What is a 3PL Inventory System? Learn the Basics of How a 3PL Helps eCommerce

What is a 3PL Inventory System? Learn the Basics of How a 3PL Helps eCommerce

What is a 3PL Inventory System

Third-Party Logistics (3PL) companies partner with eCommerce businesses ranging from scrappy startups to Fortune 500 companies to handle everything from warehousing and inventory management to fulfilling customer orders quickly, efficiently, and accurately

Why?  3PL companies can handle these supply chain functions far more efficiently and with less expense than most businesses are able to manage in-house.

With the rise of eCommerce and omnichannel order fulfillment, outsourcing logistics management to 3PLs keeps small and mid-sized businesses competitive with the same customer service and shipping options offered by their biggest rivals – often for a lower cost than keeping the same operations in-house.

This is important because 24% of customers have canceled orders due to slow shipping.

Additionally, working with a 3PL can save eCommerce businesses time and money while allowing them to free up resources to focus on more growth-oriented tasks, including product development and marketing.

But what exactly is a 3PL inventory system? And how does a 3PL help eCommerce businesses thrive?

Let’s explore.

What is a 3PL Inventory System?

A 3PL inventory system (also called a Warehouse Management System, or WMS) is a software system that both tracks and manages nearly all warehouse activities, including:

  • Management of physical inventory
  • Picking, packing, and processing returns 
  • Warehouse picking pattern optimization 
  • Labeling, shipping, and tracking orders, and
  • Managing customer returns 

A 3PL inventory system can easily track the inventory of each client or customer, including stock availability, pallet ID numbers to serial numbers, and expiration dates.   The logistics company’s eCommerce customers can access this data in real-time, enabling them to stay on top of their warehouse, inventory, and shipping operations as easily as if they’d managed logistics in-house, 

A 3PL inventory system increases both productivity and efficiency of warehouse operations by increasing the speed of work routines via streamlining picking, packing, shipping, and reverse logistics procedures.

This software can effectively manage eCommerce operations and integrations with shopping cart platforms as well. 3PL inventory systems are designed to communicate with customers and vendors, in addition to integrating easily with a wide variety of software systems and platforms.

How Does 3PL Software Help eCommerce Businesses?

3PL software helps eCommerce businesses by managing important supply chain operations, allowing them to focus on growing their businesses. Logistics companies perform a variety of functions, including: 

  • Scheduling and Receiving Your Inventory to the 3PL Warehouse 
  • Sorting, Managing, and Accounting for all Inventory
  • Picking, Packing, and Shipping Products to Customers Efficiently
  • Managing Returns and Returning Them to Inventory
  • Providing Real-time Visibility of Inventory and Shipping Operations
  • Integrating With Shopping Cart Platforms
  • Assembling Products if Necessary 
  • Managing Subscription Boxes
  • Keeping Costs Low

Cost Reduction

Because 3PLs manage logistics for multiple businesses, they wield more leverage with freight companies than individual shippers do. This enables logistics companies to negotiate pricing based on a higher volume and order frequency. 

Additionally, a 3PL inventory system can determine the most efficient warehouse setup and picking pattern, which reduces unnecessary labor and saves money. 

Companies utilizing 3PLs to manage either all or part of their supply chain free up capital to invest in growing and developing their businesses.

Customer Experience

Because the inventory system has the capability to track payments and orders from beginning to end, customers are able to track their shipments in real-time and make returns with ease. The 3PL software also makes it possible for companies to offer their customers shipping options, including same-day, overnight, and two-day shipping.

Increased Transparency

3PL inventory systems not only perform a wide array of functions but also provide up-to-the-moment reporting on them as well.  

From inventory reports to the fully-customized KPIs (Key Performance Indicators) that matter most to your clients, the 3PL inventory system gives you the data you need to keep your business running smoothly and efficiently.

Real-Time Visibility

The logistics company’s eCommerce customers can access their data in real-time, enabling them to stay on top of their warehouse, inventory, and shipping operations as easily as if they’d managed logistics in-house. 

 

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What to Look for When Choosing a 3PL Software

Selecting the right 3PL provider is key because order fulfillment is one of the most crucial aspects of any eCommerce business. Here are five features you should look for when choosing a 3PL inventory system.

Up-to-date Technology

A 3PL’s technology should provide analytics that helps customers spot trends, bottlenecks, and opportunities, including insight into reducing shipment speed and shipping costs. 

Advanced technology can provide data to help your company make better decisions, including: 

  • Where to store inventory
  • Shipping route optimization
  • Purchasing and production timelines, and
  • Optimizing warehouse stock levels

Direct Integration

Once an eCommerce store is integrated with the logistics company’s inventory system, the 3PL fulfillment center will pick, pack, and ship customer items as soon as each order is placed automatically. 

Real-Time Shipping Status Updates for Customers

Integration between the eCommerce sales channel and the 3PL’s inventory system helps keep customers in the loop on the status of their shipments. 

Once an order has shipped, the 3PL’s software automatically provides the information to the eCommerce platform, which forwards tracking information to customers. 

The ability to provide customers with up-to-date shipping data reduces the workload for customer service and increases customer satisfaction.

Scalability

eCommerce companies often outsource their logistics to 3PLs because they have outgrown their capability to manage these operations in-house. 

3PL inventory management software can be customized and scaled to suit the needs of each individual client. This creates hassle-free transitions when businesses grow, expand their markets, add new inventory, or handle fluctuating demands throughout the year.

Advanced Billing Functions

Without an effective 3PL inventory system, billing can become a complex endeavor for logistics companies providing services for multiple clients. Warehouse management software provides accurate and advanced billing to streamline operations and increase functionality.

Final Thoughts

Today’s eCommerce companies need full-service logistics companies to meet their customers’ shipping and customer service expectations. Choosing the right 3PL inventory system can increase efficiency, decrease costs, boost customer satisfaction, and help eCommerce businesses thrive. 

To get started with an advanced 3PL inventory system, check out SkuVault.

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