A Step-by-Step Guide to Successful 3PL Integration
Integrating third-party logistics (3PL) into your supply chain operations can drive significant benefits, but takes careful planning and collaboration to execute effectively. Follow these five key steps to set up a successful launch with your logistics services partner:
- Define Operational Goals and Requirements
- Thoroughly Evaluate and Select your Logistics Partner
- Map Detailed Integration Points for Systems and Data
- Plan a Phased, Region-by-Region Implementation
- Structure Proactive Ongoing Management for Continuous Optimisation
Step 1: Define Operational Goals and Requirements
The first step is ensuring all stakeholders align on the strategic reasons for bringing on a 3PL, along with the tactical requirements for day-to-day operations.
Clearly identify and rank priority goals, whether they include reducing logistics costs, addressing pain points in warehousing and inventory management, upgrading shipping and delivery, gaining supply chain visibility and analytics, or focusing internal resources on core competencies.
Outline must-have service capabilities, capacity needs, budget constraints, IT requirements and desired timelines so prospective partners understand key objectives and specifications.
Providing comprehensive upfront detail allows 3PLs to tailor proposals and solutions to address your most pressing needs, recommended implementation strategies and measures of success.
Step 2: Thoroughly Evaluate and Select your Logistics Partner
Choosing the right cultural fit and balance of logistics capabilities is crucial for a mutually beneficial 3PL relationship. Develop a detailed request for proposal (RFP) outlining your key operational requirements, service level agreements, KPIs and evaluation criteria. Distribute to a wide selection of 3PLs to compare capabilities, quotes and approaches.
Thoroughly vet shortlisted providers by checking references, reviewing qualifications, auditing facilities and systems, and meeting key contacts. The ideal partner offers leading expertise in your industry and required services, robust infrastructure and technology, high-touch customer service, and cultural synergy with your organisation.
Conduct site visits to see operational execution first-hand. Review disaster recovery plans. Compare cybersecurity protocols. Request customer case studies to verify their experience supports your goals. Validate reporting and analytics to match your visibility needs.
By undertaking a rigorous evaluation process, you gain confidence knowing you have selected a true partner to trust with the scalability, responsiveness and continual optimisation of your logistics.
Step 3: Map Detailed Integration Points for Systems and Data
With a partner selected, collaboratively design end-to-end systems connections, data flows, operational procedures, workflow hand-offs and reporting integrations tailored to your infrastructure.
Create inventory management processes linking warehouses, ERPs, orders and fulfilment. Construct transportation integration and routing digitally managed by your 3PL for outbound shipments. Map returns and service supply chains back to facilities. Outline trade compliance documentation and customs brokerage globally. Define customer service and issue escalation processes spanning companies.
Codify required data sharing touchpoints like advanced shipping notices (ASNs), electronic payments, and scan and shipment tracking data. Set standard KPI reports comparing realities to service-level agreements (SLAs) like perfect order percentages, fill rates, delivery times and inventory accuracy.
Testing every integration point before launch ensures you have built solid bridges between your partner’s capabilities and internal systems for smooth customer hand-offs and operational flex during live execution. Employee training and communication plans help support the transition.
Step 4: Plan a Phased, Region-by-Region Implementation
Rather than tackling a full-scale immediate integration, gradually shift logistics operations region-by-region or individual product lines over a 12-18 month timeline.
For example, first transfer one distribution centre or transportation process. Monitor operations for 60-90 days, refine as needed, then extend responsibilities before adding more facilities or product flows.
This phased approach allows for operational flex as collaborators align and analytics reveal optimisation points. It also lets you accurately assess service quality and build confidence before fully transitioning logistics oversight. Supporting complex integrations with suppliers, forward stocking locations, and customers requires thoughtful sequencing balanced with momentum.
Provide extensive internal and external communication plans explaining the migration schedule, operational changes, key contacts and escalation processes. Seek regular feedback during each regional deployment so learnings improve subsequent transitions.
Step 5: Structure Proactive Ongoing Management for Continuous Optimisation
Daily coordination, quick decision making and open communication channels are essential for an adaptable, evergreen partnership. Establish central POCs from each company to oversee integration status and address issues. Conduct quarterly service reviews based on KPI dashboards to maintain standards, foster continuous improvement and reward successes.
Solicit regular feedback from affected internal and external stakeholders to guide ongoing enhancements over the long term. Your partner’s interests should align with your own – shared incentives and objectives cement collaborative relationships, driving mutual growth and profitability through logistics excellence.
The pros and cons of 3PL API Integration
As with any integration, there are pros and cons to weigh up that will impact whether now is the right time to integrate with a 3PL.
Pros
Stock levels in real-time
3PLs are all about transparency, and provide real-time stock data for clients across multiple warehouses.
On top of real-time stock, they also allow you to track returns, so you can make the best use of the space available to you.
Low operational costs
Integrating with a 3PL can save a lot of money on operational costs that would normally be spent internally on staff, processes, storage, and more.
Customer Satisfaction is key
3PLs are experts at filling orders and getting them out for delivery at pace and with minimal error. This ability to rapidly ship parcels alongside tracking information can help generate positive customer interactions and improve overall customer satisfaction.
Cons
Learning the internal system
If the 3PL uses the same warehousing software as the client business, this will greatly speed up the process of integration and will help the 3PL to work quickly with software they know.
If they use separate systems, though, it can take time for the 3PL to learn it - particularly when you consider that there may be many other client businesses with their own systems that require learning also.
What types of 3PL integration are there?
1. E-commerce integration
Many retailers use Shopify as their e-commerce platform of choice. Shopify’s 3PL integration takes that service one step further by offering automation among other key integrations:
Order Management
Order management is a vital part of any e-commerce business. 3PL integration takes this one step further by allowing for real-time syncing of product data, delivery tracking, stock information, and more.
From shopping cart to warehouse
E-commerce integration allows for orders to be processed straight from the checkout into the warehouse management system. This allows the 3PL to begin work on the delivery process as quickly as possible.
Inventory Management
If you don’t have a good idea of your stock, it can lead to difficulties with getting orders shipped and ultimately customer satisfaction. 3PL integration allows you and the warehouse to be fully synced on stock levels, so no lack of stock comes as a surprise or affects a sale.
Variable shipping and delivery methods
Having the choice of shipping and delivery methods is vital for the user experience. Integrating your e-commerce platform with a 3PL allows for these processes to be automated, and ultimately creates a smoother buying experience that prioritises the customer.
Parcel tracking
Integration also allows for real-time parcel tracking, so you can keep track of customer orders. This is a key part of maintaining strong customer relationships.
2. ERP Integration
Your business ERP is possibly the most important piece of software you have, with its helpful overviews of the entire business and its processes.
Integrating your ERP with a 3PL allows you to have complete oversight of your own business and all key factors at the warehouse level. This aids with understanding stock, order picking and processing, delivery status, and more.
3. EDI and API integration
It is possible for 3PLs and their client business to connect through an EDI or an API. These two systems work in slightly different ways and have their own positives and negatives.
What is EDI integration?
EDI integrations allow for data to be exchanged seamlessly. When an e-commerce order is received, a sales order is created through the ERP system. From there, the EDI 940 warehouse shipping order is sent to the partner system at the 3PL.
Once the order is complete and shipped, an EDI 945 shipping confirmation is sent out to confirm.
The Pros of using an EDI
- Real-time data transmission means data is shared instantly, and customer transactions are much more rapid.
- Processes are automated at either end, so no manual input is needed. This greatly reduces type wasted manually retyping order information.
- Secure encrypted data transmissions.
The Cons of using an EDI
- Custom EDI solutions can be expensive.
- Off-the-shelf ERP plugins can also be costly.
- A constant connection to the EDI Data Warehouse provider is required.
- EDIs can be exceptionally complex.
What is API integration?
APIs use the cloud to push data back and forth between the 3PL and the client business. The cloud is a powerful tool for data transmission, as it allows for data to be transferred even if one side of the exchange is offline.
The Pros of using an API
- No additional certifications are needed to integrate with the third-party software, saving time and manpower.
- Communication is instantaneous, regardless of whether one of the users is offline.
- APIs can be very scalable to the needs of the client business.
- APIs can allow access to different and unique functions.
The Cons of using an API
- You are reliant on the API provider to reduce disruption and downtime.
- APIs vary across systems. This lack of standardisation can lead to added time spent on bug testing.
- You will need to duplicate your API efforts if you partner with more than one 3PL.
4. Direct Integration
Direct integration simply involves integrating directly with the 3PL’s systems. Direct integration allows you to seamlessly work with new vendors while using your current carriers.
Best practices for 3PL integration
Outline your objectives
If you are unsure of what you want from your 3PL integration, the process can become costly and cumbersome. Be sure to outline your objectives from the start so that different elements of the integration can be properly prioritised to meet your business needs.
Objectives may include:
- Ensuring real-time inventory updates
- Streamlining the order process
- Improving customer communications
Ensure robust security measures are in place
Security is often a top priority for integration service providers. Having a good understanding of those security measures, though, is exceptionally important, especially where customer data is concerned.
As the integration takes place, be sure to discuss security measures in depth with your integration service providers.
Collaborate and communicate
The best way to get your integration done quickly is to be available to the integration service provider as they need. By doing this, you can prevent hold-ups and bottlenecks in the process.
Be open and transparent in communication, too. If there is a particular function you require, or you have particular expectations or deadlines, the service provider must know.
Be prepared to problem-solve alongside the service provider, and request regular updates to keep all parties accountable.
When should I consider a 4PL?
4PLs can be incredibly beneficial for businesses that are prepared to fully outsource their entire logistics and supply chain management to a 3rd party. This 4PL company manages the entire supply chain, handling 3PLs and providing an end-to-end logistics solution (among many other processes).
If you’d like to learn more about 4PLs, read our blog on the differences between 3PL vs. 4PL next.
The Right Partner Delivers Logistics Excellence
By investing upfront in a structured 3PL onboarding, alignment on goals, co-planning of systems integrations, staged rollouts and governance models, you can maximise success in outsourcing supply chain operations.
This enables you to leverage world-class logistics expertise and technologies while focusing resources on your core business. With a true partner dedicated to responsive support, flexibility and value delivery, your company can cost-effectively scale to meet customer demands.
Contact our logistics specialists to learn more about our comprehensive suite of 3PL solutions customised for your unique needs. If you’d like to learn more about 3PL, read our complete guide to 3PL next.
FAQs
What is 3PL Integration?
3PL integration is the act of combining your current systems and processes with your chosen 3PL. This allows you to take a step back from roles like warehouse management and shipping while having complete oversight of the 3PL and their workload.
What is a 3PL?
A 3PL is a third-party logistics service that works with businesses to provide warehouse space, shipping, product handling, and more.
Why use a 3PL?
3PLs provide businesses with the opportunity to save money in a number of areas, from managing and manning a warehouse to dealing with supply chains and paperwork.
What is 3PL fulfilment?
3PL fulfilment is where the business outsources the fulfilment of retail orders to 3PLs and their expert teams.
3PL fulfilment covers all expected elements, from order receipt to picking, packing and shipping, as well as shipping and warehousing.
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