In the past two years, the logistics industry has experienced many transformative changes. These shifts are driven by technological advancements, changing customer behavior, and increased delivery traffic.
The global 3PL industry is composed for substantial growth. Research indicate it will exceed $1.3 trillion by 2026 and touch $1.75 trillion by 2027, with an average annual growth rate (CAGR) of nearly 8%.
Embarking on a 3PL warehousing business venture requires a thorough understanding of market trends, opportunities, and the competitive landscape.
This blog will offer comprehensive insights into the core functions of a 3PL warehousing and essential steps to follow for starting a 3PL business and exploring its vast opportunities.
3 core functions when starting a 3PL
The 3PL business model is revolving around inventory control and managing 3PL warehousing operations for other businesses. While the specific services and capabilities of a 3PL can vary, there are three core functions that most 3PLs offer. Let’s take a closer look at each of these fundamental operations.
Inbound inventory operations: A 3PL assists customers in transferring and managing products from manufacturers or wholesalers to the 3PL’s warehouses. This involves scheduling inbound inventory and replenishment orders to ensure customers maintain appropriate stock levels. Some 3PL warehousing services solely receive inventory, while others also help create orders and manage inbound inventory.
At MacMillan SCG, we provide data and support to help customers restock at optimal times, reducing the risk of stockouts and revenue loss. Our inbound teams swiftly offload goods and scan them into inventory software, or WMS systems giving you real-time visibility of available items at each location (read more about choosing the right WMS for your business)
3PL warehousing and storage: One of the most important functions 3PL warehousing includes is storing your inventory properly.
Top-tier 3PLs use scanning and automation tools to maintain order accurate, real-time inventory counts to be accessible 24/7. MacMillan as a top tier 3PL warehousing provider specializes in space accommodation and handling product specifications (e.g., hazardous materials, temperature-controlled goods). Additionally, 3PLs work diligently to minimize shrinkage, optimizing both their customers and their own operations.
Order fulfillment: The final component of standard 3PL warehousing service is order fulfillment. This involves picking products from stored inventory, packing them according to customized orders, and shipping these packages to the end customer. Effective order fulfillment relies on the 3PL’s strong relationships with carriers and local partners to ensure efficient distribution.
To minimize costs, it is important to work with multiple carriers and maintain multiple locations. Ensuring order accuracy is a critical responsibility of the 3PL. At MacMillan, we believe in taking accountability for our services, which is why we cover the cost of any damaged orders.
A fulfillment network such as Ship Bob with its most noticeable 2-Day Express shipping program which allows you to meet the high expectations set by Amazon, significantly reducing shipping costs for customers and speeds up last-mile delivery.
Business Opportunity in starting a 3PL Business
Starting a 3PL business offers significant benefits, the ease of online shopping, heightened by the pandemic, led to an 11.16% growth in ecommerce in 2023. This surge is driving global demand for 3PL warehousing services, as customers increasingly expect timely and accurate deliveries.
Many smaller merchants, unable to manage their own logistics operations, are outsourcing their distribution and fulfillment operations to 3PL warehousing partners to remain competitive. In response, 3PL companies are making substantial changes in supply chain management, focusing on reducing delivery costs, cutting-edge technologies, and enhancing overall responsiveness. These new adaptations are key metrics for growth in the 3PL industry.
Steps for starting a 3PL business
Before starting a 3PL business, there are several factors to consider, here are the steps a business must follow:
PART 1- EVALUATION AND SETUP
- Deciding 3PL type and specialization:
To start a 3PL business, it’s crucial to understand industry verticals and decide on a specialization. A 3PL can focus on a specific product category, such as retail, food, apparel, or large appliances, or they can operate as an ecommerce fulfillment provider. For instance, a 3PL operating in electronics fulfillment can also handle apparel due to the similar processes involved.
The chosen product specialization will form the warehouse layout, as the storage needs for apparel differs from those for appliances. This specialization also determines the appropriate pallet configurations. Additionally, 3PLs must select relevant sales channels that align with their specialized product class to maximize efficiency and market reach.
- Selecting the Location:
The geographic location of the warehouse is a critical consideration for a 3PL owner. When selecting a warehouse location, the 3PL must prioritize proximity to where products are stored and ensure it is centrally located to 3PL warehousing activities. This strategic positioning helps the 3PL achieve fulfillment and reduce shipping costs by minimizing the distance for receiving and dispatching products.
- Setting up 3PL warehousing space:
Each 3PL warehouse has its storage capacity tailored to the specific product category it serves. However, there are fundamental principles that 3PL warehouse managers should consider for effective layout design:
For inventory movement, each warehouse should include several key areas:
- Reserve storage area
- Carton and product picking area
- Packing and dispatch area
- Cross-dock area
- Empty pallet and packaging area
- MHE charging area
- Shipping
PART-2: TECHNOLOGICAL OPERATIONS
Modern warehouse management software is essential for meeting the unique needs of customers and efficiently managing 3PL warehousing and fulfillment operations, ultimately enhancing the customer experience. Such as, MacMillan offering an integrated WMS and TMS for your systems which will optimize your business processes. Find out more.
- The right 3PL software:
The right software helps to optimize fulfillment operations seamlessly for modern 3PL warehousing.
MANAGE 3PL WAREHOUSING OPERATIONS:
Implementing 3PL WMS optimizes both inbound and outbound operations by providing flexibility and real-time data visibility. It optimizes inbound processes, reducing dock-to-stock time with almost zero shrinkage, and manages the inbound workflow processes, including receiving, quality control, and put away. The WMS software enables strategies, reduces cost, automates picking, packing, sorting, and shipping processes.
MANAGING CLIENT OPERATIONS:
Once clients are onboarded, the right software will integrate with online marketplaces, sales channels, and systems. It will streamline the 3PL warehousing process by centralizing data related to orders, shipments, inventory tracking and more.
CONFIGURE CUSTOMISED WORKFLOW:
The 3PL warehousing system uses a multi-tenant approach, allowing clients to log in, track their inventory levels, orders, fulfillment data, and set reminders for specific events. This system will offer enhanced control and visibility.
3PL BILLING:
Deciding on a pricing strategy for each customer is a crucial task for a 3PL business owner. Several factors need to be considered before setting the price, including:
- Geographical area
- Size of warehouse
- Seasonal variation
- In/out volumes
- Return ratio
- Market charges
- Government regulations
Using system software can help in the 3PL billing process by automatic tracking and consumption rates while generating invoices for each customer based on the following variables:
- Inbound orders
- Pallet storage (per day)
- Total hours
- Packaging/labelling material used
- Out bound orders
- Shipping costs
- 3PL warehousing devices
Handheld scanners, such as barcode, and RFID scanners, enhance efficiency and reduce errors in inventory, receiving, picking, location management, and shipping processes. Weighing and dimensioning scales help 3PLs comply with weight limits and unit requirements. Additionally, 3PLs use printers for pallet and shipping labels. A 3PL WMS integrates all these hardware devices, generates shipping labels, and provides order tracking for both the 3PL and its customers.
Can MacMillan solve my needs?
It’s worth exploring if MacMillan can meet your business needs and alleviate your current challenges. The best way to find out is to get in touch with us and explain your requirements.
MacMillan SCG offers a robust fulfillment and warehousing platform made for modern 3PLs. The platform supports onboarding multiple clients and managing their inbound, outbound, and storage operations. It also configures workflows at the warehouse, product while integrating necessary sales channels.
Additionally, comprehensive 3PL billing module allows for the creation of highly configurable billing profiles, tracking activity and automatic invoice generation on a monthly or weekly basis.
Key Takeaways
The logistics industry has seen transformative changes over the past years, driven by technological advancements, evolving customer behavior.
This blog has provided comprehensive insights into the essentials of launching a 3PL business, highlighting core operations such as inbound inventory operations, warehousing and storage, and order fulfillment.
MacMillan SCG offers a robust platform designed to support modern 3PLs in managing their operations efficiently and making it a valuable partner for businesses looking to enhance their logistics capabilities.
