Third Party Logistics (3PL) 101: What CPG Brands Need to Know

Your business is growing, orders are rolling in, and now it’s time to get those products out the door. This is where a Third Party Logistics (3PL) provider comes into play, helping with everything from storage to shipping so you can focus on scaling.

Key Services 3PLs Offer

3PLs can handle various logistics needs: warehousing, freight, and returns processing, to name a few. Some specialize in bulk shipping, while others focus on e-commerce. Finding the right 3PL means matching their strengths to your specific needs.

Assessing Your Business Needs

Consider what logistics requirements are essential for your brand:

Volume & Order Size: Do you need to ship in bulk, or are orders small and frequent?

Special Packaging Needs: Products like liquids or glass require extra care.

Inventory Flexibility: Seasonal spikes or growing demand may need more storage space.

Returns Handling: A must if you run a subscription or high-return model.

Answering these questions will help narrow down your 3PL options to those best equipped to manage your unique logistics.

Key 3PL Cost Factors

Costs can vary widely, so it’s important to know the basic pricing elements of a 3PL:

Pick & Pack Fees: Costs for pulling items from storage, packaging, and preparing them for shipment.

Receiving Fees: Charges for processing incoming inventory; bulk shipments of the same SKU often cost less.

Storage Fees: Typically based on shelf or pallet space. E-commerce 3PLs may charge more for storage.

Request a sample invoice to get a clear picture of these costs and avoid surprises.

Common Pitfalls to Avoid

Shipping Costs

Shipping is often the largest fulfillment expense, sometimes accounting for 60-75% of costs. Beware of hidden fees like fuel surcharges, and remember that large shipping volumes usually reduce per-unit costs.

Tip: Focus on negotiating favorable rates for outbound shipping and track all expenses closely.

Tech Integration

A 3PL without compatible systems can create inefficiencies, requiring manual data entry that drains time and increases errors.

Tip: Ensure your 3PL integrates well with your existing systems to streamline orders, inventory, and customer updates.

Inventory Management

As your sales grow, your inventory will shrink. Avoid stockouts by working with a 3PL that offers real-time inventory reporting and supports efficient reordering.

Tip: Look for a 3PL with detailed inventory tracking to stay on top of stock levels.

Packaging Issues

A damaged package or too much packing material can frustrate customers. A good 3PL will guide you on packaging options that protect your product and reduce waste.

Tip: Choose a 3PL that advises on packaging solutions to keep costs down and protect your brand’s reputation.

Industry-Specific Needs

Many 3PLs have industry specialties. For CPG, a 3PL should understand your product’s specific handling requirements, regulations, and growth needs.

Tip: Find a logistics partner who knows your industry and can help your brand navigate unique logistics challenges.

Final Thoughts

The right 3PL partnership can help your brand scale effectively by handling the complexities of storage and fulfillment. Choose a 3PL that not only understands logistics but also aligns with your brand’s needs and long-term growth plans. With the right support, you can streamline fulfillment and focus on building your brand.