We live in unprecedented times. The Covid-19 pandemic has brought to a screeching halt innumerable forms of business activity we usually take for granted. It seems that no one is immune to the disruptions created by the virus.
However, some businesses are surviving and adapting better than others. This usually isn’t due to any inherent skills possessed by the business owners, but rather the structural qualities of their firms. Operational decisions made months or years ago are now either paying dividends or exacting a significant cost.
This is especially true for logistics. Those who arranged their companies for maximal flexibility and logistical resilience are able to continue their operations with minimal disruption. Those who didn’t are facing monumental challenges.
So exactly what sort of difficulties are businesses facing during these times and how are those difficulties expressing themselves in their operations? And how do third-party logistics firms fit into all of this? Continue reading below to find out.
What Is 3PL?
In case you haven’t read our last article about 3PL, we’ll go over some of the basics here very briefly.
Third-party logistics providers offer complete and comprehensive fulfillment services to businesses that ship significant amounts of goods both domestically and overseas. Think of them as a turnkey solution for your warehousing, shipping, fulfillment, and logistics requirements.
They’re ideal for preventing and mitigating the issues caused by service interruptions like Amazon’s recent suspension of non-essential shipping.
Amazon Suspends Non-Essential Fulfillment-by-Amazon Shipping
Recently, on March 17, 2020, Amazon notified the users of its Fulfilment-by-Amazon (FBA) service that it was suspending all fulfillment of goods deemed “non-essential.” It would continue to fulfill goods deemed “essential,” which included items in the following categories:
- Industrial & Scientific
- Health & Household
- Pet Supplies
- Beauty & Personal Care
While items already sent to Amazon fulfillment centers would be “grandfathered in” and shipped as usual (at least in the United States), further items were not accepted unless they fit into one of the categories listed above.
Consequences for Shippers Who Use FBA
The consequences to business owners of Amazon’s decision were dramatic and immediate. Many of Amazon’s sellers used FBA to fulfill their orders and had arranged their businesses around that service.
Disruption During an Already Difficult Time
The effects of Amazon’s decision to suspend the fulfillment of non-essential items could not have come at a worse time for many businesses. Social distancing requirements put in place to slow the spread of Covid-19 had already led to many businesses working with a skeleton crew or closing altogether.
Depending on the products or services they offered, many businesses were already seeing significant decreases in revenue.
The disruption created by the sudden suspension of non-essential fulfillment piled yet another difficulty onto an already tall heap of problems.
Those firms who attempted to continue to function by shifting to a Fulfillment-by-Merchant (FBM) model experienced a sudden and steep increase in the amount of work required to ship orders. For companies who sold a large number of orders, the logistical work required to get those orders out to customers increased exponentially overnight.
Inability to Bring In Additional Staff to Help
Not only did those firms who switched to an FBM model experience an immediate increase in the amount of logistical work required of them, but they were also often unable to bring in additional people to manage that workload. The aforementioned social distancing rules in many areas of the United States prevented businesses from functioning as they normally would.
Workarounds for Companies Who Use FBA
Firms confronted with Amazon’s decision to suspend the FBA program for non-essential items were forced to make a decision. They could suspend all shipments of products and experience a 100% decrease in revenue (not a realistic option for most companies), fulfill their orders in-house through Amazon’s Fulfillment-by-Merchant (FBM) program, or switch to a third-party logistics provider.
For reasons we’ll describe below, this last option was, in our view, the best choice for many companies.
Fulfill Orders In-House
Some firms chose to begin fulfilling orders in-house during the FBA non-essential service interruption. As many companies are finding out at the time of this writing, this approach carried with it a myriad number of difficulties. We’ve already discussed those challenges above (increased workload, an inability to bring in additional staff to deal with that workload, etc.) and suffice to say that they made this solution a less-than-optimal one.
Use a Third-Party Logistics Provider
While some firms chose to suspend operations or begin fulfilling orders in-house, others went a different route. The latter chose to use a third-party logistics (3PL) provider. These firms realized significant benefits that weren’t experienced by those who chose a different route. From the diversification of operations providers to the prevention of service disruptions, these firms were in the best position to weather the recent Covid-19 storm.
Issues That 3PL Prevents and Avoids
Companies who switched to a 3PL solution or, better yet, already used a 3PL provider at the time the Covid-19 crisis began to spread across America experienced significantly less disruption than those who didn’t.
The use of these companies allowed firms to avoid multiple issues and challenges currently faced by those organizations that didn’t make use of a 3PL provider’s services.
Over-reliance on Amazon
With respect to Amazon specifically, those retailers and wholesalers who both sold the majority of their goods on Amazon and relied on Amazon to fulfill their orders via the FBA program were, unknowingly, taking on a huge amount of risk.
The risk to which we refer is a lack of diversification. In this case, by selling all of their goods on Amazon and relying on Amazon to ship their products, any decision by Amazon to discontinue or alter the services they offered could have a disastrous impact on their company.
In fact, such a decision was exactly what befell these companies. When Amazon decided to discontinue the fulfillment of non-essential products, firms that relied entirely on Amazon for the marketing and distribution of their products were devastated.
While Amazon provides valuable services to millions of businesses worldwide, it is a mistake to rely too heavily on a single service provider for multiple components of a business. This is especially true when that service provider is a private-sector organization without a contractual obligation to keep its services active.
Amazon is a boon to many e-commerce businesses. But your business shouldn’t live or die by the decisions that Amazon makes. By diversifying your operations and outsourcing your logistics to a third party, you increase your flexibility and decrease your reliance on a single business. In other words, all of your eggs will no longer be in the same basket.
We’ve previously discussed the benefits of using a 3PL provider. They are numerous and significant. They’re especially pronounced in times of economic disruption like the one currently being caused by the Covid-19 outbreak.
3PL providers are perfectly suited to avoid service disruptions like the one caused by Amazon’s discontinuance of its FBA program for non-essential items. For example, while the FBA program is temporarily suspended until April 5, the Fulfillment-by-Merchant (FBA) program remains active for non-essential and essential items alike. In other words, all Amazon sellers who take care of their own fulfillment (via in-house solutions or 3PL) continue to ship without interruption.
Not only are 3PL solutions more robust than FBA strategies, but they’re also superior to in-house fulfillment. For all of the reasons we’ve previously discussed, in-house solutions at many e-commerce businesses are currently strained to the point of breaking. Covid-19 gathering and movement restrictions and the sudden increase in demand for in-house shipping caused by the Amazon interruption have rendered in-house solutions inadequate.
Fulfyld – The Perfect Solution for E-Commerce
Over and above all of the advantages listed above, Fulfyld is specifically designed to provide value to e-commerce companies of all shapes and sizes. We specialize in providing third-party logistics services to e-commerce companies that desire uninterrupted and reliable service.
During the Covid-19 crisis specifically, we remain fully operational at the time of this writing. We’re taking every possible step to protect our employees, our clients, and their clients.
In fact, we’ve made extraordinary efforts to ensure that as many people as possible are protected during this difficult time. We’ve created a direct pipeline to China for the shipment of necessary personal protective equipment (PPE). We hope that our small contribution helps in the greater fight against Covid-19.
On a final note, while we paused before releasing this article during a time of national difficulty, we realized that the best thing we can do for our clients is what we’ve always done. We’re the best at what we do and we want to share that capability with the world, especially during a time like this. We want to keep as many e-commerce clients operating at full capacity as we can because we know that thousands of jobs, including ours and yours, depend on it.
So, if you’ve been running into difficulty after the Amazon service interruption, the new social distancing rules, or for any other reasons, please don’t hesitate to reach out to us. We’d love to work with you to develop a perfect, custom logistics and fulfillment solution for your e-commerce business.