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The global market for 3PL is expected to reach a value of 1.26 trillion by 2026, according to an Orbis Research report. Already, 90 percent of Fortune 500 companies are using one or more 3PL services, according to a Supply Chain Dive report. So, what is 3PL, and why is it growing so quickly?
According to Shopify, companies can use 3PL to outsource their distribution and fulfillment. 3PL is sometimes thought of as simply warehousing, but these types of companies often provide a wide variety of services. 3PL companies can also offer product development, material sourcing, manufacturing scheduling, product inspection, packaging, and more. Companies can tailor 3PL services to their needs.
What companies provide 3PL services? According to Logistics Management, the list of top players includes DHL Supply Chain North America, XPO Logistics, Ryder Supply Chain Solutions, and FedEx Supply Chain. But the next big name in 3PL services could be Amazon—depending on who you ask.
According to Transport Topics, Amazon has a network of hundreds of warehouses, distribution facilities, sorting hubs, and fulfillment centers. That network stores and ships Amazon’s products and also serves a large number of third-party sellers.
New companies are also rising to offer their services in the in-demand 3PL space. For example, the Seattle startup Flexe is styling itself as the “Airbnb of warehousing,” according to GeekWire. Flexe does not own any warehouses. Instead, it helps companies find space in existing warehouses, according to Curbed. According to the Curbed report, the company operates in more than 1,000 warehouses across the country and has a client list with names big (think Walmart and Casper) and small (think new startups). According to Forbes, other startups are competing with Flex to provide on-demand warehousing.
Many companies opt for 3PL services because it is less expensive than doing it in-house. But how much does this service actually cost? It all depends on what you want the third-party service to do for your company. According to Fit Small Business, a fulfillment price structure may include fees for stock receiving, storage, packaging, and shipping. Customers also have the option to pay for other services, such as specialty kitting. Keep in mind that some 3PL companies require a warehousing commitment for a set period, according to Kanban Logistics. Other companies have per-project pricing.
When does it make sense to use 3PL services? Volume is an important metric to consider when answering this question. For example, Shopify suggests considering a 3PL service if your company fulfills more than 10 to 20 daily orders. If 3PL makes sense for your business, a wide variety of companies and pricing plans are available to research and select.
When selecting a 3PL service, consider the flexibility of the warehouse space. For example, industrial curtain walls can serve as warehouse dividers, allowing the organization and separation of goods. These curtains (like the ones offered by AmCraft) can be removed and rearranged to fit the needs of the facility’s clients.
