Ecommerce is an essential piece of the global economy. With online sales contributing $4.88-trillion to global GDP by 2021, and a projected 2.4-billion online buyers, eCommerce continues to grow. Many people are learning the value of working from home, opening online ventures to make a living out of selling products in virtual retail marketplaces.
If you’re a serious eCommerce entrepreneur looking to scale your business from your backyard to the big time, you’re going to need some help. Working with the right people in your business will separate you from your competition.
When you can offer superior, seamless service to your customer from start to finish, you know you’re winning at the game. Working with a logistics company helps you deliver for your customer, providing consistency to your ordering and shipping process.
Why try and handle everything yourself? Eventually, you’re going to have to grow. While it’s nice to think that we can all aspire to Jeff Bezos-style fame, and build an empire from the basement, there’s no need for that.
In today’s eCommerce era, some firms specialize in every step of the eCommerce phase, from sourcing to fulfillment. Today, all you need it an idea, the right network, and the right recipe for eCommerce success.
Working with a fulfillment company fills a considerable amount of required to make it online in the eCommerce world. What if we told you you’d never have to deal with customer service issues again? Or worry about tracking an order that a customer didn’t receive?
Working with a fulfillment company can solve all your logistical issues without any hassle from the minuscule to the magnificent.
Choosing the Right Logistics Partner
Working with a logistics firm sounds great, right? We bet you can’t wait to start. However, the reality is you’re not ready yet.
Merely running a search online for 3PL logistics services in your area isn’t enough. There are plenty of companies offering these types of services today. You’ll need to do your due diligence on them before you commit to any service level agreement.
In this post, we’ll give you 13 questions to ask when selecting an eCommerce fulfillment service.
1. What Is Your Service Guarantee?
Before you ever sign up with a fulfillment service, you need to know that they offer a no-nonsense service guarantee. That means that the company will deliver on time, every time. In the fast-paced world of eCommerce logistics, there’s no room for error. If a parcel goes missing, you need to know where it is, and when it’s going to reach its destination.
The last thing you need is a late delivery from your 3PL partner, causing you a lost customer. A service guarantee is now an industry standard, so make sure they include it in the service level agreement. The company needs to be willing to put the guarantee in writing, and it should be part of the standard terms and conditions on the contract, not an appendix document.
2. What Is the Companies Accuracy Rate and How Is It Evaluated?
When searching for your fulfillment partner, it’s vital you look at the company’s accuracy rate. The accuracy rate will never be 100%, and you can’t expect perfection. However, you can get pretty close to it with the right 3PL team.
There are different methods for measuring efficiency and accuracy from firm to firm, depending on how they quantify results. Some companies may take an approach that’s somewhat deceiving, giving an inaccurate view of its results.
For example, a company stating its accuracy rate is 98.5% might compute that rate based on the number of boxes it ships. However, should it make the calculation based on the number of orders shipped, the accuracy rate might drop to 95%.
As mentioned, it’s impossible to get a fulfillment center that has a 100% accuracy rate. However, your prospective firm should have a solid plan to assist with mistakes as and when they arise. Ask about the policies involved with making up for the inaccuracies and the exact procedures involved with getting the order into the customer’s hands as soon as possible.
It’s important to note the financial responsibilities for fulfilling missed orders. If the parcel should end up at the incorrect address, the fulfillment company should absorb the economic costs of returning and re-sending that parcel to the correct customer.
3. Will Your Logistics Technology Systems Integrate with My Website?
As a successful eCommerce entrepreneur, you need a fulfillment service that integrates with your current systems. You spent a career building your current system, and your fulfillment provider should work with your existing systems to provide a customized solution for your needs.
Your fulfillment partner needs to provide a means to seamlessly move orders from carts, through the checkout system, and into the order management system that captures the client delivery and billing information.
The fulfillment provider should provide you with a means to upload batches manually or enter orders through an automated solution. Ensure that you maintain access to your client information and have full access to all data produced by the 3PL partner.
The fulfillment company needs to ensure that their inventory systems can integrate with your management systems in real-time. This feature is critical for providing real-time stock updates to your store to avoid over-selling items.
With access to your inventory, your 3PL partner needs to provide your customer order information, tracking details, and all charges, while maintaining this information in a secure web interface and database.
Reporting is critical, and your fulfillment provider needs to keep tabs on all reports, issuing them to you on-demand from your dashboard. Ensure that the software you have provides seamless integration with your current systems for effortless tracking and updating.
4. Will I Get a Dedicated Account Manager?
When things go wrong, you need a direct line to the company. 3PL warehouses and logistics firms have plenty of people working there and thousands of accounts. It’s a volume business, and there’s inventory moving in and out of the door all day.
Therefore, you need a dedicated account manager you can call when you’re working in a crisis. If you need to find a parcel status or make sense of a report, your account manager needs to be there for you.
In essence, an account manager is almost like an employee of your business. Your account manager will be familiar with how you operate and manage your business and your expectations when dealing with your 3PL partner.
A customer service team is a secondary option, but they never have the same efficiency as a dedicated person looking after your interests.
5. Who are Your Freight Forwarders and Shipping Partners?
When signing up with a 3PL partner or warehouse, it’s vital you find out who they use as shipping partners. It’s best if your new partner relies on multiple channels for freight forwarding. UPS, FedEx, and USPS are all viable options offering different rates for different types of parcels.
Your 3PL partner should know when to ship something insured and save money on shipping fees. If your 3PL partner offers multiple shipping options, they’ll never have to deal with logistics issues due to strikes or company problems with shipping partners.
Working with more than one partner ensures that you’re always getting competitive rates. When 3PL firms with extensive inventories do business with freight forwarders, they get preferential pricing, and by having multiple vendors, they play down the price to your advantage.
6. Are there Discounts Available on Rates?
Your 3PL partner should scale with you as your business grows. It makes sense that as you start using the service more, you should get some sort of discount on rates. Look for vendors that offer a sliding rate scale. With this model, the more you use the service, the lower the price.
It’s important to note that the 3PL provider will use the same model with its freight forwarding service. As a result, they get savings for shipping more goods, and they should pass those savings on to you. Make sure you have a good understanding of the rate card before committing to your provider.
Most 3PL providers operate on a model that updates pricing with movements in transportation costs across the shipping and aviation industry. Therefore, existential events in these areas of transport will affect the pricing model charged by the 3PL.
Ensure that you have an agreement to lock in prices to a specific cost, and have your 3PL partner guarantee these prices.
7. What Is the Warehouse Capacity, and where are the Warehouses Located?
When signing up with your 3PL partner, discuss how much space you get in the warehouse included with your service level agreement. Some 3PL partners will offer a great rate on a specified section of warehouse space, say 3-square feet. However, they dramatically increase the cost of the warehouse space for every additional foot after that.
Ensure that the 3PL provider is playing fair with its pricing model and don’t fall victim to clauses that unfairly increase prices.
If you’re working with inventory that takes up a significant amount of floor space, negotiate with your 3PL provider for the best deal. Don’t be afraid to shop around and pit quotes against each other to create a buying war for your business between the providers.
It’s also important to understand where the 3PL partner locates its warehouses. Look for partners that offer locations in multiple hubs across the country: the more sites, the better. Most companies operate out of one central warehouse, so make sure you know its location.
8. Will You Insure My Inventory in Your Warehouse?
Accidents happen all the time, and your 3PL partner could be the victim of freak storm damage from a hurricane or tornado. Maybe there’s a flood, and the warehouse loses all your inventory. The 3PL partner needs to have a plan to deal with handling the effects of natural disasters on its business.
Ask the 3PL provider about its insurance, and make sure you have some way to verify the policy to check its authenticity. Most 3PL partners will provide a copy of the policy upon your request. Ask the consultant about filing a claim if you lose your inventory to fire, water damage, or theft while it’s in the 3PL partner’s custody and care.
Insurance is also vital for your goods while in transit. If you’re shipping high-value items, make sure the 3PL provider has the correct shipping insurance.
9. Are there Any Maximum or Minimum Order Requirements?
When signing up with your fulfillment partner, look for the minimum or maximum order quantities mentioned in terms of service. These rates matter if you’re starting and want to keep your costs low.
Minimum orders refer to the lowest quantity the 3PL party will need on a daily, weekly, or monthly basis. If you drop below this level, the company might introduce penalty rates or refuse to ship your orders without a retainer fee to cover its costs. Make sure aware of these terms before you finalize your agreement.
The maximum order level also plays a role if you’re shipping plenty of items every day. The maximum order quantity could be a problem if your business reaches a specific size, and the 3PL can no longer cope with your requirements.
You need an eCommerce partner that grows with you, accommodating your business needs as you scale your operations. When assessing your potential partner, make sure you keep in mind your current and future needs. Make sure the partner can grow with you without running into issues as you scale.
10. Do I Need to Make a Long-term Contractual Commitment?
When assessing a potential 3PL partner, make sure you look at the contract terms. Are they asking for a long-term commitment from your business? Never let a 3PL partner lock you into terms for longer than 3-months.
A 3-month contract is sometimes beneficial. The current climate means that 3PL companies are under heavy pressure to remain competitive. When one company starts offering a service to get an edge, most of the other follow suit or risk losing market share.
As a result, there are plenty of 3PL partners that offer month-to-month services where you can cancel within 30-days. That makes things flexible for you, and if you feel you aren’t getting the servicer you expect, you’re free to walk away from the deal at any stage, with minimal notice.
However, some companies might offer special rates of bonus services if you take extended 3-month or 6-month contracts. Moth-to-month has its benefits. However, if you’re dealing with an excellent 3PL partner, you’re ideally trying to build a long-term relationship with the firm.
So, if you find a partner that’s delivering, and business is going great, feel free to negotiate with the management. A contractual arrangement could benefit your bottom line while offering you premium service from the 3PL partner.
11. What Information Do You hold on Your System and Is My Data Secure?
We live in the information era, where data has a price, and everyone is trying to get as much of it as possible relating to their business. Data is now a commodity, and it’s valuable in the hands of legitimate and illegitimate business interests. We’ve all heard about the cyberattacks of credit bureaus, cryptocurrency exchanges, and even government databases. So, what makes your 3PL partner think that its security systems are up to par.
You need to know what the firm is doing to safeguard its assets from attempted theft by hackers and cybercriminals. You are responsible for the safe storage of all your customer information, and who you share it with can determine a host of different outcomes, depending on the parties involved.
You’re giving the 3PL partner the name, physical address, cellphone number, and email of your client. That data has tremendous value, and other corporate data research firms are willing to pay top dollar for that data. Make sure you safeguard your customers – and select a 3PL partner that values the privacy of your business and your clients.
12. What are Your Billing Cycle and Payment Options?
Receivi8ng payment is a critical part of your business. Understanding your customer accounts and where the money is at all times, is a crucial aspect of being in business. As a successful eCommerce entrepreneur, you have to account for every penny your spend.
When you decide to pay the bills is as important as keeping track of the payment amount. Paying the wrong bill at the wrong time could end up crippling your cashflow, causing problems with your finances and operating costs.
Most 3PL partners want new clients to settle account balances weekly. 3PL partners understand that eCommerce is a volatile business, and companies blow up and go out of business all the time. The last thing they want is for you to leave them holding the bag for running your logistics throughout the month.
Therefore, the weekly model works for them. However, after building your reputation with the company by making timeous payments on your account, they might extend your account to a bi-weekly or monthly statement.
However, make sure you never pre-pay for any form of shipping with your 3PL partner. Make sure they include itemized billing so you can track your expenses and understand the companies pricing model. Never be afraid to compare the costs of your 3PL services with another provider.
In this economy, 3PL providers are struggling, and they need new business. You have some leverage when negotiating terms, so make sure you get the most out of the deal.
14. Is there a Standard Service Level Agreement Available?
When talking to a representative over the phone or email, they’ll try to sell you on the company as best they can. There’s nothing wrong with that. Listening to a good sales pitch means that the company takes time to train its employees, and you’re dealing with a group of professionals.
However, during your conversations with different reps, you might encounter someone who makes you promises on the phone regarding the company’s services. When you finish your communication with the rep., make sure you get everything in writing.
Your 3PL partner should have a standard service level agreement available. If your rep does offer you any special rates or services beyond what’s in the service level agreement, make sure you get them to commit to that in writing as an addendum to the final SLA contract.
Selecting an eCommerce Fulfillment Center – Key Takeaways
Outsourcing your fulfillment will revolutionize your eCommerce business model.
Even if you only have a few items in your line or start a small eCommerce venture, 3PL can help you fast-track your success.
Why go to the hassle of turning your home into a warehouse and logistics center?
A 3PL fulfillment partner can take the hassle out of storage, picking, packing, shipping, and even customer returns!
Choose a fulfillment partner that meets the logistics needs of your business.
Make sure you sign up with a 3PL partner that grows with you as you scale your online business.
Remember to do your due diligence on your proposed 3PL partner using the questions on this list.
Don’t be afraid to shop around for a few 3PL partners.
Check if there are niche 3PL fulfillment partners available for your niche.
Find 3PL partners with a balance of reasonable rates, excellent service, and diversified facilities to ensure you get a fully-functional, reliable fulfillment service, anywhere in the country.
Your 3PL partner needs to understand your business needs, seamlessly integrating with your business systems and operations. The partner is there to add value to your business by offering a solution that you need.