Benefits of 3PL Automation for 3PL Companies

Learn how automation for 3PL companies helps them to overcome many of the issues facing the 3PL industry today. 

Aaron Klein

Aaron Klein


In recent years Third-Party Logistics (3PL) companies have played an increasingly important role in the supply chain industry. By providing businesses with logistics and distribution services that allow said businesses to expand, in turn, the 3PL industry has grown. With rapid growth, there tend to be growing pains, and the 3PL industry is not exempt from this. Some of the issues experienced by many in the 3PL include difficulty managing inventory, talent shortages, and struggles to keep pace with growing demand. This is where 3PL automation comes into play, allowing 3PL companies to scale more effectively and meet the growing needs of their clients. So, whether you’re already using automation technology or just considering it, this article will provide valuable insights and information to help you maximize the benefits of automation for your 3PL business.

What is Third-party Logistics (3PL)?

First, let’s develop an understanding of Third-Party Logistics (3PL). 3PL refers to outsourcing logistics and distribution functions to a specialized company. These companies provide a range of services, including storage, transportation, and the management of goods, to other businesses that do not want to handle these tasks in-house, as well as companies looking to expand their distribution network into new markets where they don’t have distribution centers. The goal of 3PL is to improve efficiency, reduce costs, and allow businesses to focus on their core competencies while outsourcing their supply chain logistics. Third-party logistics companies offer a wide range of services and can provide customized solutions to meet each client’s unique needs. This model has become increasingly popular in recent years as businesses look to streamline their operations and take advantage of the expertise and technology offered by 3PL providers.

Overcoming the Hurdles: A Look at the Top Challenges Facing the 3PL Industry Today

Like other industries, 3PL companies face a variety of challenges in their day-to-day operations. Below are a few of the most prominent issues facing third-party logistics companies today:

Lack of Integration with Multiple Systems and Partners 

3PL companies often work with multiple systems and partners, making integrating all systems and processes challenging. The complexity of integrating various systems can be costly, and errors can arise in the integration process that impede day-to-day operations.

Managing Inventory 

Balancing inventory levels and ensuring proper storage can be challenging for 3PL companies, as they manage and store products for multiple clients. If inventory levels are not managed properly, it can result in stock-outs or overstocking, negatively impacting the supply chain and customer satisfaction.

Maintaining High-Quality Customer Service 

With multiple clients, it can be challenging for 3PL companies to maintain high-quality customer service levels for each client. This is especially true during periods of high demand and when manually managing customer inquiries and requests. Inefficient manual communication channels can also create confusion, slow the customer service resolution process, and lead to poor customer satisfaction.

Maintaining High-Quality Customer Service 

With multiple clients, it can be challenging for 3PL companies to maintain high-quality customer service levels for each client. This is especially true during periods of high demand and when manually managing customer inquiries and requests. Inefficient manual communication channels can also create confusion, slow the customer service resolution process, and lead to poor customer satisfaction.

Keeping Up with Regulatory Requirements 

3PL companies must stay up to date with constantly changing regulations related to transportation, storage, and security. Compliance with these regulations is crucial for the smooth operation of these companies and to ensure the safe handling of goods. Keeping up with regulatory requirements requires significant resources, including time and expertise. Failing to comply can result in legal and financial consequences.

Timely Billing with Complete documentation 

For 3PL companies keeping up with billing in a timely manner is an arduous task, even for the most diligent. Collecting and entering detailed information about each shipment is a tedious, time-consuming, and error-prone process. These errors can be costly, causing delays and even disputes with clientele. In addition, as companies scale the labor costs associated with billing can skyrocket, often leading 3PL companies to search for ways to streamline this process.

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Revolutionizing the 3PL Industry: The Benefits of 3PL Automation for Logistics and Supply Chain Management

Automation can help mitigate the above challenges by providing real-time visibility and tracking, reducing the potential for manual errors, and streamlining processes to increase efficiency and reduce costs. By leveraging automation technology, 3PL companies can improve their operations, increase competitiveness, and better meet the demands of their clients. Let’s break down some of the key benefits of automating functions within a 3PL business:

Reduced Cost of Operations
There are many ways in which 3PL automation can help reduce operational costs for 3PL companies. One way is simply by reducing errors such as incorrect data entry. Inaccurate data entry can result in costly shipping and stocking errors. These, in turn, can result in delayed and disputed payments and reduced customer satisfaction, leading to reduced sales. Another way in which automated processes helps reduce costs for 3PL companies is by lowering labor costs. Without the need to manually enter data or verify inventory levels, you can significantly reduce your labor overhead while at the same time streamlining your company’s processes allowing employees to work more efficiently and effectively. In addition, automated systems can be fully scaled up or down based on the changing needs of your 3PL business.

Improved Inventory Management
Balancing inventory levels and ensuring proper storage is a key challenge for 3PL companies, as they manage and store products for multiple clients. This technology allows for up-to-the-minute data on inventory levels as well as the location and movement of said inventory. This information enables you to make more intelligent, faster, and more informed decisions regarding inventory management. When you know in real-time what you have in stock and where it is located within your warehouse, you can avoid stockouts and overstocking. This real-time data also enables your company to respond rapidly to shifts in demand and even predict future demand patterns. Overall, automation gives you insights into your inventory in a way that enables your company to operate with greater efficiency and accuracy, which can ultimately help your 3PL company to be more profitable and easier to manage.

Improved Customer Service Through Automation
Automated customer service systems can help 3PL companies quickly and efficiently respond to customer inquiries and requests, improving customer satisfaction and reducing the chance of errors. Automated systems can also provide real-time information to customers, enhancing communication and transparency. By using automated customer service systems, 3PL companies can improve their ability to deliver high-quality customer service, leading to better customer experiences and stronger relationships.

Streamlined Warehouse Management Functions
3PL businesses can automate warehouse management functions by leveraging various technologies and tools. Warehouse automation can involve warehouse management systems (WMS), barcode scanning, RFID tagging, and sensors. These technologies can help automate warehouse functions such as receiving, stocking, order picking, and shipping. For instance, WMS can optimize inventory placement, reduce manual labor, and minimize errors. Barcode scanning and RFID tagging can enable real-time inventory tracking, ensuring that the right products are in the right place at the right time. Sensors can also help automate warehouse functions such as temperature and humidity monitoring, guaranteeing optimal product conditions. By automating warehouse management functions, 3PL businesses can achieve greater efficiency, accuracy, and visibility into their inventory, which can ultimately help them reduce costs and improve customer service.

Transportation Management Automation
3PL businesses can automate transportation management functions by utilizing transportation management systems (TMS). These systems can optimize delivery routes reducing transportation costs and improving delivery times. TMS can automate load planning to ensure that goods are packed and transported in the most efficient way possible while also considering any regulations or restrictions that apply to the goods being shipped. This, of course, helps to reduce errors and minimize shipping costs. Other technologies, such as GPS tracking and electronic data interchange (EDI), can also automate transportation management functions such as tracking shipments and exchanging shipping documents. Automating these tasks results in more efficient and more lucrative operations for your 3PL company.

3PL Billing & Invoicing Automation
3PL businesses can streamline billing and invoicing functions by using automated billing software. Electronic billing and invoicing systems can generate invoices automatically based on customer contract terms. This allows you to process millions of orders and order lines weekly and effectively manage billions in inventory. To reduce manual tasks, billable activities such as receiving fees, storage charges, and shipping charges can be automatically captured based on warehouse operations and/or scheduled billing time. These actions are stored in a table to support customer billing. This enables you to easily track invoices and payments, ensuring that all payments are received and processed on time. By automating billing and invoicing functions, your 3PL business can reduce errors and speed up your billing process, ultimately reducing costs and improving service. Automated billing based on client Contracts and automated capture of operational tasks also provides the opportunity to capture additional revenue streams based on other value-added services such as kitting, special packaging materials, freight accessorial fees, procurement, and many other business functions performed on behalf of your 3PL clients.

Freight Reconciliation Automation
Freight reconciliation is a process that 3PL companies can use to ensure that they are being billed accurately by their carriers. This process involves comparing carrier invoices to shipping records and identifying discrepancies or billing errors. This can be a time-consuming and error-prone process. With real-time automated freight reconciliation, you can quickly and easily match invoices with quotes and reconcile any differences. This allows you to operate with greater accuracy and speed and gives you greater insight into carrier performance issues. Meaning your 3PL business can be more profitable and make more informed operational decisions.

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Keeping Up with Regulatory Requirements
3PL companies must keep up with changing regulations, including those related to transportation, storage, and security. Keeping up with these requirements can be challenging and requires significant resources, including time and expertise. Automated compliance systems can help 3PL companies keep up with changing regulations, reducing the risk of non-compliance. Automated systems can also help ensure that all required documentation is in order and up to date, reducing the chance of mistakes and delays. By using automated compliance systems, 3PL companies can ensure they meet regulatory requirements, improve the overall supply chain process, and reduce risk.


In conclusion, automation has revolutionized how 3PL companies operate, and its benefits are undeniable. The advantages are far-reaching and substantial, from improved accuracy and efficiency to cost savings and enhanced customer satisfaction. By automating manual and repetitive tasks, 3PL companies can focus on more strategic and high-value activities, leading to a more profitable and sustainable business. 3PL Automation is the future of the 3PL industry, and companies that embrace it will be well-positioned to be successful.

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