Are you a control freak? Is your business expanding? Trying to handle all the complexities of eCommerce fulfillment and logistics is challenging, especially as your business starts to take off. One day you’re happily picking and packing orders, and a few months later you don’t have as many orders coming in and you’re struggling to keep your head above water.
Relax! This situation happens to every eCommerce entrepreneur eventually. Finding your resources stretched to capacity is a good thing; it means your company is growing.
Although your increased sales are great, that growth won’t be sustainable unless you take action to improve your fulfillment and logistics process. If you neglect to research these processes when you first notice an imbalance in your logistics and fulfillment flow, it will snowball quickly out of your control.
Being unable to manage order fulfillment and logistics means that your orders will take longer to ship, and your customers will start to look at competitors that ship on time. The last thing you want to happen to your company is to lose business because you didn’t have adequate preparation for handling the logistics’ (logistical?) growth.
In this post, we’ll unpack the benefits of using a 3PL over DIY shipping strategy. We’ll give you everything you need to know to manage your growth and scale your business effectively.
What is a 3PL?
Before we look at the benefits of running a 3PL system for your company, let’s look at why you need to implement a 3PL in this first place.
3PL (third-party logistics) firms give your eCommerce company the chance to outsource all the tasks related to warehousing, picking, packing, and shipping your orders. It’s important to note that 3PL is not the same thing as drop shipping.
With drop shipping, you rely on your distributor or supplier to handle the logistics for you. The supplier picks and packs the order they receive through your system and ship it to your customer.
Dropshipping was a popular model for eCommerce fulfillment until 3PL solutions started growing across the world. A 3PL company is entirely independent of your company and your suppliers. They act as a third-party solution and it’s more reliable than dropshipping.
With dropshipping, your supplier might decide to ship your parcel to your customer with their direct marketing materials inside the box. As a result, your customer can cut you out of the deal and move directly to a supplier-customer relationship.
Dropshippers might forget to pack and ship your order or post it to the wrong address. If that’s the case, you’re liable for finding out what happened with the order and reshipping the goods. The customer won’t blame the supplier; they’ll blame you and punish your company by taking their business elsewhere.
Why Should Your Company Use a 3PL for eCommerce Fulfillment?
How would you feel about your business if you could remove the physical aspect of logistics from your processes? How much money would that save you in time, energy, and staff wages? There are plenty of benefits to working with a 3PL provider.
When your business starts escalating, and you need another option to store and ship your products, a 3PL is the answer to your troubles. With a 3PL, you outsource everything to do with warehousing, picking, packing, shipping, and dealing with customer returns. How much is it worth to your business to never have to handle another customer complaint yourself?
A 3PL offers your company an end-to-end solution for all your logistics processes. You monitor the performance of the 3PL through an integrated software portal which allows you to focus on your core business competencies. The extra time and resources you have available from outsourcing your logistics will help accelerate your business growth. With a 3PL, you take the stress of managing growth with an in-house strategy.
Here are the top 10 benefits of using a 3PL solution for eCommerce Fulfillment:
#1 Scale Your Business
Every eCommerce business that offers a good product or service will eventually experience success, provided they follow the right strategy for marketing and logistics. When that inflection point occurs, and the business turns around, you start making money.
When the business starts booming, it makes the struggle of going through the development phase worthwhile. However, your growth can be a significant risk to your company if you don’t have a strategy to manage your business’s new growth.
Working with a 3PL partner helps to mitigate this risk. They provide the resources you need to expand quickly.
#2 Increase Your Storage Space
When orders start accelerating, you’re going to need to keep more stock on hand to satisfy customers’ demand. If you run out of a product, your customer isn’t going to wait around for you to replenish supplies, they’re more likely to visit a competitor that has what they want and can supply it right now.
Expanding your business means ordering more inventory – but where are you going to put everything? Eventually, you’ll run out of space in the garage. Unless you want to live around mountains of inventory in your living and dining room, it’s time to hire a 3PL.
3PLs carry as much warehouse space as you need, and they grow with your business, always ensuring you have adequate storage for your inventory management.
#3 Expand Your Workforce without the Costs
If you’re expanding in-house, then you’ll have to hire a logistics team. That could mean a permanent staff of about 10 full-time employees. With employees, you’ll have to manage payroll. Salaries are the number-one cost for any business, and you’ll need to control the team effectively.
With a 3PL solution, you have access to a trained and competent team of logistics experts. You don’t have to pay any full-time employees or worry about the labor laws and payroll taxes.
#4 Reduce Costs with Affordable 3PL Solutions
Running a logistics department in-house can get expensive. To mitigate those costs, you’ll have to start increasing your prices or chop away your profitability to accommodate the new fees.
With a 3PL partner, you get competitive rates for all these services at a fraction of employing full-time staff with your company.
3PLs will charge you for additional services, but they will be far lower than the costs of hiring a team to do it in-house. Here are some of the additional services you’ll have to pay for when using a 3PL partner for your eCommerce fulfillment.
- Setting Up Your Account – The 3PL will charge you a setup fee for registering your account and preparing your account. In most cases, these costs will involve moving your inventory from your current warehousing solution to your 3PL provider.
- Minimum Monthly Order Volumes – You’ll have to agree to monthly minimum order volumes. If you fall under this target, the 3PL will charge you a fee.
- Logistics – The 3PL runs and maintains a fleet of delivery vehicles and transport solutions. You avoid the expense of buying cars and hiring drivers.
- Receiving Goods – 3PLs charge you for receiving your inventory and checking the order.
- Warehouse Space – 3PLs charge you for warehouse storage space. Make sure you understand the costs before committing to the service level agreement.
- Picking and Packing – 3PL providers charge you for picking and packing your order and processing it through the 3PL system.
- Shipping and Kitting Fees – The 3PL delivers your goods to the customer, charging you for it. They may also charge for curating orders that contain different items from your inventory, such as a mystery box.
- Additional Services – 3PLs offer a range of other services for your eCommerce fulfillment. Building furniture and bagging t-shirts are examples of additional services you’ll need to pay for with your 3PL provider.
#5 3PL is a Reliable Solution to Your Logistics Issues
If you’re struggling to manage the logistics side of your business, it’s time to hire a 3PL service. However, many eCommerce entrepreneurs have trouble with “letting go” of the control of these processes. As a result, they wait too long to hire a 3PL, which hurts their business.
Learning to delegate your duties is an essential part of being an entrepreneur. When things get too much for you to handle, you need some help. However, hiring a bunch of people might not be the best way to handle the challenge. Think about the office space, payroll, and managing the team – who’s going to do all of that?
If you’re trying to keep your business costs as lean as possible, you’ll need to work with a 3PL partner. Most 3PL firms are looking to build lasting relationships with entrepreneurs. As a result, with a bit of due diligence, you can find the right 3PL partner to suit your business. A very good e-commerce 3PL company can also help you manage your inventory correctly so that you can avoid getting too many backorders.
A 3PL is reliable, and you shouldn’t have any issues with letting go of this side of the business. Trust in the processes of your 3PL, and let them do what they do. According to studies of relationships between eCommerce entrepreneurs and 3PL partners, more than 90% of companies were satisfied with the service and satisfaction from its third-party solution.
#6 3PL Stays Accountable for Delivery of Your Goods to the Customer
As mentioned, drop shippers don’t stay accountable for the logistics process. If a parcel goes missing or arrives late, it’s your head on the block, not the supplier. The last thing you need is to start losing customers as your business is expanding.
However, with a 3PL partner, you get the accountability you need in your eCommerce fulfillment strategy. A 3PL partner will issue you a software linking to its internal order processing facility. When your company sends through an order, the system acknowledges it, starting the process of picking, packing, and shipping the customer their parcel.
The system updates you automatically with all workflows from the 3PL, ensuring that they remain accountable for sending your goods to your customer in a timely fashion. The software tracks everything in real-time, giving you a snapshot of all your orders, and where they are ion the logistics process.
#7 Speedy Shipping
Most leading 3PLs run a network of warehouses across the US. As a result, they can get orders out quickly. For this reason, you can get anything from Amazon, anywhere in the country, with delivery in 1 to 3-days.
As an eCommerce entrepreneur, your business gets to leverage this warehousing network. This strategy keeps goods close to your customer, reducing shipping times.
#8 No Need to Hire Staff
When you work with a 3PL partner, you’re outsourcing your logistics – as well as your staff planning. As mentioned, one of the most significant issues with managing growth in your business comes from the hiring and managing of staff.
With a 3PL, there’s no need for interviewing, contracts, or any other aspects you have to deal with when hiring staff. This feature of a 3PL is convenient for eCommerce businesses, allowing them to keep payroll costs lean.
#9 Outsource Processing Your Customer Returns
Do you have a customer returns policy in place? It’s great to see orders going out the door, but what do you do when they come back, returned by an angry customer? Customer service is a critical aspect of building a successful online eCommerce business. However, returns on your goods need immediate attention, and process for evaluation and refunds.
With a 3PL solution, you’ll never have to deal with customer returns or customer service again. The 3PL partner takes care of all customer complaints and returns. How much more efficient would your business be if you no longer had to worry about dealing with customer service or returns?
#10 Focus on Your Core Business Tasks
With a 3PL partner taking care of your logistics, it frees up your time and resources to handle other vital matters.
With a 3PL solution, you never have to worry about spreading yourself too thin in your business functions.
A 3PL solution can keep your head in the game, allowing you to focus on your company’s core competencies that make your product, service, or value offering great.
The Final Thought – Can Your Business Benefit from 3PL?
Do you think your eCommerce fulfillment can benefit from a 3PL solution? If your business is expanding, start the process of due diligence on a 3PL provider, and prepare for future growth. Let us know, we’d love to hear from you!