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3rd Party Shipping: What You Should Know

a roadmap to get started with third party shipping

  • Written by Paola Olivera
  • Published on December 6, 2023
  • Time to read 9 minutes

If you’re reading this, you’re probably seeking efficient solutions to streamline your shipping and logistics processes for your e-commerce brand. One such solution gaining popularity is “third party shipping.” In this blog post, we’ll define third party shipping, explore its pros and cons, explain how it works, and provide you with a roadmap to get started with third party shipping for your business.

What is Third Party Shipping?

At its core, 3rd party shipping, often referred to as third-party logistics or 3PL, is an intelligent outsourcing strategy that enables businesses to delegate their shipping and logistics tasks to external service providers. Instead of handling everything in-house, companies partner with specialized logistics experts to manage various aspects of their supply chain.

How 3rd Party Shipping Works

1. Engagement: The journey begins when a business embraces the benefits of third party shipping. They agree with a third-party logistics provider (3PL) outlining the scope of the required services.

2. Inventory Management: Once the partnership is in place, the 3PL may manage inventory, including storing and organizing products in their warehouses or distribution centers. This frees up valuable space and time for the business.

3. Order Processing: When a customer orders, the information is relayed to the 3PL. They meticulously handle order processing, which includes tasks like picking the ordered items, packing them securely, and labeling packages for shipping.

4. Shipping Selection: It’s time to choose the most suitable shipping method and carrier. The 3PL provider’s expertise comes into play here, ensuring efficient, cost-effective, and reliable shipping options.

5. Transportation: The selected carrier takes charge of the products, transporting them directly to the customer’s location or a distribution center for further processing. The 3PL provider manages this intricate dance of moving goods.

6. Tracking and Visibility: Throughout this journey, all parties involved – the 3PL provider, the business, and sometimes even the end customer – can access real-time tracking and visibility data. This ensures everyone stays informed about the shipment’s progress.

7. Delivery: Finally, the products reach their destination, whether a customer’s doorstep, a retail store, or another specified location. The 3PL’s choice of carriers ensures efficient and reliable delivery.

8. Returns Management: In the event of returns or exchanges, the 3PL can manage the entire reverse logistics process. They inspect returned products, restock inventory, and process refunds or replacements, taking the hassle off the business’s plate.

Now that we’ve examined how 3rd party shipping works let’s dive into its pros and cons.

Third Party Shipping Pros

1. Cost Efficiency: By partnering with a 3PL, businesses can often access bulk shipping rates and cost-saving opportunities that may not be available when shipping independently.

2. Expertise and Efficiency: 3PL providers are logistics experts with the knowledge and resources to streamline shipping processes, leading to faster and more reliable deliveries.

3. Scalability: Third party shipping can adapt to fluctuations in demand, ensuring businesses can meet customer needs during peak seasons without overstretching their resources.

4. Focus on Core Competencies: Outsourcing shipping allows businesses to concentrate on their core activities, like product development, marketing, and customer service, without the burden of managing logistics.

5. Access to Technology: Many 3PL providers leverage advanced logistics and inventory management software to provide real-time data and analytics, helping businesses make informed decisions.

6. Global Reach: For international shipping, 3PL providers bring valuable experience, networks, and knowledge of cross-border logistics, including customs and regulations.

7. Reduced Risk and Liability: 3PL providers often assume some shipping risks and liabilities, protecting businesses from potential losses due to lost or damaged goods.

8. Improved Customer Experience: Efficient shipping, accurate tracking, and timely deliveries contribute to a positive customer experience, increasing customer satisfaction and loyalty.

9. Time Savings: Managing shipping in-house can be time-consuming. Outsourcing to a 3PL provider frees time and resources for other vital business activities.

10. Environmental Benefits: Some 3PL providers prioritize eco-friendly shipping options, helping businesses reduce their carbon footprint and meet sustainability goals.

While the advantages of third party shipping are compelling, it’s essential to consider the potential drawbacks.

A graphic illustration shows a list of the pros and cons of 3rd party shipping.

3rd Shipping Cons

1. Reduced Control: Outsourcing shipping means relinquishing some control over the process, which can concern businesses that prefer hands-on management.

2. Limited Customization: Standardized processes may not accommodate highly customized or unique shipping requirements, which can challenge some businesses.

3. Communication Challenges: Coordinating with a third-party provider can sometimes lead to communication challenges, mainly if there are differences in time zones, languages, or communication protocols.

4. Dependency: Relying on a third-party provider can create dependency. Disruptions in the provider’s operations can impact the business’s shipping and supply chain.

5. Cost Concerns: While third-party providers can offer cost savings, the costs associated with outsourcing logistics can be significant. Businesses should ensure that it remains cost-effective.

6. Data Security and Privacy: Sharing sensitive data with a third party can pose data security and privacy risks. Businesses must ensure that their 3PL provider has robust security measures in place.

7. Quality Control: Maintaining consistent quality control over products and packaging can be challenging when outsourcing logistics. Close monitoring is essential to meet brand standards.

8. Limited Visibility: Businesses may have reduced visibility and control over the shipping process compared to handling it in-house, which can impact customer service.

9. Potential for Misalignment: Misalignment in goals and priorities between the business and the 3PL provider can lead to conflicts and challenges.

10. Loss of Direct Customer Interaction: Outsourcing shipping can reduce direct customer engagement, impacting the customer experience.

Having weighed the pros and cons, you might be wondering where to start if you consider implementing third-party shipping in your business.

Getting Started

1. Assess Your Needs: Begin by assessing your business’s specific shipping and logistics needs. Identify areas where third party shipping can provide the most significant benefits.

2. Research 3PL Providers: Research and compile a list of reputable 3PL providers. Look for providers with a strong track record, industry expertise, and services that align with your needs.

3. Cost Analysis: Request quotes from potential 3PL providers and conduct a thorough cost analysis to determine the potential savings and the overall cost-effectiveness of outsourcing.

4. Customization: Ensure that the 3PL provider can accommodate your unique requirements, such as branding, packaging, and special handling needs.

5. Technology Integration: Evaluate the compatibility of the 3PL provider’s technology and systems with your existing infrastructure, ensuring seamless integration.

6. Contract Review: Carefully review the contract terms, including service level agreements (SLAs), pricing structures, and any hidden fees. Seek legal counsel if necessary.

7. Transition Planning: If transitioning from in-house logistics or switching providers, develop a clear transition plan to minimize disruptions.

8. Continuous Monitoring: After partnering with a 3PL provider, continuously monitor their performance against agreed-upon metrics and KPIs.

9. Customer Experience: Ensure that the 3PL provider maintains or enhances the service and satisfaction your customers expect.

10. Contingency Planning: Have contingency plans for potential disruptions or emergencies affecting your shipping operations.

Conclusion

In conclusion, 3rd party shipping, with its cost efficiencies, expertise, and scalability, can significantly benefit your business. However, it’s essential to weigh these advantages against potential drawbacks and carefully select a reputable 3PL provider that aligns with your specific needs and goals. With thorough research, clear communication, and ongoing monitoring, you can optimize your shipping and logistics processes and enhance your overall business operations.

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