Logistics might just be one of the most complicated parts of running a thriving e-commerce concern. There are so many facets to the issue of getting your inventory into the hands of your loyal customers that it can be hard to keep track of them all.
The complexity of logistics and order fulfillment is just one of many reasons to consider outsourcing those tasks to a third-party logistics (3PL) company. But there are many others. Continue reading below to see our top nine reasons to go with a 3PL company.
Because Logistics is a Specialty
Do you file your own taxes? Argue your own litigation in court? Build your own web servers? Hopefully, the answer to all of these questions is a resounding “no.” We assume that you let accountants, lawyers, and engineers do those things while you focus on building and maintaining your business.
So, why would you do anything else with your logistics needs? Logistics involves a complex web of requirements, competencies, and regulations. For most people, it is beyond their realm of expertise.
Just like with accounting, or law, or any other specialized field, leaving logistics up to the professionals is the best way to ensure that you competently execute that aspect of your business. Trying to do it yourself is a recipe for a slapdash and amateurish solution.
Scalable & Flexible
Logistics isn’t a plug-and-play kind of responsibility. There are a lot of moving parts that change from day-to-day and month-to-month. Some periods of time will see your shipping requirements slow to almost nothing, while others will require an ability to regularly move high volumes of products.
It’s not easy to build a logistics capacity that is well-suited to both the slow and peak times. If you build that capacity in-house, you’ll wind up with either high-volume capability that is frequently not in use, or low-volume capability that is sometimes overstretched and vulnerable to frequent errors.
3PL is a much more scalable and flexible solution. By contracting with a competent third-party logistics provider, you can be assured that your products will get where they’re supposed to go, whether you ship five products that month, or fifty thousand. Further, 3PL companies will be able to manage large and frequent shifts in the number of products you ship each month.
Focus on Your Business
You have a job to do. Your role is to grow a profitable business to the best of your ability. You have a limited amount of time in which to accomplish this goal. If you spend three hours every day ensuring that John Smith’s returned item is properly processed and that Jane Doe’s order is safely packaged your ability to grow your business will be handicapped.
While logistics are an incredibly important part of your business, there are better ways to make sure that it gets done than doing it yourself.
Contracting with a 3PL provider allows you to free up the time you need to focus on growing your business, rather than messing with the details of individual orders and shipments. It also frees you from the hassle of having to create, from scratch, an in-house logistics solution that may or may not work so well. So spend your time thinking about the big picture, and not the minor details about how Product X can best be sent to Customer Y.
We’ve all heard the expression “economies of scale.” There’s a reason it’s a cliche. Generally speaking, the more of something you do (or sell, or offer) the cheaper it becomes to do that thing. This is for a number of reasons. You’ll gain expertise. You’ll gain skill. You can put your human and machine resources to greater and more efficient use.
Logistics is no exception to this rule. Larger 3PL providers, who do nothing but logistics all day, can ship and manage your orders much more efficiently than you can. They have the knowledge, skills, workforce, and technology to make things happen much faster and cheaper than you’d be able to manage in-house.
Even when you account for their profit margins (which are typically very small anyway), a 3PL provider can get that package from Point A to Point B at a fraction of the time and monetary cost that you can. That’s their job, and they do it well.
Orders sent to the wrong address. Packages sent containing the wrong items. Orders that go unfulfilled. Delayed shipments. The list of potential pitfalls in logistics goes on and on. Each of these errors has a concrete cost in wasted time and reduced customer satisfaction.
And despite some folks’ tendency towards doing it all themselves, these errors are more likely to happen in-house. That’s because, while 3PL companies do nothing but logistics (and have gotten extremely good at it), in-house logistics solutions are made up of human and machine resources that aren’t specialized to the task.
Further, when an error does occur, 3PL companies have expertise in knowing how to best remedy the situation quickly and efficiently. In-house solutions are less flexible with their limited time available for solving problems and correcting mistakes.
E-commerce companies face a myriad of risks. From the small, like minor currency fluctuations, to the large, like pandemics and recessions. Outsourcing your logistics operations to a 3PL company helps the average firm to manage those risks in a number of ways.
First, the firm’s inventory is held off-site, usually in a location far from the headquarters of the organization. This helps to prevent inventory damage or loss in the event of catastrophes like fire, earthquake, or hurricane.
Second, because 3PL companies are typically larger than the e-commerce companies they serve, they have a better ability to absorb and deal with economic shocks than their clients. For example, while it may be difficult for a mom-and-pop e-commerce operation to continue fulfilling its orders through a pandemic, a larger 3PL company is more likely to have safeguards in place that would allow it to continue to function.
Finally, putting your logistics into the hands of a 3PL company creates a degree of separation between your organization and your order fulfillment. If a disaster or an inconvenience befalls your company’s leadership, your 3PL company will remain able to fulfill orders while management deals with the crisis.
Enable Expansion Into New Markets
Expanding into new markets can be a logistical nightmare. Unfamiliar customs regimes, duties, and foreign currencies and languages all combine to make establishing an economic foothold in a new location a significant challenge.
Luckily, these are the types of challenges that 3PL companies thrive on. Their experience and expertise in dealing with order fulfillment all over the world make it much easier for them to adapt to the nuances of any particular country’s commerce regulations. And while navigating the complexities of a far-away country’s customs rules might drive you up the wall, the same task is old-hat to a competent 3PL organization.
No Need for Infrastructure
Any e-commerce operation with a significant number of orders will need substantial infrastructure to handle that volume. At least, that was the conventional wisdom for a while. Now, with 3PL, even major players in the e-commerce industry can divest themselves of costly and unwieldy real estate and property they once used for logistics and order fulfillment.
Cost Smoothing (Predictability)
Shipping costs can be wildly variable. This is especially true when, as in seasonal e-commerce businesses, volume shifts substantially from month to month. For example, shipping 40 orders to California can result in a significantly different bill than shipping 400 orders to Hong Kong.
Most companies will do anything possible to smooth out those bills and increase the predictability of their shipping costs. Outsourcing one’s logistics to 3PL is one of the best ways to do this.
Most 3PL companies offer scale discounts. As you ship more products, the price per product decreases. Additionally, their ability to navigate the complex world of international shipping minimizes the cost, and therefore the variability, of order fulfillment.
When all of the advantages of a 3PL company are combined, the net result is one in which your overall costs are reduced and you’ll see less of a swing from month to month in average shipping costs.
There’s no getting around the fact that order fulfillment and logistics is a complicated process. Between the shifting regulatory requirements, complex economic calculations, and infrastructure requirements, there’s a lot to keep in mind when you’re searching for the perfect logistics solution.
And while there is no perfect solution, there is no question that outsourcing your logistics requirements to a 3PL company is the best available solution for most companies.
We at Fulfyld believe that we provide the best service for the best price available anywhere in the United States. By focusing purely on providing 3PL services to e-commerce companies, we’ve developed the expertise and experience required to get your orders fulfilled at the lowest price possible.
Drop us a line today. We’ll be in touch as soon as we’re able to work out a fantastic solution for your e-commerce organization.