3PL Warehousing & Logistics Guide | How It Works & Benefits
So you've been struggling with supply chain inefficiencies?
Managing inventory, order fulfilment, and shipping can be overwhelming, and that’s where a 3PL (Third-Party Logistics) provider comes in. Handling logistics through delegating a bulk of back-end processes allows you to focus on big-picture initiatives like expanding into new markets or launching new products. In today’s fast-paced world, it is imperative to do everything possible in order to streamline operations, cut costs, and improve efficiency to stay competitive.
So, whether you're an e-commerce entrepreneur, a manufacturer, or a global retailer, understanding how 3PL services work can help significantly improve your logistics strategy.
What is 3PL & Why Does It Matter?
When outsourcing, everything from inventory storage, order fulfilment, and transportation to distribution would be handled by a specialised provider. Whether it is during a geopolitical conflict, another pandemic or economic uncertainty, 3PL helps mitigate any negative effects. Furthermore, 3PL offers value-added services like customised packaging, handling any return issues, and improving supply chain efficiency.
In layman's terms, the key functions are,
In layman's terms, the key functions are,
- Warehousing & Storage – Storing inventory in fulfilment centres or distribution hubs.
- Inventory Management – Tracking stock levels, replenishment, and demand forecasting.
- Order Fulfilment – Picking, packing, and shipping products efficiently.
- Transportation & Freight Management – Coordinating shipping through carriers for domestic and international deliveries.
- Reverse Logistics – Handling returns, exchanges, and disposal of unsellable goods.
- Value-Added Services – Custom packaging, labelling, kitting, and product bundling.
How 3PL Works: Step-by-Step Process
Now that you know what it is, how exactly does it work in each stage? Below is an outline of the step-by-step breakdown of how third-party logistics work, from receiving inventory to handling returns.
1) Receiving Your Goods
The chosen 3PL company receives your products from your domestic or overseas supplier or your manufacturing facility. Upon arrival, the hired company inspects, sorts, and logs the inventory into its Warehouse Management System (WMS). When all products are accounted for and it’s made sure to be up to stringent quality control standards, the next step is to make sure inventory levels are updated in real time. This allows businesses to track stock remotely and ensure seamless order fulfilment to keep your customers happy!
2) Managing your Inventory
The 3PL warehouse then takes those goods and strategically places them in the most efficient manner for quick-paced picking and packing according to its Warehouse Management Guide. Advanced inventory tracking systems can help monitor stock levels, preventing stockouts or overstocking, and making sure your customers get their goods as fast as possible! Some 3PL providers can also leverage automated demand forecasting, analysing sales trends to recommend optimal stock replenishment and help avoid unnecessary storage costs.
Need better inventory tracking? Click here to learn about our inventory reconciliation services.
3) Fulfilling the order
3PL uses software integration to connect with your online platform or marketplace. So when an order is placed 3PL’s warehouse team can then retrieve the items from storage. The product is then packaged in the most suitable material to ensure product safety and minimal costs to the company. 3PL can also add customised labelling or branding to further promote your business!
4) Shipping to your happy customers
3PL then ships the orders through a selected carrier, such as FedEx, UPS, DHL, or a regional courier. The system then generates a tracking number, which updates in an inventory management system allowing tracking by you or your customers. The product will then be shipped depending on your policies or selected shipping options!
5) Returns
For whatever case in the possibility of a return the 3PL manages the reverse logistics process. Returns are inspected to determine whether the items can be restocked, refurbished, or discarded based on predefined criteria set by your business. By streamlining returns, 3PL providers help your losses to a minimum, maintain inventory accuracy, and keep your customers happy!
1) Receiving Your Goods
The chosen 3PL company receives your products from your domestic or overseas supplier or your manufacturing facility. Upon arrival, the hired company inspects, sorts, and logs the inventory into its Warehouse Management System (WMS). When all products are accounted for and it’s made sure to be up to stringent quality control standards, the next step is to make sure inventory levels are updated in real time. This allows businesses to track stock remotely and ensure seamless order fulfilment to keep your customers happy!
2) Managing your Inventory
The 3PL warehouse then takes those goods and strategically places them in the most efficient manner for quick-paced picking and packing according to its Warehouse Management Guide. Advanced inventory tracking systems can help monitor stock levels, preventing stockouts or overstocking, and making sure your customers get their goods as fast as possible! Some 3PL providers can also leverage automated demand forecasting, analysing sales trends to recommend optimal stock replenishment and help avoid unnecessary storage costs.
Need better inventory tracking? Click here to learn about our inventory reconciliation services.
3) Fulfilling the order
3PL uses software integration to connect with your online platform or marketplace. So when an order is placed 3PL’s warehouse team can then retrieve the items from storage. The product is then packaged in the most suitable material to ensure product safety and minimal costs to the company. 3PL can also add customised labelling or branding to further promote your business!
4) Shipping to your happy customers
3PL then ships the orders through a selected carrier, such as FedEx, UPS, DHL, or a regional courier. The system then generates a tracking number, which updates in an inventory management system allowing tracking by you or your customers. The product will then be shipped depending on your policies or selected shipping options!
5) Returns
For whatever case in the possibility of a return the 3PL manages the reverse logistics process. Returns are inspected to determine whether the items can be restocked, refurbished, or discarded based on predefined criteria set by your business. By streamlining returns, 3PL providers help your losses to a minimum, maintain inventory accuracy, and keep your customers happy!
Why You Should Use a 3PL
1) Invest where it counts!
Your business could eliminate the need to invest in unnecessary infrastructure, equipment and personnel. Furthermore, by leveraging offered packages with bulk shipping discounts, transportation costs can be reduced, further improving your bottom line. These extra funds can be diverted wherever needed, whether that would be expanding the brand or making a new product, you can now focus on what’s important for your business!
2) Leveraging the Experience and Adapting
Through experience,3PL companies can handle various issues efficiently. It could be anything from supply chain disruptions to taking advantage of new growth opportunities as fast as possible! Instead of fretting when your business has a boom you can instead take advantage of the existing distribution network without having to invest in infrastructure.
Using 3PL you can get access to valuable insights and guidance on supply chain issues, allowing you to make informed decisions and gain a competitive advantage.
3) Lightning Quick Order Fulfillment
3PL services keep up to date with regulatory compliance for international or domestic shipping ensuring no unnecessary delays are caused. This in combination with strategically placed fulfilment centres can help offer next-day or faster shipping times to your customers. This with real-time tracking can reduce any possible headaches for you and your customers!
Your business could eliminate the need to invest in unnecessary infrastructure, equipment and personnel. Furthermore, by leveraging offered packages with bulk shipping discounts, transportation costs can be reduced, further improving your bottom line. These extra funds can be diverted wherever needed, whether that would be expanding the brand or making a new product, you can now focus on what’s important for your business!
2) Leveraging the Experience and Adapting
Through experience,3PL companies can handle various issues efficiently. It could be anything from supply chain disruptions to taking advantage of new growth opportunities as fast as possible! Instead of fretting when your business has a boom you can instead take advantage of the existing distribution network without having to invest in infrastructure.
Using 3PL you can get access to valuable insights and guidance on supply chain issues, allowing you to make informed decisions and gain a competitive advantage.
3) Lightning Quick Order Fulfillment
3PL services keep up to date with regulatory compliance for international or domestic shipping ensuring no unnecessary delays are caused. This in combination with strategically placed fulfilment centres can help offer next-day or faster shipping times to your customers. This with real-time tracking can reduce any possible headaches for you and your customers!
What’s Changing Going Forward in 3PL?
- AI Integration: Using AI inventory tracking tools can help reduce human error and optimise warehouse space efficiency as much as possible! AI robotic picking systems can also help improve order accuracy and fulfil orders as fast as possible!
- Becoming Green: As being sustainable is growing in importance more 3PL businesses are adopting green practices like carbon-neutral shipping and eco-friendly packaging. Warehouses are also implementing solar energy and electric vehicle fleets to reduce emissions to save our planet!
How To Choose The Best Service For You?
If you are looking to choose a one-stop product sourcing and logistics solution, you should consider a few factors.
Location, Location, Location!
The location of a 3PL’s warehouses can significantly impact shipping times and costs. If you sell internationally, having a provider with multiple fulfilment centres in key regions is important in reducing shipping costs and transit times.
Industry Support
Some 3PL providers specialise in certain industries, such as fashion, electronics, or consumer goods. If your business requires customised solutions like specialised packaging, fragile item handling, or sustainable fulfilment, choose a 3PL with relevant experience ensuring you and your customers are satisfied!
Scaling With Demand
As your business grows, your logistics provider should be able to scale with you. Whether you’re launching a new product, expanding into new markets, or dealing with seasonal spikes in demand, your 3PL should be able to offer you a diverse range of options ranging from flexible storage, and shipping, to fulfillment.
Avoid Unnecessary Costs
Every 3PL has different pricing models, which may include charges for storage, picking, packing, and shipping. You should discuss possible fees, such as minimum order volumes or penalties for slow-moving inventory. Pricing structures should be compared to ensure that the 3PL offers cost-effective solutions that align best with your budget.
Location, Location, Location!
The location of a 3PL’s warehouses can significantly impact shipping times and costs. If you sell internationally, having a provider with multiple fulfilment centres in key regions is important in reducing shipping costs and transit times.
Industry Support
Some 3PL providers specialise in certain industries, such as fashion, electronics, or consumer goods. If your business requires customised solutions like specialised packaging, fragile item handling, or sustainable fulfilment, choose a 3PL with relevant experience ensuring you and your customers are satisfied!
Scaling With Demand
As your business grows, your logistics provider should be able to scale with you. Whether you’re launching a new product, expanding into new markets, or dealing with seasonal spikes in demand, your 3PL should be able to offer you a diverse range of options ranging from flexible storage, and shipping, to fulfillment.
Avoid Unnecessary Costs
Every 3PL has different pricing models, which may include charges for storage, picking, packing, and shipping. You should discuss possible fees, such as minimum order volumes or penalties for slow-moving inventory. Pricing structures should be compared to ensure that the 3PL offers cost-effective solutions that align best with your budget.
So, What Is Next?
At the end of the day, outsourcing your logistics to a trusted 3PL provider is more than just a cost-saving move, it’s a strategic decision that can drive efficiency, improve customer satisfaction, and scale your business globally. By finding the right 3PL partner, you can streamline operations, mitigate risks, and focus on expanding into new markets or launching innovative products.
Here at The Sourcing Co., we go beyond traditional 3PL services. Our end-to-end product sourcing solutions ensure quality control, seamless manufacturing, and efficient global logistics—all under one roof. With an on-the-ground presence in China, we provide direct supplier oversight, reducing risks and ensuring that your supply chain runs smoothly.
Whether you’re looking to optimise your logistics, source high-quality products, or enhance supply chain management. Contact us today to simplify the process and help your business succeed.
Here at The Sourcing Co., we go beyond traditional 3PL services. Our end-to-end product sourcing solutions ensure quality control, seamless manufacturing, and efficient global logistics—all under one roof. With an on-the-ground presence in China, we provide direct supplier oversight, reducing risks and ensuring that your supply chain runs smoothly.
Whether you’re looking to optimise your logistics, source high-quality products, or enhance supply chain management. Contact us today to simplify the process and help your business succeed.