Growth is exciting. As an executive, you likely smile when you review the latest sales figures and see those revenue lines trending up and to the right. Your business is thriving. However, behind the scenes, your operations team is panicking, trying to fulfill all those international orders with limited warehouse space and staff.
Growing pains are a good problem to have, but a problem nonetheless. After all, fulfilling orders is the lifeblood of any business. As you scale, supply chain logistics only get more complex. What if you could snap your fingers and make it someone else's problem?
Well, you can with third-party logistics (3PL).
This article will explore third-party logistics warehousing, how it works, who can benefit from it, and how to implement it in your business.
What is Third-Party Logistics (3PL) Warehousing ?
To understand 3PL, we first need to understand inbound and outbound logistics. Inbound logistics refers to everything required to receive, store, and distribute materials for production.
Outbound logistics covers fulfilling customer orders and transporting them to the final destination. 3PL acts as a bridge between these two critical functions.
Specifically, third-party logistics warehousing entails:
- Inventory management: Keeping track of your stock levels and ensuring you always have the right products.
- Warehousing: Providing a safe and secure place to store your goods until they're ready to be shipped out.
- Picking and packing: Selecting the right products for each order and packaging them carefully.
- Labeling: Making sure each package has the correct shipping labels and documentation.
- Order fulfillment: Processing and getting orders out the door and on their way to your customers.
As you can see, contract warehousing is different than 3PL warehousing. With contract warehousing, a business leases a warehouse or storage space, and that's it. Meanwhile, with 3PL warehousing, the provider handles all aspects of logistics and fulfillment.
How it Works
Here's a simple scenario to illustrate the concept. Your manufacturing business ships palettes of finished products to a 3PL warehouse in France.
The 3PL company logs these products into its 3PL warehouse management system and stores them on racks. When a customer orders from you (direct B2B sale, e-commerce website, a distributor ordering from you) , the 3PL provider picks the items, packs them, and ships the package to your customer.
You get to focus on production, marketing, and all the critical parts of running your business.
3PL in Europe : For What Kind of Businesses ?
3PL can work wonders for businesses across various industries. Yet some common characteristics make certain companies prime candidates. Many high-growth companies can benefit from distribution warehouse services :
- Rapidly scaling organizations that lack warehouse space
- Businesses without enough staff to handle logistics
- Companies that lack supply chain expertise
- Organizations that want to reduce operational costs
If your organization fits that profile, third-party logistics warehousing likely offers an attractive solution. Some industries that often turn to 3PL include manufacturing, pharmaceuticals, construction, and retail. But really, if you've got products to sell and customers to serve, 3PL could be a viable solution.
The Strategic Importance of Third-Party Logistics Warehousing
Outsourcing logistics to a specialized 3PL provider offers numerous benefits. The following all support business growth, flexibility, and expansion into new markets.
Cost Savings
With 3PL, you don't invest precious capital into European warehousing infrastructure and staffing. Instead, you pay one predictable fee to your 3PL partner to handle it all. Their supply chain expertise means fewer costly disruptions down the line. It's like having an entire logistics division for the price of one monthly invoice.
Find out how to stock, invoice and ship to your B2B customers in France, Switzerland and Belgium with our support.
Expertise Access
Lean on specialists who focus 100% on logistics rather than trying to figure it out yourself. 3PLs continually refine routes and workflows to reduce shipping expenses. They also stay on top of international regulations and nuances that even catch seasoned exporters off guard.
Focus on Core Competencies
Let's face it—you didn't start your business to spend all day packing boxes and tracking shipments. With supply chain operations handled, your sales, marketing, and product teams finally have more time to focus on what they do best—accelerating top-line growth.
Faster Shipping
Faster delivery means happier customers. 3PLs know all the tricks when it comes to fast fulfillment. They know how to route orders optimally and pack shipments efficiently. Their warehouse teams pick, pack, and ship orders by whatever carrier gets them there fastest.
Return Management
Processing returns in-house requires manually checking items back into inventory, coordinating refunds, determining restock eligibility—the list goes on. 3PLs handle the entire cycle from port to warehouse to reshelving or disposal—one less headache for you !
Choosing Between 3PL Warehousing vs. In-House Logistics
Despite all these benefits, running an in-house warehousing operation still seems like an attractive option for many. And it does allow for more control and flexibility. For example, you can offer special services like made-to-order products. Last-minute changes are also easier to accommodate.
However, building out a logistics function requires finding (and likely expanding) warehouse space. You may have to install racks and loading docks and continually optimize layouts and workflows. You must also recruit and manage staff to handle receiving, storing, picking, packing, and shipping inventory. As your business fluctuates, you may end up with excess warehouse infrastructure and employees.
Things become much more complex, which can hamper your ability to scale. Of course, there are cases where in-house makes sense. But for most businesses, 3PL benefits will outweigh those of in-house logistics.
--> more about the advantages and disadvantages of 3PL and In House logistics here.
How to Select a 3PL Provider
Choosing between third-party logistics companies in Europe is like choosing any other business partner. You want someone reliable, experienced, and ready to go the extra mile. Finding such a provider requires looking into various criteria.
Years of Experience
Look for an established company with years of experience across multiple industries. These companies are more likely to have robust systems and processes to handle rapid changes.
Services
Some 3PLs offer bare-bones warehousing and logistics in Europe, while others come with a wider array of services.
Think about what services are must-haves for your business. Do you need real-time tracking for your customers? Help with returns? Think about these and other nice-to-have perks like transparency tools for real-time inventory visibility.
For global businesses, seek 3PLs with an international warehouse footprint matching your expansion plans. This allows you to scale into new markets seamlessly.
Customer Service
Remember, your 3PL provider is more than just a vendor—they're an extension of your team. Since you'll be working closely together, you want a partner who values communication and responsiveness. Treat initial meetings as a litmus test for the relationship.
Tech Stack
In case you haven't heard, warehousing in Europe has gone high-tech. Look for warehouses augmented with automation, robotics, and analytics to drive efficiency. Evaluate their warehouse management system (WMS) and inventory management capabilities carefully. These serve as your source of truth for your warehousing fulfillment service in Europe.
Understanding the Differences: 3PL vs 4PL Logistics
A relatively new concept, fourth-party logistics (4PL), has emerged recently. Like 3PL, 4PL providers manage your supply chain operations through a mix of owned assets and contracted services.
However, they provide an additional layer of oversight and orchestration across all components while optimizing and reengineering processes. They'll handle everything from long-term strategy to coordinating multiple logistics providers.
For example, a 4PL provider for an e-commerce company might coordinate efforts across multiple 3PL warehouses, carriers, and technology systems to provide the highest level of service at the lowest cost.
--> more details on the differences between 3PL and 4PL, here.
Implementing 3PL Warehousing in Your Business
Transitioning logistics operations from in-house management to a 3PL partner requires planning. Here's a step-by-step guide to making it happen :
Step 1: Understand the "Why"
Document concrete reasons for the move, like cost reductions or scalability challenges. Define key performance indicators to track success after implementation.
Step 2 : Appoint a Project Manager
Transitioning to 3PL is a big undertaking, so you'll want to put someone in charge of overseeing the process. Choose a project manager who knows your supply chain inside and out - they'll be the key liaison between your team and your new 3PL partner.
Step 3 : Calculate New Costs and Compare
Before you sign on the dotted line, take some time to crunch the numbers. Conduct an objective cost analysis that factors in expenses like inventory storage, staffing, and freight. Compare these numbers to a 3PL quote to determine ROI.
Step 4 : Ship Inventory to the 3PL Warehouse
Once you've chosen a 3PL provider, it's time to get your products where they need to go. Work with your project manager and 3PL partner to coordinate the logistics of shipping your inventory to their warehouse. Provide them with product information like SKUs, dimensions, and storage requirements.
Step 5 : Integrate Systems
Integrate your e-commerce or logistics platform or ERP system with the 3PL's warehouse management software. Doing so will allow for seamless communication and real-time updates on inventory levels, order status, and more. Place test orders to confirm the integration works properly.
Addressing Common Concerns and Challenges
As with any big business decision, moving to 3PL has its fair share of concerns and challenges. While third-party logistics warehousing delivers immense strategic value, some common concerns include :
- Lack of Control: Shift operations to an external provider can feel disconcerting. Define key metrics and service levels in the 3PL agreement and schedule periodic reviews.
- Data and Privacy Issues: Conduct due security and compliance checks on the 3PL's systems and facility access policies. Data privacy clauses should be included in the legal agreement.
- Central Point of Failure: What happens if your 3PL provider drops the ball? It's a valid concern. Consider diversification by using multiple 3PL warehouses across geographic regions to mitigate risk. Also, ensure your 3PL contract has robust SLAs. Use a 3PL contract template to prevent any legal headaches later.
Conclusion
Third-party logistics warehousing serves as a powerful catalyst for business growth. It allows you to scale rapidly without logistics bottlenecks while controlling fulfillment costs. Leveraging 3PL warehouse experts enables your team to focus on accelerating core strategic initiatives rather than becoming mired in supply chain complexities.
As you explore implementing 3PL in your organization, we're here to help. We're experts in the Europe third party logistics market. We can assess your unique needs, help you find the perfect 3PL partner in Europe, and guide you through every step of the process.
