Warehousing is a challenge for manufacturers and retailers, big and small. Finding the right space, running an order fulfillment system, and sourcing great talent are just a few of the many headaches for ops managers. And how many growing companies have the deep pockets to fund these expenses or even the in-house expertise to get a warehouse up and running?
That’s where third-party logistics providers step in. Also called 3PLs, these companies specialize in offering outsourced logistical support. When used, a 3PL can transform your business, giving you the chance to zero in on ramping up production (for manufacturers), procurement (for retailers), and your overall operations instead of getting stuck in warehouse problems. By handling the everyday management of your logistics needs, 3PLs allow you to concentrate on your strengths — expanding your business.
3PLs offer a big selection of logistics services, but warehousing remains far and away one of their most centralized offerings. If you’ve been thinking about how 3PL warehouses work, let’s take a more in-depth look at their operations.
A 3PL warehouse is owned and managed by a third party. When your goods arrive, the 3PL team will document the inbound delivery and then stock the new inventory. When orders come in, the entire physical fulfillment process – from picking an item off the shelf to readying and releasing it for shipment – will also be done by the third party.
If you watch these operations in person, it looks just like any other modern commercial warehouse. The biggest difference is behind the scenes: the 3PL is running the show, not you and your team. You’re essentially handing over the responsibility of your inventory and order fulfillment to the 3PL.
Why would retailers or manufacturers give up control of their warehousing needs? There’s a long list of reasons, from cost to scalability to efficiency. Here’s a rundown of some of the main reasons companies are considering a 3PL service:
Warehousing is expensive. First, there’s the cost of the facility itself, which can be in the millions of dollars even for a small space. Then there’s staffing and equipment, and building maintenance. These costs are unavoidable and can be prohibitive for smaller retailers or manufacturers.
3PLs already have the physical assets and people in place. While it costs money to partner with these companies, they’re offering a turn-key operation that’s tested, proven, and optimized. Once a contract is signed, a 3PL can start providing full logistics support right away. Not only is this faster than setting up internal warehouse operations from scratch, but it can also be less expensive upfront.
For small and midsize retailers or manufacturers, or any business, scaling up is hard. Along with increasing production or adding new product lines or markets, companies will need more of everything – marketing support, raw materials, and storage space for the increased output. That’s where a 3PL can help. These companies offer a range of solutions for their clients, the goal being to allow growing businesses to capitalize on their success without being held back by their logistics. You’ll likely be able to work with your 3PL to increase your warehousing capacity as your inventory and storage needs grow.
This kind of flexibility would be hard to match with an in-house operation, which would require more time, money, and energy to secure additional facilities or space beyond what’s already available. These internal barriers to scalability would be a major problem for smaller businesses with limited resources.
3PLs are the experts. They live and breathe warehousing, fulfillment, and shipping, and have long since developed the tools and processes to make it efficient. The best 3PLs also have the latest technology and digital innovations to maximize productivity and reduce warehousing costs.
Independent companies like retailers and manufacturers trying to self-manage their warehousing needs won’t match these efficiencies. Why? Because logistics is one piece of their business, not the whole business. It’s a puzzle piece within their larger supply chain, which itself is part of a larger operational matrix. But logistics is the bread and butter of 3PLs. That’s why 3PLs put serious effort into best practices, technology and streamlining warehouse operations.
For example, innovations like our tech-powered inventory management, real-time tracking, and automated fulfillment processes have quickly become integral to the services we offer at LOKI 3PL. Many of our partners rely on our advanced logistics solutions to improve order fulfillment, streamline warehousing, and enhance customer satisfaction. These industry leaders know that utilizing smart technology is key to creating more efficient operations and delivering faster, more reliable results.
Like anything else, there are downsides to working with a 3PL, and you’ll have to decide if these are worth the benefits. Here’s what we’d consider before signing up with an independent logistics provider.
When you contract with a 3PL, you’re giving up control of the logistics and inventory management of your business. And while you may not lose all control, you do lose some. The relationship is based on trust and communication.
That’s fine for many businesses, which are happy to be free of the headaches of managing a complex warehousing environment. But manufacturing companies and retailers might not want to hand over their inventory management to a third party. Maybe that’s because they have processes they want to keep in-house or it’s because of the nature of their products (although the best 3PLs can accommodate customization through various value-added service options). For companies not ready to outsource logistics to a third party, keeping it in-house is worth the added complexity and responsibility.
It’s expensive to buy, staff, and run a warehouse, and you’ll also have to pay for 3PL services. The more expensive options often come with larger trucking and distribution networks or more advanced automation and software solutions, but the monthly service costs are high.
Companies will need to weigh the initial expenses of establishing a warehouse that they run themselves against the recurring service charge of many third-party logistics (3PL) firms. For small and medium-sized retail and manufacturing firms that don’t have sufficient scale, either in orders or inventory, to warrant a 3PL regularly, that re-empowered decision is one they shouldn’t take lightly.
A 3PL service can help most types of manufacturing and retail businesses. If you are producing goods at scale, your finished product must be stored somewhere.
Investing in a logistics provider that makes the at-holding room, receiving, and delivery part of the operation work smoothly gives access to next-level warehousing strategy and technique while also buying back some of the precious corporate bandwidth that logistics consumes.
Finding a local and right-fit 3PL partner can unlock savings, efficiency, and potency that you may not have even considered- and that’s exactly where LOKI 3PL comes in. We go beyond just moving goods; we become an extension of your team. With the right logistics partner, growth stops being a headache and starts feeling like momentum.
Loki 3PL is your trusted third-party logistics (3PL) partner, handling warehousing, fulfillment, and transportation so you can focus on growing your business. We streamline supply chain operations, ensuring fast, reliable, and cost-effective logistics solutions.
