3PL Warehousing Guide

Published: August 15, 2023 | Last Updated: April 14, 2024

3PL warehousing is an essential service with many business benefits, but what exactly is it, and why does it matter?

From definition to benefits and everything in between – here’s all about 3PL warehousing.

What is 3PL Warehousing?

3PL warehousing; as the name suggests, refers to warehousing services provided by a 3rd party logistics (3PL) company.

But that definition is not very helpful unless we know what 3PL is, what warehousing is, and the relationship between the two. Let’s dig in.

3PL Defined

A 3PL, or Third Party Logistics provider, is an external company that manages all or a significant part of the logistics requirements for other businesses. Some of these services include picking, packing, warehousing, and transport.

3PL’s offer a comprehensive suite of services that allow businesses to outsource various aspects of their supply chain operations. This can range from a specific task, like transportation or warehousing, to a full set of logistics services. By leveraging the expertise and infrastructure of a 3PL, businesses can achieve cost savings, increased efficiency, and enhanced flexibility in their supply chain operations.

This is in contrast to 1PL (first party logistics). 1PL is when the company does their logistics in-house.

Let’s use the fictional company, Charlotte’s Australian Cupcakes as an example. Charlotte needs to ship in pallets of flour. She can either do this herself with her own truck and employees, or she can hire a logistics company. If she shipped the flour in-house, it would be 1PL. If she hired a logistics company, it would be 3PL.

So 3PL simply refers to the outsourcing of all or part of logistics elements to a 3rd party. That 3rd party is referred to as a 3PL provider.  

Warehousing Defined

Warehousing is an element of logistics that refers to the handling and management of goods within a facility. It encompasses various activities including receiving goods, receiving orders, order fulfillment, storage, and distribution to retailers or end consumers.

Warehousing is a crucial component of the logistics and supply chain process, ensuring products are stored and managed safely and efficiently while awaiting transportation or sale.

3PL Warehousing Defined

Using these definitions, a more in-depth definition of 3PL warehousing is: The handling and management of goods within a warehouse facility by a third party logistics provider.

What Services Do 3PL Warehousing Companies Provide? 

3PL (Third Party Logistics) warehousing companies offer a comprehensive suite of services that extend beyond just the storage of goods. Here are some of the key services that 3PL warehousing companies typically provide:

1. Storage: Providing space to store goods, whether on pallets, in bins, or through bulk storage. This includes both short-term and long-term storage solutions.
2. Inventory Management: Tracking products throughout their lifecycle in the warehouse, from intake to dispatch, using systems that might include barcode scanning, RFID, and other technologies.
3. Order Fulfilment: Picking, packing, and processing orders to be shipped to the end customer or retailer.
4. Cross-Docking: Receiving products and immediately preparing them for outbound shipping without storing them long-term.
5. Value-Added Services: These can include kitting (assembling multiple items into ready-to-ship kits), product labeling, packaging, and quality inspections.
6. Transportation: Many 3PLs also offer transportation services, managing the movement of goods to and from the warehouse and to the end destination.
7. Reverse Logistics: Handling returns and exchanges efficiently.
8. Distribution: Directly managing the distribution channels for getting products to retailers or other endpoints.
9. Freight Forwarding: Acting as an intermediary between the shipper and freight transportation services, negotiating freight rates, and booking cargo space.
10. Customs Brokerage: Assisting with the import and export of goods, ensuring that they clear customs smoothly.
11. Integrated IT Systems: Offering clients real-time visibility into inventory levels, order status, and other crucial data through Warehouse Management Systems (WMS) and other platforms.
12. Temperature-Controlled Storage: Providing specialised storage for goods that require certain temperature or humidity conditions, such as perishables or pharmaceuticals.

In essence, 3PL warehousing companies provide integrated logistics solutions that cater to the varied needs of their clients, helping streamline and optimise supply chain operations.

3PL Warehousing Benefits

Utilising 3PL warehousing offers several advantages over 1PL warehousing (in-house or self-managed warehousing). Here are some of the key benefits:

1. Cost Savings: Outsourcing to a 3PL can often result in significant savings. This is due to the 3PL’s ability to achieve economies of scale and their expertise in logistics. Companies can avoid capital expenses associated with buying or leasing warehouse space, equipment, and technology.
2. Flexibility and Scalability: 3PLs can easily scale storage space and services up or down based on the business’s needs. This is especially beneficial for businesses with seasonal fluctuations.
3. Expertise: 3PL providers specialise in logistics and bring industry best practices to the table. This expertise can lead to more efficient operations and faster problem-solving.
4. Advanced Technology: Many 3PLs have invested in state-of-the-art warehouse management systems (WMS), advanced automation systems leveraging robotics and AI, and other technologies, giving clients access to advanced tools without the high upfront costs.
5. Focus on Core Competencies: By outsourcing warehousing, businesses can concentrate on their primary functions, whether it’s product development, marketing, sales, or other areas.
6. Risk Reduction: 3PLs can help reduce risks associated with logistics. They often have better safety and compliance protocols in place and can manage issues like product recalls more efficiently. They have extensive insurance coverage, and in the event of any problems like theft or damage then they will bear all or some of the responsibility.
7. Geographical Advantage: 3PLs often have multiple warehouse locations, allowing businesses to store products closer to their end customers, resulting in faster shipping times and reduced transportation costs.
8. Value-added Services: Many 3PLs offer additional services like kitting, packaging, and labeling that might be resource-intensive for businesses to manage in-house.
9. Continuous Improvement: Given the competitive nature of the logistics industry, 3PLs are often at the forefront of innovations in warehousing and transportation. This can lead to continuous improvements in operations.
10. Integrated Services: Beyond warehousing, many 3PLs offer integrated logistics services, including transportation, freight forwarding, and customs brokerage. This can simplify supply chain management for businesses.

In contrast, 1PL or in-house warehousing requires businesses to manage, invest in, and continuously update their warehousing operations. While this can give companies more direct control, it can also tie up resources and limit flexibility.

Finding a 3PL Warehousing Company

So you’re interested in reaping the many benefits of 3PL warehousing, but not sure where to find a good provider that. you can trust. Here are some suggestions to guide your decision-making process:

1. Research Their Reputation: Check online reviews, ask for references, and tap into your network to gather feedback on the company’s performance and reliability.
2. Evaluate Their Expertise: Consider how long they’ve been in the business and the breadth of services they offer. Experience matters in logistics.
3. Inspect Their Technology: A good 3PL will employ modern warehouse management systems and offer real-time tracking capabilities.
4. Consider Location: Ideally, the 3PL’s facilities should be strategically located near your key customer bases or distribution points.
5. Assess Their Scalability: Ensure they can adapt to your needs, whether it’s increasing storage space during peak seasons or offering additional services.
6. Ask About Security: Delve into the measures they have in place to ensure the safety and security of your products.
7. Understand Their Pricing: Transparent and competitive pricing is crucial. Be sure to understand all fees, including any potential hidden costs.
8. Visit Their Facility: If possible, tour their warehouse. This can give you a first-hand look at their operations and gauge the professionalism of their team.
9. Evaluate Their Communication: Effective communication is key. You want a partner who is responsive and keeps you informed every step of the way.

These are all important considerations for finding. a 3PL provider that aligns with your business goals and needs.

At Freight Assist, we have been at the forefront of providing 3PL warehousing services since 2012. With a nationwide presence and warehouse locations in Sydney, Melbourne, and Brisbane; we understand the intricacies of logistics and are dedicated to offering top-tier solutions tailored to our clients’ unique requirements.

3PL Warehousing: An Opportunity For Enhanced Efficiency

3PL warehousing is simply the outsourcing of warehousing services to a 3rd party warehousing specialist. The benefits of going 3PL are clear: cost savings, flexibility, peace of mind, and expertise.

To find a good 3PL warehousing provider, look for a company with a strong reputation, technological capabilities, strategic locations, and the ability to adapt to your business’s fluctuations.

Start your search for a 3PL warehousing provider by looking no further than the authors of this post. We are Freight Assist,  Australia’s leader in transport and logistics since 2012. Let us show you how we can deliver cost savings and peace of mind with leading 3PL warehousing and distribution services. Click here to start the conversation with one of our dedicated 3PL specialists.