3PL, or Third-party logistics companies (also sometimes referred to as fulfillment centers) are the modern solution for inventory management and order fulfillment at any scale. Running a fast-growing eCommerce business? Struggling to fulfill all the orders by yourself? Or maybe you don’t have the space to store your products. It might be time to consider outsourcing some of those responsibilities to a 3PL so you can get back to running your business the way you’re supposed to.
Before partnering with a 3PL, there are some things you will need to know to ensure you get the best results for your business. Continue reading to find out what a 3PL can do for you, how to choose the right one, how much it might cost and more…
What does a 3PL do?
Third-party logistics companies provide a number of services that can help alleviate the pressure of trying to manage a growing eCommerce business. The most common services a 3PL may offer include:
- Storage and Warehousing – store your products in a secure warehouse with on-site management and up-to-date security systems.
- Inventory Management – have your inventory tracked, managed, and audited by industry leading experts
- Picking and Packing – have your products picked and packed with care and precision by trained professionals
- Shipping (domestic and international) – get your orders fulfilled efficiently, accurately and shipped to your customers safely
- Receivals – send your products straight from the manufacturer to your 3PL for processing
- Returns – have any order returns processed on-site and communicated back to you
Not all 3PL’s are the same, some may provide additional services than listed above or entirely different ones altogether. Generally speaking though, these are the most common logistics services a 3PL will offer.
How does a 3PL work?
3PL’s provide relief for eCommerce business owners who cannot, or no longer want to manage and fulfill their orders and inventory. The typical flow for a 3PL Fulfillment Centre looks something like this:
|Products are made by the manufacturer
|Your business advertises products online
|Manufacturer ships products directly to 3PL warehouse
|Orders placed online are received in 3PLs’ database
|3PL picks, packs and ships orders to your customers
This is standard among majority of 3PL’s providing fulfillment for eCommerce businesses. 3PL companies act as a one-stop-shop for all order fulfillment and inventory management services you may need as a growing business.
Pro’s and Con’s of Partnering with a 3PL
There are many benefits to working with a 3PL but in the business world there is no ‘one-size-fits-all’ approach. Outsourcing certain aspects of a business might work perfectly for some and not so well for others. This section will outline some of the pro’s and con’s of partnering with a 3PL to so you can make the right decision for your business.
- Time – by using a 3PL to handle your logistics, you are freed up to focus on growing your business. Most 3PL clients experience significant growth when they start using a 3PL simply because they are allowed more time to spend working on the business and less time working for it.
- Work with professionals – by working with a 3PL, you are putting your products and orders in the hands of industry experts. With the logistics industry ever-evolving, you can be sure they will be keeping up with all the latest technologies and fulfillment practices.
- Scalability – when storing your inventory at a 3PL, you are only paying for the space you use, having a down period? Scale back your inventory levels and pay less for storage. Sales picking up again? Have more stock shipped to the warehouse and only pay for the extra space used. This is particularly effective for brands that are more popular during certain seasons.
- Ship with ease – some 3PL’s will provide their own means of distribution, whereas others will partner with companies who specialize in shipping orders e.g AusPost, DHL etc. Either way, you won’t have to worry about it anymore.
- High-level inventory management and tracking – as an eCommerce business, you may have hundreds or even thousands of SKUs in your inventory. Managing this by yourself can be a handful and takes countless hours of organizing. Outsourcing your inventory management to a team of experts will free up a lot of time so you can focus on other important parts of your business, like marketing and customer communications.
- Resources – a typical 3PL has greater access to the necessary resources for storage and distribution than the average small business owner. By partnering with a 3PL you are tapping into this resource pool, therefore you will have more options for things like order packaging and void fill, racking space, carton storage etc. at a fraction of the price.
- Less Visibility – you will have less direct contact with your inventory and orders. You will still have access to any relevant data but physical access to your products will be limited. Therefore, it is exceptionally important to ensure you partner with a 3PL that exercises transparency of operations and good communicative practices.
- Cost – for smaller eCommerce brands (<50 monthly orders) it is possible that the cost of a 3PL’s services will seem a bit expensive. However, a good 3PL will usually offer customizable pricing solutions in this case to make sure you still get the results you’re looking for.
How to choose the right 3PL?
Now, the most important part, how to find a 3PL that’s right for you. 3PL’s provide many services in logistics, some of these may be highly beneficial to your business, some may not be useful to you at all. Either way, if you’re an eCommerce brand it is likely that at some point along your business growth journey you will be looking to work with a 3PL.
Key things to look for in a third-party logistics company:
- Flexibility – as you likely already know, managing a business is never straightforward, and sales may fluctuate regularly throughout the year. Working with a 3PL that is flexible with their storage and pricing solutions is key to successfully navigate any downturns or growth spurts.
- Security – ask about what security measures are being taken to ensure the safety of your products.
- Communication – a great 3PL will make every effort to stay on top of client communications and remain transparent throughout operations. Most 3PL’s will have a contact us or get a quote page. A company’s response to enquiries through these pages is a key indicator of the level of their client communication practices.
- Technology – keeping up to date with modern technologies is crucial in the logistics industry. Ensure that your 3PL is staying current with their integrations. In addition, partnering with a 3PL who’s software integrations are compatible with the software you are currently using will provide a much more seamless transition. If they are not using compatible technologies, at least ensure they are willing to go above and beyond to integrate your database in an efficient and accurate manner.
- Location – do they have multiple locations? Or are they at least situated optimally for shipping your orders to your most common customers.
- Reviews – check out client reviews to see what people are saying about their experience.
Whether you decide a 3PL is the right fit for you and your business or not, third-party logistics companies are by far the most modern solution for order fulfilment today. Every year they are helping eCommerce businesses experience exponential growth by handling all of the manual labour requires and allowing business owners to get back to what they do best; running a business.