Understanding the Pros and Cons of Different Types of 3PLs and Fulfillment Providers

If you are an ecommerce brand looking to outsource your fulfillment to a third-party logistics provider, it’s important to understand that not all 3PLs offer the same services. You need to find support that meets the specific needs of your products and your brand. Once you integrate with a 3PL it can be a difficult decision to switch partners., and cumbersome to prepare and execute changing providers.  

Some 3PLs specialize in niche products while others offer generalized service for products that don’t require any custom operations. Keep in mind that different types of 3PLs are not mutually exclusive—many providers offer a combination of services.  

One way to better understand what a specific 3PL can offer is to look at their client roster. If they support products similar to yours, chances are they’ll be able to do a great job as your partner.  

Tech 3PLs

Tech 3PLs use advanced technology to help improve and enhance their fulfillment and logistics offerings. Analogous to SaaS (software as a service) companies, tech 3PLs are considered FaaS (fulfillment as a service) providing a basic service for companies to pay-as-they-go. Over the past decade, technologically-driven third-party logistics providers have become more commonplace, driven by an influx of venture capital funding into the logistics sector. The businesses are strategically built from large capital investment to fuel rapid expansion.  

As the name implies, tech 3PLs are technology first, meaning they leverage software systems, automation tools, and data analysis to optimize their operations. They use these tools to improve efficiency, accuracy, speed, and package visibility. In an industry that has relied primarily on manual and analog operations, new tech has drastically changed the face of how some brands do business.  

Tech 3PLs have been known to lack customer service, specialization, and complex projects like retail fulfillment or international shipping. Some tech 3PLs outsource their fulfillment, acting as a fourth-party logistics company (4PL). This extra layer in the supply chain can create gaps where quality and service issues arise.  

Key benefits of tech 3PLs include turn-key service and state-of-the-art software. They offer a “set-it-and-forget-it” version of fulfillment and logistics. The advanced technology system of a tech 3PL may include any of the following:  

• WMS (Warehouse Management Systems): expect tech 3PLs to have sophisticated WMS platforms to effectively track inventory and streamline systems like receiving, picking, storage and sortation for shipping.  
• OMS (Order Management System): incoming orders will be efficiently processed and tracked, often employing automated processes. Check which ecommerce platforms or retail channels your 3PL connects to, as they may not have a one-size-fits-all system. 
• Data analysis: with the use of many tech tools comes the ability to gather and analyze data to make better business decisions. Gain insights into inventory velocity, order patterns, transportation costs, and more. 
• Automation and robotics: more recently tech 3PLs have begun to employ automation technologies, such as conveyor systems, robotics, and autonomous vehicles, to streamline warehouse operations, improve efficiency, and minimize human errors.  
• Security: there are many layers of secure systems that need to be in place when managing orders—physical security of products, data security of customer personal information, plus cybersecurity to prevent unauthorized access or data breaches. 

Tech 3PLs are at the forefront of leveraging technology to optimize logistics operations, improve customer experience, and provide enhanced visibility and control over the supply chain. By harnessing the power of advanced systems and analytics, they can offer their clients more efficient and reliable logistics solutions.

Big Box 3PLs

There are many large 3PLs who offer “big-box” style logistics. These companies move very large volumes of products around the US and help big brands store, fulfill, and ship their products. They are typically asset-based (I.e., they manage their own facilities) and have a global footprint. 

Distinguishing features of big box 3PLs include:  

• High minimum order volume, making them better for medium to larger brands.  
• Multiple warehouses and distribution centers across many regions and countries, which means faster last-mile logistics including same-day and next-day shipping. 
• Limited custom fulfillment projects, making them a good fit for brands who have simpler, standardized packaging.  
• On-Demand warehousing, this means flexible and scalable warehousing solutions where brands or retailers can rent storage space on-demand—this helps even out the ebbs and flows of volume shifts during peak seasons. 
• End-to-end supply chain support, making them helpful for value-adds like procurement, inventory management, and transportation—they will help coordinate with suppliers, manage forecasting, optimize transportation routes, and more.  

Big-box logistics providers may also be helpful with larger retail support. They’ve likely done business with large marketplaces and retail outlets, so they will have the infrastructure to help brands meet the needs of these big-box sales channels.  

3PLs with Niche Operations

Some brands need support in only one aspect of their fulfillment and logistics—they choose to work with a 3PL who offers the specific services they need. These may look like a brand who is happy doing in-house fulfillment but needs partial support in one operational area, like returns.  

Here are a few types of 3PLs with niche operations:  

• Reverse logistics providers: Returns is a difficult aspect of ecommerce, and there are some 3PLs that focus on managing the flow of products back to the brand. Their services should include returns management, repairs, recycling, waste or disposal, and product recalls.  
• Warehouse and distribution centers: There are some 3PLs who only offer warehousing and distribution services. Their strength is in storage and inventory management; they often handle order fulfillment and logistics to and from other facilities.  
• Transportation providers: Some 3PLs focus primarily on shipping and product transport. They offer services like trucking, shipping, air freight, and rail transportation. They likely have great relationships with a wide variety of shipping carriers and can help negotiate competitive rates. 
• Cold chain logistics providers: For products that need temperature-controlled storage and transportation, there are 3PLs that specialize in this—they often handle perishable goods, such as food, medicine, and other temperature-sensitive products. 

Boutique 3PLs  

Some brands want specialized services. In the industry these are known as value-added services, like assembly support, branded packaging, custom kitting, or other fulfillment projects. The ecommerce market is competitive and brands who seek support from a boutique 3PL are often looking for customization that will help set them apart from the rest of their competition.  

A boutique 3PL may cater to specific industries or product categories—for example, apparel and fashion, consumer electronics, beauty and cosmetics, perishable goods, and more. These providers understand the unique requirements of their customers’ industry and tailor services accordingly. 

Benefits of working with a boutique 3PL are many, they include:  

• A more intimate level of customer service. These 3PLs aren’t likely to have a team of professionals to help answer your questions and collaborate with your operations team. No hotlines or self-serve AI chat bots here.  
• Higher levels of quality across all departments. For brands shipping high value goods, they want to make sure every detail of their product journey matches the value of their products—a boutique 3PL specializing in luxury items will have that.  
• Investment in your growth. Many boutique 3PLs don’t just take on any clients, they want to ensure their partners are aligned with their values and growth opportunities. If you find a 3PL that fits your brand needs, they’ll likely have more room for your growth and help you scale.  
• Access to your preferred sales channels. A 3PL who supports high-growth, premium brands, will likely have established relationships with the sales channels that you want—luxury retailers, or marketplaces that specialize in high-value goods.  

Finding the 3PL That Fits Your Brand Needs 

Before partnering with a 3PL to handle your fulfillment and logistics, the most important factor to consider is how their services meet your brand needs. You’ll need to look at what you need now, and also what you’ll need in a few years from now. You want a fulfillment provider you can grow and scale with. Be sure your 3PL matches the value of your products, your brand, and can integrate into your supply chain.  

At DCL Logistics we offer customized fulfillment solutions for high-growth brands. Value added services is something we’re great at, including packing, kitting, assembly, and postponement work. If you’re looking for a modern 3PL to help improve your fulfillment strategy, take a look at  the services we offer. Reach out and send us a note. We’d love to hear from you.