Understanding 3PL Software: Definition, Features, Benefits, and Selection Guide

Logistics is the backbone of modern supply chains, with a global market size valued at $9,833.8 billion in 2022 and projected to reach $16,794.7 billion by 2032. 

With the surge in e-commerce, which is projected to add $1 trillion to US retail sales by 2027, outsourcing logistics to third-party logistics (3PL) providers has become commonplace. These providers handle crucial supply chain functions like transportation, warehousing, and order fulfillment, driving efficiency and faster time-to-market.

No wonder the 3PL sector is expected to generate $1.31 trillion in revenue by 2024.

However, to drive operational efficiency and superlative customer service, 3PLs need more than just infrastructure and manpower. They need sophisticated technology solutions to streamline processes, data-driven insights to make informed decisions, and robust analytics to monitor performance. 

This is where 3PL software solutions prove invaluable. 

3PL software empowers 3PL to streamline order fulfillment processes, optimize resources, and deliver unparalleled value to their clients. So if questions like what 3PL software is, what its key capabilities are, and how to evaluate the best solution occupy your mind, this blog is just what you need.

Introduction to 3PL software

3PL software, short for third-party logistics software, is a specialized technology solution that helps logistics and supply chain companies optimize and manage their operations in a better way. It handles tasks like tracking orders, keeping tabs on inventory, organizing warehouses, managing transportation, and handling billing.

Overview

• Essentially, 3PL software is like a command center for third-party logistics companies, making sure everything runs smoothly and efficiently.
• 3PL software provides automated invoicing, customized workflows, powerful analytics, and fleet and transport management features to streamline last-mile delivery operations.

Types of 3PL Software

Feature	Core Focus	Key Capabilities	Integration	Benefits	Typical Users
WMS	Warehouse Operations	Inventory Management, Order Picking, Packing, Shipping	Integrates with other systems like TMS, ERP, and eCommerce platforms	Improved inventory accuracy, increased productivity, reduced labor costs	Warehouse Managers, Logistics Managers
TMS	Transportation & Logistics	Route Optimization, Carrier Management, Freight Cost Optimization	Integrates with WMS, ERP, and carrier systems	Optimized transportation routes, reduced freight costs, improved delivery times	Transportation Managers, Logistics Managers
Order & Inventory Management	Order Fulfillment & Inventory	Order Allocation, Inventory Visibility, Procurement	Integrates with WMS, TMS, and ERP	Increased order accuracy, reduced order cycle time, improved customer satisfaction	Order Fulfillment Managers, Inventory Managers
ERP	Financial & Operational Management	Financial Accounting, HR, Supply Chain Planning	Integrates with all core business functions	Improved financial visibility, streamlined operations, better decision-making	CFOs, COOs, Operations Managers
SCM	End-to-End Supply Chain	Demand Planning, Supply Planning, Execution	Integrates with all core business functions and external systems	Enhanced supply chain visibility, improved planning, reduced costs	Supply Chain Directors, C-Suite Executives

There are primarily 5 types of 3PL (Third-Party Logistics) software available in the market, each tailored to specific aspects of supply chain management. 

Here are five primary categories of 3PL software solutions catering to varied 3PL operational requirements:

1. Warehouse Management Systems (WMS)

A warehouse management system software forms the core technological foundation for 3PLs providing warehousing and fulfillment center services. Warehouse management software oversees critical warehouse operations, including:

• Inventory management: Provides real-time data visibility into stock levels across warehouse zones. Enables tracking of batch and serialized inventory.
• Order allocation: Handles daily workflow planning, order allocation, and order fulfillment process sequencing based on shipment deadlines, inventory availability, and labor.
• Task workflow automation: Automatically defines pickup paths, assigns inventory put-away logic, and allocates packing stations to optimize travel efficiency.
• Productivity analytics: Leverages historical performance metrics around inventory turns, peak throughout, and utilization rates to identify improvement areas.

By optimizing workflows, a WMS enables the 3PL warehouse to improve inventory accuracy, order fill rates, and storage density while reducing operational overheads.

2. Transportation Management Systems (TMS)

Transportation management systems enable 3PLs to manage the fleet efficiently and execute freight movements for their last-mile logistics clients. Key capabilities include:

• Multi-mode execution: Handles planning and execution across LTL, FTL, parcel, rail, and ocean shipments under one platform.
• Route optimization: Leverages network data and constraints to build cost and time-efficient delivery plans optimized to customer needs.
• Carrier collaboration: Streamlines tendering, booking, and track-and-trace across carrier networks through API integrations for better freight visibility.
• Settlement management: Automates freight audit, payment processing, and chargeback management to simplify billing complexities.

Modern cloud-based TMS solutions leverage machine learning and predictive analytics to improve planning and asset utilization for logistics providers constantly.

3. Order & inventory management system software

Order management systems designed for 3PLs focus on the core planning and execution capabilities required for omnichannel order fulfillment, including:

• Distributed order orchestration: Dynamically allocates orders to warehouses based on product availability, demanded delivery SLAs (Service Level Agreements), and other constraints.
• Inventory visibility: Maintains a cross-network view of inventory levels across partner warehouses, stores, and dropship sites. It enables you to make promises based on actual product availability.
• Procurement workflow: Triggers automated purchase order creation based on reorder points to maintain optimal fill rates across networks.
• Reverse logistics: Enables smooth handling of customer returns and associated refunds or replacements as per business rules and regulations.

By providing capabilities tailored to omni-channel fulfillment profiles, these solutions enable 3PLs to deliver superior order fulfillment rates and accuracy.

4. Enterprise Resource Planning (ERP) software

ERP software designed for the 3PL industry consolidates operational and financial data onto a single integrated platform:

• Financial management: Handles advanced billing, invoicing, payments, and complex chargeback workflows.
• Asset management: Maintains lifecycle costs and deployment analytics for key assets like warehouse infrastructure and shipping fleets.
• 3PL core vertical needs: Addresses niche needs like vendor and carrier collaboration, cross-border compliance, service benchmarking, and auditing.
• Business analytics: Leverages integrated financial, operational, and customer data for data-driven insights.

By unifying information workflows, ERP solutions enable unified visibility for streamlined decision-making.

5. Supply Chain Management (SCM) suites

SCM software provides an integrated command center for managing end-to-end supply chain operations:

• Control tower visibility: Delivers real-time tracking of orders from placement to last-mile delivery through system integration.
• Scenario simulation: Enables advanced analytics to assess supply chain resilience during uncertainties.
• Supplier collaboration: Provides inventory visibility across contract manufacturers and transparency into production schedules for proactive planning.
• Integrated business planning: Links financial forecasts with demand projections based on historical trends to improve new product introduction and inventory planning.

Such holistic visibility and one-stop control empower 3PLs to meet customer expectations through supply chain agility and accurate customer order promises.

What Does a 3PL Software Provide?

3PL software platforms come equipped with a diverse set of capabilities to meet varied operational requirements. 

However, there are some core functionalities that enable these solutions to deliver enhanced efficiency, deeper supply chain insights, and superior customer service.

Some key features of 3PL software include:

1. Warehouse management: Efficiently manage warehouse operations, including inventory tracking, receiving, putaway, picking, packing, and shipping.
2. Transportation management: Optimize transportation routes, manage carrier contracts, track shipments in real time, and ensure on-time deliveries.
3. Inventory management: Maintain accurate inventory levels across multiple locations, track stock movements, monitor stock levels, and implement inventory optimization strategies.
4. Order management: Streamline order processing, manage order fulfillment centers, track order status, and handle returns and exchanges.
5. Supply chain visibility: Provide real time visibility into the entire supply chain, allowing stakeholders to track shipments, monitor inventory levels, and identify potential bottlenecks or delays.
6. Reporting and analytics: Generate reports and analytics to gain insights into key performance metrics such as order fulfillment rates, inventory turnover, transportation costs, and warehouse efficiency.
7. Integration capabilities: Integrate with other systems, such as enterprise resource planning (ERP) software, customer relationship management (CRM) systems, e-commerce platforms, and carrier systems for seamless data exchange and workflow automation.
8. Billing and invoicing: Automate billing processes, generate invoices based on shipment data, track billing and payment status, and manage customer accounts.
9. Compliance and regulatory support: Ensure compliance with industry regulations and standards, such as customs regulations, trade compliance, hazardous materials handling, and international shipping requirements.
10. Customer portal: Provide customers with self-service capabilities to track orders, manage returns, access documentation, and communicate with customer support.
11. Mobile accessibility: Offer mobile apps or mobile-friendly interfaces to enable users to access critical logistics information and perform key tasks on the go.

Benefits of 3PL Software

Implementing third-party logistics (3PL) software offers a range of benefits to businesses looking to streamline and optimize their logistics operations. 

Some key benefits include:

1. Improved operational efficiency

3PL software enables logistics providers to manage operations more efficiently by automating manual tasks, streamlining workflows, and providing real-time visibility into orders and inventory.

 In fact, 75% of organizations say workflow automation provides them a significant advantage over their competitors.

2. Enhanced supply chain visibility

Powerful analytics dashboards provide insights into key performance metrics across warehousing, transportation, and delivery. 

With real time visibility into inventory levels, shipment status, and overall supply chain performance, 3PL software enables businesses to make informed decisions. It even helps them respond quickly to changing conditions such as sudden fluctuations in demand, unexpected disruptions in transportation, delays in production, or changes in market trends.

Additionally, granular data helps identify improvement areas to achieve logistics operational cost savings and service levels further.

3. Greater scalability

As a logistics company grows, it can use 3PL software to handle more work without extra staff or space. 

The software makes adding more warehouses, customers, and regions an easy process. This is done through flexible setup options and modular processes. This enables fast business growth without major disruptions.

4. Optimized Inventory Management

The software helps businesses keep the right amount of products in stock so they don’t run out or have too much. 

The features in 3PL software help businesses manage inventory levels, reduce stockouts and overstock situations, and improve inventory turnover rates.

5. Reduced operational risks

Automating order and inventory management activities reduces costly human errors like shipment delays and misplaced inventory. Advanced algorithms also allow proactive fixing of issues before they impact customers.

6. Faster customer onboarding

Intuitive templates, pre-built integrations with client channels, and APIs allow quick onboarding of new or potential clients globally. This accelerates the delivery of third-party logistics services to customers.

7. Tighter carrier collaboration

Tracking and proof-of-delivery features provide end-to-end shipment visibility across road, rail, and air. This helps coordinate smoothly with transport contractors and improve customer communication.

8. Regulatory compliance

3PL software solutions make it simpler to maintain compliance across regions via seamless customs documentation, label printing, shipment tax calculation, and leveraging denied party screenings. This prevents penalties and shipment delays.

Signs that You Need 3PL Software

I’ll divide these signs into the two categories while maintaining the exact wording:

Business Growth Outpacing Current Systems

• Finding it hard to manage increased orders, shipments, and inventory levels
• Warehouse space crunches causing stock bottlenecks
• No systems for forecasting demand patterns or fulfillment network capacity modeling
• Repeated shipping delays and mistakes indicate overly manual processes
• Manual effort is needed for data exchange across platforms
• Inability to track orders or inventory levels in real-time
• Unsure of how much inventory you have on hand or where it’s located
• Unable to measure key performance metrics like order fulfillment rates, inventory turnover, and transportation costs
• Struggling to optimize transportation costs, warehouse space utilization, or inventory carrying costs

Increased Customer Complaints about Service Delays:

• Struggling to meet customer expectations for fast, accurate, and reliable order fulfillment and delivery
• Invoices frequently dispute actual services consumed
• Dealing with the complexities of international shipping, including customs clearance, regulatory compliance, and documentation requirements

Key Features of 3PL Software

When evaluating 3PL (Third-Party Logistics) software options, it’s essential to look for key features that align with your business needs and objectives. 

Here are some key features to consider:

1. Customization

With varied operational needs, customization allows tailoring software to unique workflows.

For instance, if you require specific order processing workflows or inventory management rules, a customizable system allows you to implement them without being constrained by pre-set templates. 

This kind of flexibility ensures that the dispatch routing software aligns perfectly with your business’s supply chain processes, maximizing efficiency and productivity.

2. Modular System

Consider a scenario where your business expands into new markets or introduces additional product lines.

Modular software with loose coupling between capabilities like WMS, TMS, and OMS will allow you to use only the functions needed. This avoids overspending on unnecessary capabilities.

This modular approach not only helps in cost reduction but also ensures that you can adapt the software as your business evolves, maintaining agility and relevance.

3. Mobility Access

With mobility access, you can oversee your logistical operations while on the go. 

Features like driver apps for proof-of-delivery, mobile scanning to verify receipts, smartphones to track shipments, and Android tablets for warehouse operations management boost productivity. It even cuts down on paper-based logistics processes.

With this capability, you can enhance your responsiveness and address urgent issues from anywhere with an internet connection. You can also provide your team members with the capability to stay connected and productive even outside the office premises.

4. Flexible reporting and dashboard

A flexible reporting and dashboard feature allows you to customize key performance indicators (KPIs) and metrics based on your business goals. 

For example, you can create visual dashboards that display inventory turnover rates, order fulfillment times, or transportation and shipping costs, enabling you to make informed decisions quickly. 

This visibility helps you identify areas for improvement and drive continuous optimization.

5. EDI and API capabilities

Electronic Data Interchange (EDI) and Application Programming Interface (API) capabilities enable smooth communication and data exchange between different systems. 

Whether you’re automating order processing or synchronizing inventory levels in real time, these capabilities ensure seamless connectivity and interoperability across your supply chain ecosystem.

6. Cloud-based system

Cloud-based systems offer scalability, accessibility, and reliability without the need for on-premises infrastructure. 

This means you can scale your operations up or down as needed, access your data from anywhere, and benefit from automatic software updates and maintenance. 

Cloud-based 3PL route scheduling software provides the flexibility and agility to adapt to changing business demands.

7. Robust analytics and data insights

Embedded analytics models providing demand forecasts, delivery predictions, and dynamic pricing guidance enable data-backed decision-making to improve profitability.

With route analytics software, you can leverage predictive analytics to forecast inventory shortages, enhance warehouse efficiency, and uncover cost-saving opportunities in transportation routes.

By harnessing the power of data, you can stay ahead of the competition and drive continuous improvement.

8. Exception management

You can detect and address issues such as inventory discrepancies, shipment delays, or order errors in real-time, through exception management. 

By setting up alerts and notifications for critical events, you can proactively resolve issues before they escalate. It helps minimize disruptions to your supply chain and maintain high service levels for your customers.

9. Workflow automation

Workflow automation enables you to automate manual processes such as order picking, packing, or invoicing, reducing human error and increasing operational efficiency. 

For example, you can set up automated workflows for order routing, batch processing, or inventory replenishment, allowing your team to focus on more value-added tasks.

By automating routine operations, you can achieve higher throughput rates, faster order cycle times, and improved overall productivity.

10. Scalability

Scalability is essential to accommodate increasing volumes of orders, shipments, or inventory without sacrificing performance or reliability. 

Whether you’re expanding into new markets, adding new product lines, or serving more customers, a scalable 3PL software solution ensures that your logistics operations can scale seamlessly. 

This scalability future-proofs your investment and positions your business for sustained growth and success in the long run.

Choosing the Right 3PL Software

Selecting the right 3PL (Third-Party Logistics) software is a crucial decision that can significantly impact your logistics operations and overall business performance. Here’s a step-by-step guide to help you select the right 3PL software:

Step 1: Define your requirements

Start by clearly defining your business requirements and objectives for implementing 3PL software. Identify the specific pain points, challenges, and goals you want to address with the software

Step 2: Request demos and trials

Research and identify potential 3PL software solutions and reach out to software vendors to request product demonstrations and trial versions of their software. 

Take the time to explore the features and capabilities of each solution to ensure they meet your needs and are user-friendly for your team.

Step 3: Evaluate user feedback and reviews

Look for user reviews, testimonials, and case studies to gain insights into the experiences of other businesses that have implemented the software. 

Step 4: Assess integration capabilities

Consider how well the 3PL software integrates with your existing systems and platforms, such as ERP, CRM, e-commerce, and carrier systems. 

Step 5: Consider customization options

Assess the level of customization and flexibility offered by each 3PL software solution. Choose a solution that can be tailored to your specific business needs and workflows.

Step 6: Calculate Total Cost of Ownership (TCO)

Consider the total cost of ownership (TCO) of each 3PL software solution, including upfront costs, subscription fees, implementation costs, training expenses, and ongoing maintenance fees.

Choose a solution that offers the best value for your budget and business needs.

Step 7: Negotiate contract terms

Once you’ve selected a preferred 3PL software solution, negotiate contract terms and pricing with the vendor to ensure a mutually beneficial agreement. 

Also, clarify licensing terms, service level agreements (SLAs), and any additional costs or fees.

Simplify and Automate Your Intricate Logistical Operations with 3PL Software

Satisfying customers’ shipping expectations is a crucial part of a business’s logistical operations. That’s where 3PL software comes in.

By bringing together different logistics tasks on one platform, 3PL solutions improve visibility and coordination and provide useful insights. They focus on tasks like planning transportation, optimizing warehouses, and managing orders efficiently.

If you’re facing issues like inconsistent delivery times or difficulty tracking shipments and inventory, it’s time to consider 3PL real-time tracking software. It helps you handle daily challenges and adapt to changes in the market, keeping your business competitive.

Ultimately, meeting customer demands requires a strong supply chain, and 3PL software provides the technology needed to achieve that.