3PL that already has a streamlined process (one that covers labelling, quality control checks, and reports on return trends) for handling returns. There needs to be clear protocols in place to do returns management successfully. Transparency is also crucial for customers who want an easy way to track the status of their returns.
What Does Working with 3PL Companies Look Like?
Working with a 3PL has multiple stages. After finding the right 3PL for your business (which involves assessing warehouse locations, order fulfilment processes, gathering client feedback, carrier partners, checking e-commerce platform integrations, and learning about the pricing models), there is a bit of negotiation that needs to be done.
You and your 3PL provider need to agree on certain KPIs (key performance indicators) to make sure that you are all aligned in terms of performance expectations.
After signing the contract, there is client onboarding. This is the stage where you will be introduced to your account manager. This is also when the technical support team will help you with software and e-commerce platform integrations. As for shipping options, dimensions, weight, insurance, and customs requirements will be considered closely.
Your suppliers will now ship to the fulfilment centres, and the “goods-in” team will distribute your products to the picking locations.
When a sale happens, a picking note is generated. Picking notes are instructions for the picking team to collect the order and prepare it for packing and shipping.
Orders are arranged by courier provider at the packing station. When they’re ready for collection, the 3PL’s partner carriers will come to collect the goods.
After the orders are picked up by carriers, your customers will receive tracking notifications and information. Once they receive the goods, some consumers will have queries, and in some cases, they will return the products.
There are 3PLs that can support these processes too.
The usual key 3PL services include:
- Warehousing, where inventory is kept in strategically located warehouses.
- Order fulfilment. This involves picking, packing, and shipping customer orders.
- Inventory management, where stock levels are monitored and replenished as needed.
- Returns management is the process of handling product returns and reverse logistics processes.
The Difference Between 3PLs and 4PLs
If you’re looking into order fulfilment providers, you will encounter two common terms: 3PL and 4PL. Both terms are related to outsourcing e-commerce logistics and fulfilment services, so it’s crucial to understand the difference between the two in terms of process and purpose.
| 3PL | 4PL | |
| Order fulfilment | Focuses on warehousing, picking and packing orders, and shipping packages. | Does order fulfilment, transportation, and order technology. |
| Supply chain | Sellers work directly with 3PLs to optimise order fulfilment. | 4PLs take on a more strategic and operational role. They manage the entire supply chain and act as the single point of contact for operational support and communication with other vendors. |
| Customer communication | Sellers have direct access to 3PL’s customer service team or even have a dedicated account manager for faster issue resolution. | 4PLs manage 3PLs. But since the 4PL is the seller’s main point of contact, all communication is filtered through the 4PL to the different 3PLs, which may cause delays in resolving issues. |
Deciding whether to go with a 3PL and a 4PL comes down to what your business needs to succeed. There are benefits that 4PLs can offer that 3PLs can’t, and vice-versa.
3PL providers will take care of your order fulfilment needs, but they leave the management to you. A 4PL provider, on the other hand, takes full control of your entire logistics operations. They take on a more comprehensive management role and oversee multiple 3PLs too.
Final Thoughts: The Future of 3PL in Retail
As retailers face increasing pressure to meet customer expectations for faster shipping, flexible delivery options, and eco-friendly practices, third party logistics providers need to keep up. The future of outsourcing logistics relies on economic factors, technological factors, and consumer expectations.
Advancements in automation, AI and data analytics, and sustainability practices also create a promising future for 3PLs and retailers who are keen to stay ahead of market trends.
Grow your business efficiently and partner with a forward-thinking 3PL, like Green Fulfilment, to meet your customers’ pressing demand for speed, convenience, and sustainability.