Ask a QuickBooks Expert Series
Topic: 3PL basics
My role as an implementation specialist means I work closely with businesses…
…as they prepare to go live with Acctivate Inventory Software. There are a lot of different ways businesses of various industries can configure Acctivate with the many add-on modules and integrations. Just to name a few, the number of customers I see using our web store integration module, EDI, and 3PL integration has grown.
What is 3PL?
Third-party logistics, more commonly referred to as 3PL, is outsourced supply chain management services, such as inventory, order fulfillment, and transportation services.
3PL is an efficient and accurate means of communicating with a third party who manages your inventory for you.
3PL has become much more common nowadays. Now, we have many customers who are either using 3PL or looking into it. It’s more efficient in some cases because rather than having to buy or lease a warehouse and find employees to do picking and such, you can just contract with a 3PL warehouse. Especially as our customers get bigger, some of them deal with multiple 3PL warehouses.
I wanted to go over some of the basics of 3PL so if you’re interested in using 3PL services, you have a better understanding of it. Here are some of the questions I get asked the most when it comes to 3PL.
How does the 3PL process work?
You would take a sales order in Acctivate and then that gets submitted into a file electronically. Acctivate creates the file and the 3PL warehouse will then take that file, put it into their system, and they’ll pick the items on the order – they’ll pick it, pack it, and ship it. Then they’ll report back what was shipped, the quantities, and also the tracking information.
Is Electronic Data Interchange (EDI)
required for 3PL?
Technically no, it’s not. But EDI definitely streamlines things, especially when it comes to 3PL. EDI makes the order fulfillment process quicker, easier, and more accurate. If you’re considering using 3PL services, you should look into using EDI as well.
My coworker Lauren Stine, who is the manager of implementation, covered EDI in a previous blog article. I would highly suggest you read her blog article on EDI because it covers what you need to know about EDI and its relationship with 3PL.
What are the top three benefits of having 3PL warehouses?
The first benefit is the efficiency – 3PL is so much quicker than having to fulfill orders in your own warehouse. All you have to do with 3PL is enter the order, export it, and then just import the information that comes back from the 3PL warehouse.
Secondly, 3PL provides accuracy. Again, all you do is enter the order, send a file, and they’ll send back a file also, which gets imported into Acctivate. There’s a lot more accuracy because you’re not having to key it in multiple times.
Finally, I’d say another key benefit is the ease of things as far as staffing, overhead, and managing everything. With 3PL, you are only concerned with the order entry side of things and you do not have to manage a whole warehouse. You don’t have to manage receiving inventory into a warehouse and picking inventory, so it’s much easier with 3PL. You can do a lot more with fewer people.
When would you suggest customers should look into 3PL warehousing?
The circumstances can really vary. I’ll give an example using one of our customers: they were having a hard time finding a warehouse where they were located so instead, they found a 3PL warehouse. They pay for 3PL services monthly, which is almost like a rental fee based on how much inventory they have. They don’t have to lease a full warehouse for themselves and they don’t have to have all the employees necessary to pick all their orders.
It’s also a good idea to look into 3PL if you don’t have the resources to purchase or manage a whole warehouse on your own, or you’ve outgrown your current warehouse and you don’t want to expand into a second warehouse yourself. That way, someone else is managing inventory for you.
Do you need one or multiple 3PL warehouses?
It just depends on your needs.
Typically, you can get away with one 3PL warehouse. However, 3PL allows for the possibility to have warehouses in different parts of the country. So you could have an East Coast warehouse and a West Coast warehouse but your main office could be located anywhere centrally. Most businesses probably only need one warehouse but the benefit to having a second or multiple 3PL warehouses is quicker ship times.
What should you look for in a 3PL provider?
Of course pricing and services offered should be considered. However, if there’s a prospective 3PL warehouse you’re looking at, I would make sure that everything will work as far as integration goes.
For instance, we can provide 3PL providers Acctivate specs for integration, so it’s very important that they can map to our specs and to our transaction files. This ensures that we’re providing all the information they need and that they’re going to be sending back all of the information we’re expecting.
What are some common 3PL-related issues? What can you do to prevent those issues?
The good news about 3PL is there are not a lot of errors. Once you get it set up, it’s a simple import and export.
However, it’s critical that the initial steps of the setup are done correctly. There’s certain information that gets exchanged between Acctivate and the 3PL warehouse so that needs to be consistent, such as units of measure. For example, in Acctivate, if you’re going to sell by “eaches”, then the warehouse should also have that unit available or the ability to map to that unit if they call it something other than “eaches”.
By making sure all of the product information, such as product names, in Acctivate and the 3PL system are the same will eliminate any errors. Otherwise, you will get some errors if the warehouse refers to a product by a certain name and Acctivate doesn’t have that information in its database because it wouldn’t recognize the data when you’re trying to import it.
Acctivate does have the ability to set up different identifiers for the products in the system, though. So you can have the Product ID, the UPC, or even an alternate product ID; so if the 3PL warehouse wants to send the UPC code over, that’ll work for Acctivate. The Acctivate user would need to make sure that that information is filled in correctly in Acctivate. So if the 3PL warehouse wants to send and retrieve product information by UPC, you need to make sure that UPC number is in Acctivate if it’s not already there.
My final thoughts on 3PL…
I think 3PL is very beneficial because it allows you to process a high volume of transactions a lot easier and more accurately. I’m a big fan of it. Once you get it set up correctly, you can really do a lot. The main advantage is the accuracy and the ease of 3PL, as far as you do not have to pick the information yourself. You just create the order and just import what was picked and shipped and invoice it. Simplicity: that’s key.
You can get a better idea of 3PL and 3PL integration by reading about The Brand Passport, one of our customers who uses Acctivate and 3PL services to manage their inventory.
Until next blog everyone,
– Brad Bearden
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Brad Bearden
Latest posts by Brad Bearden (see all)
- Brad Bearden talks: The Basics of 3PL - October 30, 2015
