Sep 14, 2021 3 Min READ

How Do You Become a 3PL?
Chad Kleiman

Chad Kleiman is a member of the marketing team experienced in various aspects of marketing and the supply chain as he seeks to share his knowledge with the third-party logistics industry at large in an easily digestible format.

3 Min READ
How Do You Become a 3PL?


Do you find yourself with extra storage space in your warehouse? Have you had companies reach out to you to store their inventory? Are you wondering how you can fulfill inventory and build customer trust?

Where do I begin?

For many, third-party logistics (3PLs) warehouses are built in phases. Private warehouses, where one company or brand stores and owns their own inventory, can be a prime example for a transition to the warehousing industry. Like many small business owners, growth and expansion into different markets can lead to tremendous success. But how do you transition a small private warehouse into a fully functioning 3PL warehouse?

Private warehouses have a perfect opportunity to acquire new clientele. From experience with managing their own inventory, private warehouses can gradually grow into a 3PL by reaching out to companies who share the need for someone to manage their inventory and fulfill orders. This is where the main transition occurs. From a private warehouse, only storing and managing inventory owned by the warehouse, to a desire to grow into a 3PL warehouse takes time to adjust the business model to offer similar services to outside customers. With all this presumed growth, every aspect must grow with the business.

However, managing your own inventory takes certain skills, but managing another company’s inventory requires precision. Errors, flaws, and incidents cannot occur. That is why it is important to understand all aspects a 3PL warehouse has to offer and fulfill.

What is a 3PL?

Before starting a 3PL warehouse, understanding what 3PLs are and how they work is a necessity. 3PLs are outsourced businesses that fulfill the needs of the customer’s supply chain and logistics operations. Brands, retailers, manufacturers, and other merchants seek the help of 3PLs to better provide service to their customers.

3PLs allow B2B, omnichannel, and ecommerce businesses to operate more efficiently by outsourcing product fulfillment and logistics services to a third party. These 3PL warehouses offer three main components: inventory management, warehousing, and order fulfillment. A 3PL’s primary goal is to allow the customer to operate more efficiently so that they can deliver goods to their clients quicker and faster through the help of the 3PL’s services.

3PL Warehouse Requirements

From receiving, picking to packing, transportation, shipping, etc., the 3PL’s primary goal is to act as a service provider to better operate a company’s logistics pipeline. 3PL warehouses are typically expected to:

  • Complete the routine tasks of order management and fulfillment allowing a business to better serve and focus on their customers
  • Offer services to track inventory with programs that automate tracking to provide deep visibility into inventory levels
  • Create a repeatable and scalable service, meaning that they continue to work to better optimize the supply chain
  • Collaborate with shipping providers to facilitate delivery into different regions and find the best shipping rates for the fastest possible delivery
  • Scale to support customer order volume growth while maintaining transparency and operational efficiency
  • Fulfill orders quickly, creating a positive experience for end customers, resulting in repeat buyers for the merchant.

What does this all mean?

3PL warehouses fulfill the needs of other clients by offering efficiency and transparency within their business practices. There are many aspects of a 3PL that can consume a beginner within the field, but with the right practice and understanding, a 3PL can be an amazing investment for those who seek a larger clientele. Warehouse space and proper management are key in developing a 3PL warehouse and the clients should always remain the utmost priority.

Eventually, companies who decide to move deeper into the 3PL warehouse industry identify that there are businesses dedicated to helping and developing software to help run a 3PL warehouse. Extensiv’s warehouse management system (WMS) helps transform warehouses into a paperless environment. Errors, flaws, and accidents become a thing of the past with the correct WMS. Like many people who choose to research a WMS, they find themselves in a new world of transparency and efficiency.

What does a WMS really do?

A WMS is a software solution that records and manages almost all physical and transactional aspects of a warehouse and its operations. If the warehouse is public or has multiple clients/customers, then the WMS can logically distinguish and monitor inventory and transactions by customer.

WMS software is used by many in the warehousing field to monitor, ship, and manage physical inventory. 3PLs who leverage a WMS operate at a higher capacity which limits errors and allows businesses to function more efficiently.

What are the next steps?

To fulfill the necessary functions of a 3PL, a WMS can and will be essential. After deciding whether to become a 3PL is the correct choice, if you feel that you have the proper warehouse space, the right WMS technology, the right staff, and infrastructure, you may want to try it.

To learn more about Extensiv and our WMS, subscribe to our blog for our latest product news and updates.

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