2020 is well underway. The coronavirus pandemic swept across the world, forcing governments to lockdown countries to prevent the spread of the pathogen in communities. As a result, people have to stay indoors.
Wherever they can, consumers are looking to buy products from home. Nobody wants to go to the store if they can help it, and food delivery services are skyrocketing in sales. Ecommerce is booming. If you’re in business selling products online, chances are you see a boost in your business this year, thanks to more people staying home and ordering online.
Seeing your company grow to new heights is an exhilarating feeling. When the orders start flowing in every day, and you start meeting your sales targets, it’s a cause to break out the champagne. However, the party stops when you realize you have stay up all night to fulfill the influx of new orders.
Are you new to eCommerce, and find yourself dealing with the rapid expansion? Chances are you’re struggling with a specific aspect of your fulfillment and logistics process. Relax, that’s okay. Most eCommerce entrepreneurs run into issues during periods of growth.
It’s time for you to start thinking about incorporating a 3PL partner into your business strategy. You don’t have the time to sit around packing orders and dealing with customer returns all day. As an eCommerce entrepreneur, your job is to build the company and not play the employee’s role.
In this post, we’ll look at ways to use a 3PL partner to reduce eCommerce fulfillment headaches.
1. Understanding Cost-Per-Order
The expenses involved with fulfilling your orders come in six categories.
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Management
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Freight
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Direct Labor
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Indirect Labor
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Facilities
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Packing Supplies
For most eCommerce businesses, freight is the leading expense. In some cases, your freight costs might be more than the total of the other factors combined.
For the balance of the business expenses, more than 50% of the remaining expenditure is due to labor and management costs.
Break down your cost categories, and analyze your expenditures. You’ll find you have plenty of room to implement strategies to bring down your costs.
2. Reduce Shipping Costs
As mentioned, your freight costs will likely be taking most of your budget. Therefore, it makes sense to reduce your expenses where you can, to increase profitability. By signing up with a 3PL, you get to leverage the company’s distribution network and cheaper freight rates.
3PLs negotiate contracts with freight forwarders to get the best price possible. Since the 3PL is shipping thousands of orders for multiple companies every day, they have more buying power than your company. Therefore, freight forwarders and couriers are willing to deep-discount the services to the 3PL, which they pass onto your business.
Your 3PL negotiates contracts with freighters frequently, allowing them to adjust to market conditions and save money.
By using the enterprise shipping system offered by the 3PL, you get control over your processes from all locations. Your business will reduce the manual effort required for the preparation of international orders. As a result, you get better maintenance and reduce your compliance costings.
Most 3PLs provide cartonization, saving your company on packing costs. Ensure you conduct an internal audit on your shipping costs to see if you’re paying too much. Get quotes from other 3PLs to see if they offer a better rate.
3. Understand Your Packing Costs
Packaging costs make up a significant chunk of your logistics expenses. Finding the right suppliers for boxes, bubble wrap, padded envelopes, and tape is challenging. By signing up with a 3PL, your company benefits from the economies of scale provided by its packaging suppliers.
3PLs package and deliver thousands of orders every day. Therefore, they get rock-bottom rates on all packaging supplies. In some cases, the 3PL can offer you customized, branded packaging for the same price you’re currently paying for your sundries.
4. Boost Productivity
How many hours of the day do you waste on tasks relating to your eCommerce fulfillment strategy? It’s challenging for many new eCommerce entrepreneurs to let go of the logistics side of their business. Keeping control over your processes might end up costing you money.
As your business grows, you need to accommodate the boost in order volume. You can hire people, but it’s going to take time to train them to do the job, ensure the accuracy of their order fulfillment, and there’s the additional burden of the cost of payroll taxes.
By hiring a 3PL, you resolve this issue of scaling, allowing you to free up your time. As a result, you spend less time working “in” your business and more time working “on” your business.
When you’re free to do the creative work in the company, you have the time to spend on expansion and managing your processes, rather than trying to do it all yourself.
5. Effective Warehouse Management
Why are you stumbling around in your garage or parent’s basement looking for inventory? Sure, most eCommerce entrepreneurs start from home or small rented office space. However, as the business grows, your needs for eCommerce fulfillment begin to shift.
There comes a time when you need to move your business out of your home and into a warehouse. A 3PL partner is the best option for this change in your strategy. The cost involved with maintaining a warehouse is astronomical, even if it’s a small venue.
You might have to resort to using a storage unit until you have the capital for a warehouse lease. Even worse, you might consider going to the bank for a business loan or mortgage on a commercial property. Sure, there’s nothing wrong with taking a risk if you believe in your business’s future.
However, the factors involved with making that decision require some serious thought, and consultation with financial and legal advisors – and those fees don’t come cheap.
With a 3PL partner, you have a reliable warehouse with distribution hubs across the country. You can choose to warehouse your inventory at multiple locations to improve the service delivery to your customers. You get this without owning any responsibilities attached to a lease or mortgage on a commercial building.
Thanks to the competitive nature of the 3PL industry, most providers have short-term contracts with customers. As a result of the need for companies to remain competitive to attract your business, some offer 90-day service contracts, renewable at the end of each quarter.
6. Automate Processes
When you’re starting with your eCommerce company, it’s a one-person show, with you wearing many hats. You might eventually hire one or two people to help you out with picking and packing orders, but ultimately, your business needs supersede what a few employees can offer.
As a result of the rise in new order volume, you find yourself facing a crossroads. Do you create an in-house team and a complete warehousing and logistics department? Think about the headaches and costs involved in a project like that.
Sourcing funding and partners for expansion, premises, distribution, logistics – it all sounds like a nightmare. With a 3PL partner, you can access a purpose-built business designed to specialize in the delivery of eCommerce fulfillment services.
As a result, you benefit from the automated processes the copay builds, investing in them yourself. Building systems in business is one of the biggest challenges you have. Therefore, by using a 3PL partner, you leverage the companies systems, helping you control your entire inventory and logistics strategy from within a custom-designed software program.
7. Leverage Technology
Building systems and processes isn’t easy. If you’re thinking about developing an in-house solution for your logistics, you better be working with some bright minds. You can expect the process to take months to implement, and years to refine.
Tweaking your processes every week to find your balance between operating costs and profitability takes constant maintenance. Expect to add hours to your weekly schedule until you get everything up and running. The bad news is the work doesn’t stop there. Even after you implement your system, you’ll need to monitor the process continually.
Why go to all this hassle? Unless you want to bet the next Jeff Bezos, why take on all this extra responsibility and risk in your business?
Working with a 3PL partner allows you to leverage the time and money they spend on building, implementing, and executing systems and processes. If you work with the right 3PL, it could revolutionize your business, freeing your time to focus on your core competencies.
A 3PL will issue you with access to its cloud-based software system. You get to monitor all your orders in real-time, right up to its final destination.
Beneficial systems technologies available to you through a 3PL partner include the following.
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Transportation Management System (TMS)
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Real-time Tracking of all Orders
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Consolidation and Route Optimization Software and Tools
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Reporting and Data Analysis Tools
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Freight Auditing
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Payment Gateway Solutions
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Industry and Operational Expertise
Taking the initiative to understand your customer needs and communicating those requirements to a carrier can dramatically increase your business performance. With a 3PL, you have a platform to fine-tune the logistics process to your business needs.
The 3PL partner will act out the role of the coach on your team. They’ll teach you the best practices relating to your products’ transport and the eCommerce fulfillment strategy of your business.
8. Overcome Challenges with Network Capacity
When you’re a small eCommerce company, it’s challenging to offer convenient, fast shipping times across the United States, and the world. If you’re shipping out of one central location, say in California, it’s going to take longer to get packages delivered to NYC than Seattle.
With a 3PL partner, you get access to a warehousing network across the country. You can strategically place your inventory close to commerce hubs where you get the best response from customers. This strategy allows you to cut your delivery times in half, improving the customer experience.
9. Improve Service
With the right 3PL partner, you can dramatically improve your service offering to your customers. With a 3PL partner, you don’t get the same mistakes you do with managing your logistics yourself. There’s no more incorrect labeling or misspelled addresses. With a 3PL partner, you get a competent, accountable partner who wants to improve your business.
With a 3PL partner, you no longer have to worry about customer returns. They’ll handle all aspects of your eCommerce fulfillment and returns, including dealing with angry customers – doesn’t that sound amazing? Customer returns, complaints, and refunds are all managed by the 3PL.
10. Manage Risk
As a small eCommerce company, you might rely on USPS for the delivery of your parcels. You might have an employee who handles all your logistics while the company is small – including delivering your daily packages to the post office.
Things could happen with your employee, or the USPS that delay order completion to your customers. If that happens to an in-house employee, you’re going to have to clean up the mess. You’ll also have to remain accountable to your customers and try to put out the fire that might cost you their business.
All types of hazards can occur while a package is en–route to its destination. Unplanned events happen all the time. However, with a 3PL, that issue is no longer your problem.
The 3PL partner will manage its fleet and drivers, and bring you results. However, while 3PLs dramatically improve your delivery accuracy, even they will occasionally make mistakes. The difference is that they have policies and procedures to handle the situation and resolve a positive outcome.
Wrapping Up – Why Give Yourself a Headache?
Going with a 3PL partner for your eCommerce fulfillment makes sense. Why go through the pain of managing the growth in your company when you can get some help? The most talented eCommerce entrepreneurs understand that they need people around them to help them achieve business directives.
By working with a 3PL, you get to hand-off a part of your business that chews up your time and resources. A 3PL can save you time and money on your logistics strategy, freeing your responsibilities to this department of your eCommerce business.
As a result, you get the time to focus on strategy and managing processes. With your additional availability, you lead your company into the future and the next stage of growth.
