3PL-EDI (Third-Party Logistics)

3PL stands for third-party logistics. The term third-party logistics is often also used interchangeably with order fulfillment. A third-party warehouse provides a full range of eCommerce fulfillment services. This can include warehousing, order processing, and shipping and receiving. Many 3PL warehouses provide other services. These can include customer support, returns processing, and customization.

Third-party logistics providers manage inbound and outbound transportation for their clients, as well as warehousing. Most 3PL companies own or lease warehouse space, which they provide to their clients. They generally don’t own their own fleet of trucks but contract with other carriers for freight and shipping.

Third-party refers to the fact that you’re outsourcing your order fulfillment. You don’t own the warehouse. Instead, you rent shelf space for your products in a large warehouse that stores products for multiple companies. Warehouse employees receive your products and place them into inventory. They pick items from shelves to fill orders and pack them securely for shipping. The 3PL works with various carriers to deliver orders to your clients.

Third-party logistics warehouses are designed to maximize speed and efficiency. As your business grows, they can handle the extra volume and you can expand your capacity without hiring additional staff. A 3PL can work with you on ways to reduce your shipping costs and delivery times. When you use a 3PL company for your eCommerce fulfillment, you get the benefit of experience and focus.

In general, third party warehouses store products for manufacturers which then instruct the warehouse to ship to other locations. This process, utilizing EDI, generally follows this sequence:

Upon establishing a partnership, the manufacturer will provide the 3PL with an EDI 832 Item Master. This transaction set is used to electronically request or provide the prices of goods or services in the form of a catalog. The 832 replaces the paper catalog and is used by manufacturers to provide detailed product information to their supply chain, including retailers, distributors, dealers and the like.

At some point, the manufacturer will receive an EDI 850 Purchase Order transaction set, used to place an order for goods or services. The 850 is generally transmitted to the manufacturers, although, at times, the manufacturer will ask the 3PL to receive it directly. The EDI 850 provides the same information you would find in a paper Purchase Order (PO) document, including items, prices, quantities ordered, and shipping details.

Prior to shipping product to the warehouse, the manufacturer sends a shipment notification to indicate to the warehouse that inbound product is on its way; this is done using the 943 Warehouse Stock Transfer Shipment Advice transaction.

Upon receipt of the product into the distribution center, the warehouse confirms receipt by transmitting an EDI 944 Receipt transaction.

The manufacturer periodically submits an EDI 940 Warehouse Shipping Order to the warehouse. This transaction directs the warehouse to ship product from its stock, usually to customer locations such as retailers or other manufacturers.

The warehouse confirms shipment of the order using a 945 Warehouse Shipping Advice transaction.

With the information from the 945 document, the manufacturer can prepare and submit an Advance Ship Notice (EDI 856) to the customer, along with an Invoice (810 transaction). In some instances, the manufacturer will have the 3PL transmit the EDI 856 directly to the retailers. This becomes problematic when a manufacturer utilizes multiple distribution centers and providers but can flow very easily when using only one DC/provider.

There are a few other transaction sets that are also utilized throughout the process:

EDI 947 transaction set can be used to inform a warehouse/depositor of a quantity or status change to inventory records. This transaction set provides detailed information concerning the internal adjustments which occur between a warehouse and a depositor.

Some trading partners use an EDI 753 Request for Routing and 754 Routing Instructions to communicate final routing information for purchase orders, purchase order overrides and to authorize shipments