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Buyer's Guide

by Daniel Harris,
Market Research Associate
Last Updated: March 27, 2017

There are many third party logistics (3PL) solutions on the market that offer unique functionalities for nearly all industries and organization sizes. All the various types of 3PL solutions and their different features can make the purchasing decision confusing for buyers.

In addition, constantly changing compliance requirements and technology platforms make the process of selecting the right software tricky. This buyer's guide is designed to make the process convenient for the software buyer.

Here's what we'll cover:

What Is Third Party Logistics Software?
Common Features of Third Party Logistics Software
Evaluating Third Party Logistics Software
Market Trends to Understand

What Is Third Party Logistics Software?

Third party logistics (3PL) software helps 3PL companies manage the ordering, warehousing and transportation of supplies for another business. This software category includes warehouse management tools, freight broker software and procurement systems to track inventory, sales, purchase orders, shipping and more.

Common Features of Third Party Logistics Software

Because these providers oversee so many steps of the supply chain process for so many different businesses, 3PL software must be equally vast in scope. Specific features include:

Warehouse management With supplies from so many different customers moving through a public warehouse, customer profiling and lot number recording is absolutely critical. 3PL software helps managers monitor picking and put away through radio-frequency identification (RFID) capabilities.
Shipping & receiving 3PL software has transportation management capabilities that automate the printing of shipping and receiving labels. Bills of lading inform the supplier that supplies have been loaded onto the 3PL provider’s carrier and are ready for delivery, and inbound receipts help warehouse managers monitor the arrival of new supplies.
Order fulfillment One of the primary functions of a 3PL company is to fulfill orders that have been sold by someone else’s business. This means being able to handle all of the MTS, BTO and ATO capabilities typical of order fulfillment software.
3PL billing Billing is typically completed on two schedules: a monthly service/storage fee, with some kind of variable fulfillment cost. The billing needs to match these services, so the 3PL can bill easily based on orders and storage use.

Evaluating Third Party Logistics Software

These solutions need to handle the same processes as robust SCM software systems, but without as much of a focus on the business intelligence often seen with other SCM programs. The critical evaluating criteria for a 3PL system then is whether it meets the warehousing, shipping and order fulfillment needs that match your customers.

Ask the following questions when selecting your software vendor:

  • Can the system be implemented through web based portals or is it strictly an in-house program?
  • If your fulfillment house is looking for assistance with order management, does the system include advanced billing and tracking tools?
  • Does the system have a number of possible options for pallet tracking and stock rotation, such as first in, first out (FIFO ) and last in, first out (LIFO)?

Market Trends to Understand

In the past few years, the 3PL market has evolved as a result of the advancements in mobile applications and many other technologies. Therefore, as you begin the process of software comparison and evaluation, there are some emerging market trends in the field of third-party logistics that you must consider before making your final selection:

Improved cooperation between shippers and 3PL providers: Third-party logistics companies depend on new technologies to improve their offerings in a way that delights their customers. Early on, 3PL providers relied on paper to communicate and record data, but everything has now transitioned to the digital format. Electronic communication and digital data storage allows for rapid communication between people and also helps maintain the integrity of the data.

In the immediate future, even the smallest third-party logistics providers and their vendors are expected to manage inventory through web-based portals.

Increased usage of mobile applications: Until recently, customers had to be physically present at their office or home computer to order a product or check shipment status. Thankfully, users are no longer restricted to desktops, as mobile apps have transformed the way business is being conducted. In the future, all innovations are expected to be focused on achieving agility through mobility as mobile devices, along with proficient mobile apps, will become a regular part of all 3PL providers.

Also, devices with radio-frequency identification (RFID) that have the capability to store products data will enable prospective customers to process freight shipments or place an order from anywhere and at any time.

Deployment of innovative software and hardware devices: Third-party logistics companies will most likely invest in progressive software, which can include transportation management systems (TMS) and advanced speech recognition software. There will also likely be a push for smart devices that deliver quick returns on investment. These technological advancements will save time and operating costs as well as reduce errors and inconsistencies.

Advanced speech recognition systems will help workers connect and communicate better with their warehouse management system. Productivity will be improved through enhanced stock recording. Also, features like voice recognition are expected to become as ubiquitous a part of supply chain processes as stock inquiries and freight tracking.

The impact of big data: Big data is expected to have a significant impact on the overall logistics industry and may be incorporated by third-party logistics players as well. 3PLs will use cloud-based technologies to ensure that operations aren’t hampered and can remain operational round the clock in the event of any natural disasters.

The proper deployment of big data models will also enable third-party logistics players to process data and information that optimizes their operations. Also, data sharing will help them track items in the overall supply chain.

Work on a global outlook: As the world economy becomes increasingly integrated, third-party logistics providers are expected to work on a larger scale and have a wider global expansion plan. Also, since the supply chain process will become more complex as a result of operations spread across different global regions, third-party logistics players need to be willing to adopt the latest technologies in the market to continue staying in the game.

The above trends will help you understand recent developments in the field of third-party logistics and guide you in selecting the ideal system for your business.

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