Sure you could order a pair of gloves online, instead of at a retail store. But the pair of gloves would have to physically reach you. So issues of warehousing, inventory, packing, shipping, and tracking, would still have to be taken care of.
In a retail store, you can simply hand over the merchandise to the customer. But you have to spread your tentacles much wider with ecommerce. You, the ecommerce business, are responsible for ensuring delivery. And in case the goods are returned, you have to manage the whole new world of reverse logistics.
Sure there are many advantages of ecommerce. But logistics is one of the areas where complexity increases as one moves from physical retail to ecommerce. That makes a compelling case for hiring a third party logistics provider.
What Is Third Party Logistics?
If you outsource your logistics requirements to a service provider, that service provider is called a third party logistics provider. In industry parlance, these service providers are also referred to as 3PL.
One of the basic strengths of the ecommerce paradigm is that participants get to perform roles that they specialize in. As a result, outsourcing to a third party logistics organization fits well with the ecommerce ecosystem.
What Services Does a 3PL Provide?
A full service 3PL should take care of all your logistics requirements. Their services would include:
- Supply Chain Management
A well-oiled supply chain is at the heart of a successful ecommerce business. So if your inbound freight delivery requirements are taken care of, then the 3PL has done a good job.
- Warehousing
Even though an ecommerce merchant may not have a physical store, physical goods need to be stored at some location. A 3PL will typically take care of your warehousing requirements. It will invest in the space and technology required to efficiently run a warehouse. One expects that warehousing by a 3PL will be more cost efficient, as it is able to spread its overheads over multiple clients.
- Consolidation Service
Ecommerce merchants often send many small goods to the same location. This is a situation where the whole can be lesser than the sum of the parts, i.e., if we consolidate all the small goods into one shipment, the shipping charges could be substantially lowered. A service provider sending several small packages as one large package is referred to as a consolidation service, also known as freight consolidation or cargo consolidation. It is one of the many services provided by a third party logistics provider.
- Order Fulfillment
If an ecommerce business has not fulfilled the order, it has done nothing. And order fulfillment is not just about making sure that the goods reach the buyer. The goods that reach the customer must be the right goods; they must reach on time, and in good condition. All of this may sound obvious, but ecommerce is plagued with erroneous order fulfillment.
A good third party logistics service provider would be able to take care of your order fulfillment requirements.
Some of the common reasons to choose a third party logistics provider are:
- Flexibility and Scalability
Not all ecommerce businesses are Amazon.com. Several of them need to start small. Setting up one's own logistics division may require too much fixed expense. A third party logistics provider could give you the flexibility of starting small, yet scaling up when needed.
- Efficiency and Specialization
If you are good at selling to customers then that is what you should spend all your energies doing. Only when you specialize in your function will you be efficient at it.
- Technology
Like all other domains of business, logistics is ever-evolving. Hardware, software, and equipment keeps upgrading all the time. A good third party logistics provider would keep up with the times, as logistics is their core business.
