Oct 18, 2022 10 Min READ

A 3PL’s Guide to Order Management

10 Min READ
A 3PL’s Guide to Order Management

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Order fulfillment encompasses the entire process of a third-party logistics (3PL) provider.  It runs the gamut from receiving an order to shipping the order and everything in between.

During order processing, the 3PL team locates the item in the warehouse, packages it, and then carries out the process of shipping it either via a service like FedEx, UPS, or USPS, or by loading it into a truck and shipping it as freight to its destination.

The entire order management process might seem cut and dry, but it’s not. A lot of snags and roadblocks can occur.  If not properly handled, a 3PL can experience many pain points such as slow turnaround times, problems during order surges, errors, a lack of communication, and high financial costs.

In this complete guide to order management, we will examine the entire process. We’ll explore order management solutions to help streamline the system for greater efficiency such as adding order management software (OMS) and developing an omnichannel fulfillment strategy.

What is a 3PL?

A 3PL will either own or lease its warehouse storage and transportation fleet to provide its services. 3PLs supply logistics services to effectively manage all aspects of a customer’s logistics and shipping operations and ensure accurate fulfillment of orders from the early inventory stage all the way to the transportation process. Retail companies, ecommerce brands, and other businesses pass on their order management and fulfillment to a 3PL so they can focus on other aspects of their organization.

The first third-party supply chain models appeared in the 1970s. At that time, the intermodal marketing companies would receive packaged loads and take them to the railroads for delivery.

Things have changed since those early days. Now, the order management process has become highly modernized with the use of 3PL software to streamline every step and ensure accuracy and speed. Businesses of all sizes now turn to 3PLs. In fact, 90% of Fortune 500 companies outsource their logistics processes to 3PLs.

Features of 3PL Order Management

Not all 3PLs are created equal. Some utilize more advanced inventory management interfaces and technology than others. However, to succeed in the highly competitive environment of third-party logistics, a 3PL must focus on a well-designed user interface.

Many 3PLs need to integrate with ecommerce platforms. A 3PL fulfills orders for their ecommerce customers so they’ll need to ensure they have the best order management solutions to accurately receive information and data about all incoming orders to quickly start fulfilling each one.

Automatic order fulfillment is not a luxury but a necessity. Even today, some 3PLs still try to manually handle operations, but the future looks unpromising for such third-party logistics providers. 3PLs with automation and order management solutions offer far greater speed and efficiency. Any 3PL clinging to manual processes simply cannot keep up or compete.

Order Management Services Provided by a 3PL

A 3PL customizes and scales the order management process to meet each customer’s needs. Each step along the path has one goal in sight–to fulfill the order from start to finish in a speedy and accurate manner. Order management fulfillment includes the following processes: 

Warehouse Storage

A 3PL offers ample warehouse space to store the inventory of customers. A 3PL improves order management efficiency with the following innovative tech features from a cloud-based warehouse management system (WMS) platform:

  • Inventory tracking of all stock in the warehouse from anywhere via the cloud
  • Directed putaway to store all inbound inventory in a rapid manner
  • Full automation of all orders with API/EDI integrations and shopping carts
  • Fully dedicated API and EDI support teams
  • Accurate mobile scanning of all warehouse inventory

Inventory Management

Using WMS solutions, a 3PL can warehouse all products and sync everything in real time to keep track of inventory, meet demand/surges, and avoid any dip in supply.

Inventory Distribution

Many 3PLs manage multiple warehouse locations and then distribute the items through many fulfillment centers to different parts of the country or globe to ensure faster shipment to the end consumer.  

Effective 3PL WMS software helps streamline the warehouse by relying on innovative technology for all processes:

  • Receiving
  • Putaway
  • Inventory Management
  • Picking
  • Packing
  • Shipping
  • Returns

By automating manual processes via technology, order management becomes far more efficient. A 3PL can effectively ship orders in a day without increasing staff. They can also meet any increase in order volume when needed such as during peak season.

Picking and Packing

Picking and packing involves the collection of orders throughout the warehouse followed by the preparation of the items for shipment.

WMS technology provides 100% data accuracy with real-time accuracy throughout the warehouse by using mobile barcode scanning and more. A WMS allows hands-free picking, packing, and shipping without missing a beat.

Shipping and Freight Forwarding

Following picking and packing, the next part of order management involves shipping and delivery. All 3PLs function differently when it comes to shipping and freight forwarding. Some partner with carriers based on price and delivery speed while other 3PLs rely on local carriers when shipping less than truckload (LTL) shipping or local orders.

Often, 3PLs work out discounts with the big name carriers like DHL, USPS, UPS, or FedEx to provide even faster service and delivery speeds for a low cost.

Shipment Tracing and Tracking

A 3PL also handles the tracking and tracing processes on shipments. The 3PL’s customers and their consumers receive shipping information, and they can then track the order from beginning to end. WMS solutions offer full transparency every step of the way.

Reverse Logistics

Some 3PLs handle reverse logistics for returns. They supply return labels for the carrier to return the item to the fulfillment center.

Order Fulfillment Steps

Let’s examine order management with a 3PL.

Step One: Receiving

The first step in order processing involves ensuring that the warehouse has the inventory needed to fulfill the order. Large orders might have items spread across a multitude of fulfillment centers. Every 3PL has their own receiving and storing inventory process.

The use of WMS solutions supplies inventory transparency and management across all fulfillment centers via the cloud.

Step Two: Picking

The 3PL will pick the item once the order has been received. Using integrated technology, the WMS automatically sends order information to the 3PL for rapid fulfillment. Once the order has been received, the picking team will collect the items to prepare for packaging.

Step Three: Packing

After picking, the order undergoes packing for shipment. Some 3PLs even offer packaging choices such as bubble wrap, bubble mailers, branded boxes, poly bags, or packing tape. On occasion, a 3PL will even charge additional fees for certain packing materials. The best 3PLs always opt to use premium materials for product protection while still creating reduced practical dimensional weight to lower shipping prices.

Step Four: Returns

As mentioned above, not all 3PLs handle returns as part of order management. When a 3PL does offer return services, all returns go back to the 3PL where they are then re-processed, restocked, or disposed of depending on the organization’s particular policy.

Benefits of Letting a 3PL Manage Orders

Working with a 3PL for order management offers many benefits. Benefits of partnering with a 3PL provider for all aspects of order management include:

  • Time savings for all order management and processing
  • Cost saving benefits for warehousing, inventory management solutions, and shipping
  • Increased efficiency utilizing the latest technology to streamline order management and processing
  • Fast and efficient order shipments
  • The ability to easily add scalable, customized services such as warehousing, shipping, and distribution to meet the changing needs of ecommerce
  • Improved access to optimum inventory management software and integrative technology
  • Access to a network of shipping carriers and providers and potentially better rates

Technology for Better Order Management

Nationwide, labor shortages have become a challenging problem for many 3PLs. Embracing technology gives a 3PL warehouse the edge needed to continue to meet the growing demands of order volume and seasonal surges.

Saying goodbye to tedious manual processes that have become outdated, and embracing innovative tech allows a 3PL to better meet customer expectations and tackle the growing demands of faster and more efficient shipping processes.

WMS solutions provide greater visibility for inventory management and streamlined integrations. A tech-enabled 3PL not only attracts new customers from the competition but also retains a steadfast customer base.

Automation is the crucial component in becoming a tech-enabled 3PL. The automation process cuts problem-prone manual processes using software combined with hardware. Manual processes are fraught with error, slower speeds, and inconsistencies. Any 3PL that focuses on adopting new technology will quickly notice verifiable improvements in all their order management steps.

Using digital automation in the form of warehouse management system software creates a strong framework for managing all day-to-day operations throughout the warehouse. The WMS acts as a solid foundation for additions to a technology stack.

With a WMS, a 3PL will gain the following benefits:

  • Automated cycle counting
  • Tracking of all goods throughout the warehouse
  • Auditing capabilities
  • Real-time management of inventory
  • Location management for rapid directed putaway
  • Mobile barcode scanning for picking and packing
  • Automated integrations through electronic data interchange (EDI), application programming interface (API), and online shopping
  • Receipts for advance shipping notice (ASN)
  • Accounting software connectivity
  • Built-in carrier information for all orders and shipping
  • Label creation
  • Customer management
  • Enabled customer portals
  • Automated billing

WMS Automation for Billing

Billing and accounting form the basis of any warehouse management system. A WMS can automate billing functions by effortlessly capturing all invoices and billable events for each 3PL customer.

The WMS calculates shipping and receiving charges, storage fees, and more. The warehouse operator has the choice of creating  daily, weekly, or monthly invoices that show all charges with crystal transparency.

A warehouse operator can then export invoices for every 3PL customer to QuickBooks or other integrated accounting software to reduce billing time and ensure greater accounting accuracy.

Creating a Tech Ecosystem

A tech ecosystem doesn’t have to be confusing. In fact, with a WMS it can quickly become a powerful tool that allows repeatable workflows without a hitch. A 3PL can handle every type of transaction within the tech ecosystem throughout the warehouse.

A WMS works with many software offerings such as the order management system (OMS), inventory management system (IMS), warehouse control system (WCS), enterprise resource planning (ERP), warehouse execution system (WES) and other advanced tech stacks.

If you aren’t careful, you can quickly become overwhelmed with the many software options available for a 3PL for order management.  The best place to start when focusing on order management software is with a WMS. The 2021 3PL Warehouse Benchmark Report listed the WMS as the most implemented software used by 84% of 3PLs.

In the 2022 State of the Third-Party Logistics Industry Report, WMS was identified as the technology that enhances the 3PL’s operational prowess by driving greater efficiency, reducing the need for manual labor and by aiding with a warehouse’s order volume growth.  

Hardware for a 3PL

After adopting WMS software, it's time for a tech-enabled 3PL to focus on updating their hardware to use the software features more effectively.

Explore things like:

  • Robotics
  • Automated guided vehicles (AGVs)
  • Radio frequency (RF) scanners
  • Mobile barcode scanning technology

You can embrace the latest technology and take things to the edge or keep it simple and find tech that works well with your WMS. Whatever hardware your choose should improve your warehouse accuracy and aid in different functions throughout the order management process.

Mobile Barcode Scanning

Mobile barcode scanners increase efficiency and improve accuracy with inventory, receiving, picking, packing, and more.

Mobile scanners accurately verify the number of products in the warehouse, incoming inventory, serial numbers, SKUs, and pick time. They help select the package type and make sure that the shipments are placed in the correct envelopes or boxes to go to the proper carrier service for delivery.

Mobile scanning partners well with a WMS to help end errors. It accurately double checks all information with the WMS in a rapid fashion.

A 3PL that embraces the internet of things (IoT) will gain a significant edge. They can explore other technologies such as voice automated picking, put-to-light, AGVs, and pick-to-light to enhance their automation processes and drive improved efficiency throughout the entire supply chain.

Reports show that 69% of leading 3PLs are investing in IoT technology. In order to remain highly competitive and keep order management efficiency, a 3PL must branch out and create a tech ecosystem focused on success.  

Omnichannel Order Management

In 2022, omnichannel has become a trendy buzzword for both 3PLs and ecommerce businesses. However, you might wonder exactly what is omnichannel order management?  

Basically, omnichannel order management is the process of combining all aspects of order management into a single system process regardless of sales or fulfillment channel. A WMS helps create successful omnichannel order management.

You can effortlessly carry out the following functions with a single system:

  • Access orders
  • Manage all warehouse inventory across a multiple fulfillment center
  • Stay up-to-date on inventory in sales channels
  • Follow inventory from the point of sale all the way through the entire enterprise

Think of omnichannel order management as a one-stop shop for everything that is order management. It's a streamlined way to carry out all processes quickly and efficiently with 100% accuracy.

A 3PL that implements an omnichannel fulfillment strategy will embrace a unified approach to every aspect of managing inventory to order processing.  

The 2021 Third Party Logistics Warehouse Benchmark Report revealed that in 2021, 85% of 3PLs experienced order growth. 3PLs that focus on offering omnichannel fulfillment had the greatest order growth at 92%.

A 3PL warehouse focusing on omnichannel fulfillment manages orders coming from many sales channels. The warehouse carries out order management by rapidly picking, packing, and shipping from the warehouse to the consumer or to a designated pickup location.

The 3PL also handles returns. With omnichannel fulfillment, the 3PL will meet the needs of their customers and consumers to create optimum satisfaction.

Any 3PL that wants to focus on omnichannel fulfillment will need to build an effective warehouse technology stack that offers reliability. Technology improves all of the warehouse operations and helps with order management by rapidly processing orders from numerous sales channels while also allowing integrations to achieve even greater order growth.

The entire process hinges on embracing a WMS, mobile barcode scanning, and order management to truly hone a successful omnichannel fulfillment strategy. Without the proper components, a 3PL will lack the needed visibility to flourish with order management, inventory visibility, picking, packing, and shipping.

If you want your 3PL to spring ahead of the competition, you’ll need an omnichannel fulfillment strategy to gain increased accuracy, greater efficiency and better meet the needs of your customers.

Benefits of an Omnichannel Fulfillment-Focused 3PL 

Are you still on the fence about developing an omnichannel fulfillment strategy to help warehouse functions and order management?  Let’s explore the benefits of an omnichannel fulfillment focused 3PL.

Cross Platform Fulfillment

A 3PL with omnichannel fulfillment can integrate seamlessly with a customer’s sales channels and with all order management solutions. You can use plugins for even easier integration.

Greater Customer Experiences

As a 3PL, your focus is on meeting the needs of your customers and their consumers. With an omnichannel strategy, you can ensure efficient streamlined order fulfillment.

Integration Throughout the Supply Chain

An omnichannel third-party logistics provider brings together all aspects of the supply chain to effectively ship orders through a broad range of channels by using a single inventory strategy sometimes across multiple fulfillment centers and warehouses.

Enhanced Inventory Visibility

Customers want and deserve inventory visibility and accuracy. A WMS lets you know exactly what stock your warehouse holds and also shares the information with customers. You can see where in the warehouse located and whether or not they are ready to pick and ship.

Fast and Efficient Pick and Pack

Fulfillment speed matters more than ever for customer and consumer satisfaction. You want to ensure that orders are picked within hours of a customer completing their checkout.

Reliable Order Fulfillment

With the latest technology, WMS, OMS, and more, you can perfect your entire pick and pack fulfillment process to ensure customer and consumer satisfaction. Your order and inventory accuracy rates will quickly improve and you’ll take your third-party logistics business to the next level.

Conclusion

A 3PL provider offers cost-efficient solutions for their customers. The use of technology enables a 3PL to supply differentiated services that better support the logistics providers growth and that of their customers.

Third-party logistics providers notoriously work in a very narrow margin environment, so in the past, many have had to focus on lean practices to continue to stay afloat. However, those days are long gone. Now 3PLs must focus on taking things to the next level with technology to remain competitive.

A 3PL that offers advanced services will exceed their operating margins and end up attracting even more customers. Utilizing technology will help a 3PL become even leaner and more competitive, which fosters the growth of the bottom line. In the competitive landscape of modern  third-party logistics, order management with innovative tech will pave the way for future success. A 3PL must grasp an effective omnichannel strategy with strong tech support to build lasting customer relationships.

The unprecedented growth and demands of the supply chain have pushed the top 3PLs to focus on the latest technologies for improved order management.

With 3PL Warehouse Manager, we can help you say goodbye to outdated technology. Our ultramodern warehouse management system is built to scale. It will lower labor costs, offer complete visibility, improve your warehouse functions such as order management, and increase your 3PL's profitability. Request a demo today to learn more.

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