How a 3PL Grows Your Ecommerce Business
The ecommerce industry has grown tremendously this decade – especially during the pandemic years. Ecommerce has, in many ways, reduced the barrier to entry, and so many new small businesses have emerged.
But every successful business reaches a point where growth seems overwhelming. You’re delighted that your business is expanding, but it also demands much more from you. You need to ramp up your customer support, expand your marketing efforts, and most challenging of all, streamline your logistics processes.
Managing inventory, processing returns, and providing fast delivery are challenges that many growing businesses face. And that’s why 3PLs have become integral partners for ecommerce merchants.
What is a 3PL?
A 3PL, or third-party logistics provider, is a services provider that manages another company’s logistics and supply chain management, including warehousing, distribution, fulfillment services, and more. 3PL providers have teams of skilled fulfillment experts to optimize your logistics and order fulfillment processes, ensuring customer orders are delivered securely and on time.
What 3PLs typically offer
3PL providers can help you scale sustainably and focus on growing your brand. 90 percent of Fortune 500s are using them for a reason – here’s how the partnership agreement works.
Ecommerce platform integration
Online stores offer many advantages over brick and mortar, but there’s one glaring problem; your physical inventory is separate from your store. That makes inventory management and tracking difficult – unless you have the right tech.
3PL providers have advanced software that integrates seamlessly with your ecommerce platform, making it easy to process orders, generate picking tickets, manage inventory, and even forecast demand.
FTL and LTL freight shipping and receiving
FTL stands for full truckload and LTL stands for less than truckload. As you might know already, these are two different models for freight shipping. In FTL, one truck takes all your orders for shipping, making it ideal for larger orders and faster deliveries.
In LTL, multiple businesses chip in on the same truck to have their small orders delivered. The result is a more economical shipping model, but the delivery speeds are slower and it’s not ideal for fragile goods or high-value products.
A poorly managed inventory can drive your business costs up significantly. Overstocking can unnecessarily increase your overhead costs, while understocking can lead to lost customers.
Moreover, poor inventory management and a lack of tracking increase the chances of theft.
When you work with a logistics provider, they leverage advanced technology to streamline inventory management. Moreover, a team of fulfillment experts will stock, track, and manage your inventory.
Picking, packing, and shipping
Getting picking, packing, and shipping right helps you increase customer satisfaction and loyalty. And 3PLs can be of great help here.
When you work with an experienced 3PL provider, their team of fulfillment experts manages your entire order fulfillment process. Their 3PL software generates picking tickets and their experienced team locates the items from the warehouse, reducing the chances of wrong orders.
Moreover, the team members are trained to securely pack the goods – using the right dunnage and box sizes – and make sure the orders are shipped on time. So, third-party logistics providers can decrease the amount of damaged or wrong orders and help you achieve faster shipping times.
Same-day shipping can be a logistics nightmare – and not just for your carrier. When customers place an order for same-day shipping, your fulfillment team has to act fast. They must quickly (and accurately) pick, pack, and ship the orders.
This increases the chances of mistakes and puts pressure on your team to deliver – especially if you’re a small business with a modest team.
However, since 3rd-party logistics providers have dedicated, skilled fulfillment teams and the right technology, they streamline your fulfillment process and make same-day shipping possible. Even at scale.
Reverse logistics (aka returns)
Processing returns is one of the worst parts of e-commerce, but it’s a necessary part of good customer service. A good returns experience can make the difference between a customer choosing to buy again from your business, or leaving you for a competitor.
Fulfillment providers manage your reverse logistics efficiently, giving customers a positive experience and improving customer satisfaction overall.
How a 3PL differs from dropshipping
When you work with a 3PL or adopt a dropshipping model, you don’t need to manage your own inventory, have your own warehouses, or ship your own orders. But despite the similarities, the two different types of fulfillment have some important distinctions.
In the dropshipping business model, you don’t truly own the inventory. You’re effectively a middle-man. When customers place an order on your ecommerce store, you forward it to the manufacturer or supplier who then picks, packs, and ships the order. As you can imagine, this makes you heavily reliant on the manufacturer – and can lead to some serious logistical challenges.
It also means you don’t have direct control over overstocking, meaning you can’t accurately predict shortages or prepare for demand surges.
Conversely, when you work with a 3PL provider, you still own your inventory and have control over the order fulfillment process. 3PL providers manage your services for you, but you still remain in control and they keep you in the loop. Completely outsourcing your supply chain and logistics operations fall under fourth-party logistics.
The benefits of working with a 3PL
Not sure if working with a 3PL is a good idea? Here are some advantages of partnering up with a fulfillment service.
Save time and money
3PL providers can help you save time and money in more ways than one. They can reduce errors and damages, streamline your order fulfillment process, and help you achieve faster shipping times.
Work with fulfillment experts
Fulfillment experts excel at each stage of the order fulfillment process, from accurately picking orders to packing them correctly. But their expertise can also help your business in a broader scope.
For example, fulfillment experts can improve your inventory management to forecast demand and prevent overstocking and understocking.
They also help improve the seemingly smaller parts of order fulfillment – like using the right-sized boxes – which can significantly improve your overall fulfillment process.
Grow your business to compete with Amazon
Amazon’s expedited shipping services and competitive pricing has made it difficult for small businesses to compete. How can you deliver faster without charging customers massive shipping fees? Well, you can work with a 3PL. They’ll help you achieve faster shipping times without driving costs through the roof.
What to look for in a 3PL service
As with any service, 3PL services are not all equal. If you’re looking to work with a 3rd-party logistics partner, it’s crucial to vet potential partners thoroughly and make sure they’re a good fit for your business.
Here’s a quick checklist of what you should look for in the best fulfillment companies.
A good 3PL partner should have the right technology to streamline your inventory management. Their warehouse and inventory management software should integrate with your ecommerce store, updating stock changes in real-time and performing more advanced functions like demand forecasting.
2-day shipping has become a standard expectation for modern consumers. Unfortunately, most consumers don’t realize that small businesses struggle to compete with Amazon-level fulfillment speeds. But if you’re looking to invest in a 3PL partner, it’s important to find one that can help you achieve 2-day shipping – at scale. That means delivering the same expedited shipping options in peak seasons, like the holidays, too.
Multiple fulfillment centers
Remember how we mentioned providing expedited delivery without incurring high costs? Well, a third-party provider can help you achieve this through a distributed system of fulfillment centers. Distributing your inventory across multiple, strategically placed distribution centers lets your 3PL partner fulfill and ship orders quicker.
Moreover, orders are sent to customers from their nearest location, reducing delivery fees and shipping costs.
Amazon FBA prep
You don’t need to use a 3PL for all of your supply chain and logistics operations. If you find Amazon’s fulfillment services more appealing, you might choose to stick with them.
But a 3PL can still help you meet Amazon’s stringent requirements here.
Amazon’s FBA program requires strict adherence to their criteria, which includes quotas for damaged goods and order accuracy. Meeting these requirements is tough, especially if your team is small or not highly trained. A good 3PL partner, however, can help you meet these requirements at scale.
A good ecommerce fulfillment company shouldn’t just provide logistics services. They should also offer to manage your reserve logistics – and optimize them, too. That means managing returns and providing customers with the best returns processing experience.
Kitting & customization
Kitting and customization help you increase upsells and improve your customers’ experiences by pairing items together and showcasing them as a collection. If you want to take advantage of this offering, try to find a 3PL partner with the right capabilities – one that offers customizations and helps you pair goods together.
Data & reporting
Supply chain and logistics processes are the backbones of any successful ecommerce business – but most business owners struggle to optimize them. That’s understandable because logistics is an especially demanding area.
But when you work with a good 3PL partner, they can help you optimize processes with data and reporting. They can leverage data to identify inefficiencies in the fulfillment process, forecast demand, and even detect stock discrepancies and potential thefts.
It’s also important to find a 3PL partner with data & reporting because it helps you keep tabs on their progress. When you have access to relevant data, you can monitor how well your 3PL is performing and if they’re meeting your agreed goals.
International shipping is a messy business because it involves clearing packages through customs, preparing the relevant documentation, packaging orders properly, and choosing the right carrier. So when hunting for a 3PL provider, it’s important to find one that not only offers international fulfillment but is skilled at it. Asked them questions about their process, including how they manage and prepare documentation, and which carriers are best for your needs.
When should you work with a 3PL?
Depending on the size of your business and the scale of your operations, you may not need a 3PL provider at all. But as your business grows, there comes a point where you might need some help to scale. Here are some signs that it might be time to find yourself a 3PL logistics company.
You’re shipping over 100 orders per month
If you’ve crossed the 100 orders mark, it means you’re ready to scale, fast. At this stage, ecommerce companies generally want to focus on growth – expanding into new markets, strengthening customer relationships, and expanding their visibility. You won’t want to be overwhelmed with logistics challenges and technicalities, so it might be time to consider fulfillment providers.
You’re running out of space to store inventory
If you’re running out of warehouse space, your options are to:
- Get more space – i.e. get another warehouse. That means more overhead costs and you’ll need to hire more fulfillment staff too.
- Get yourself a 3PL partner. They’ll store your inventory in their 3PL warehouses and their fulfillment team will manage it for you.
In this situation, it’s generally best to find yourself a 3PL partner. You’ll save on costs significantly and also won’t have to worry about operational challenges.
You want to offer free 2-day shipping
If competing with Amazon were easy, Amazon would probably expand its offering even further. 2-day shipping is no easy feat, but Amazon has consumers convinced that it is. So if you’re looking to offer expedited shipping without increasing financial risk, you might need to partner with a 3PL.
Third-party logistics (3PL) FAQs
Here are some of the most common questions that ecommerce business owners have about 3PL providers.
Why are third-party logistics important?
Third-party logistics is important because it helps the little guy compete with megacorps. Small business owners can’t easily reach Amazon-level fulfillment on their own, and offering expedited shipping without the right infrastructure can lead to financial ruin.
But a 3PL can help you scale sustainably and meet your fast shipping goals. Thanks to their distributed fulfillment networks, advanced technology, and teams of fulfillment experts, they can help you deliver faster while reducing fulfillment costs.
What is the difference between 3PL and a freight forwarder?
Freight companies offer specific transportation services – they move goods between two designated locations. A 3PL provider offers many services beyond transportation that small ecommerce businesses can benefit from. This includes warehouse management, inventory management, order fulfillment operations, and reverse logistics.
When should you use a 3PL?
You should use a third-party logistics company when you’re ready to scale your operations and need to focus on growth. With a 3PL managing the important aspects of your ecommerce business, you can focus on optimizing other business operations growing your brand.
How do you measure 3PL performance?
You can measure 3PL performance with the help of data and reporting, and also by observing physical results. For example, if your 3PL partner helps you manage demand surges in the holiday season well, you know their logistics support is excellent. And from a data perspective, you can look at how many orders are delivered safely and accurately, how balanced your stock levels are, etc.
Why you should choose ShippingTree as your 3PL
If you’re ready to scale, you might be considering partnering with a 3PL partner. But why choose ShippingTree?
Our fulfillment teams operate at the intersection of tech enablement of traditional expertise. When you work with ShippingTree, we help you streamline operational logistics and reach Amazon-level delivery speeds.
Because freight companies and Amazon FBA can only help you out so much. Our all-in-one fulfillment offering will help you manage the entirety of your supply chain and logistics operations.
Reduced shipping costs
You can’t provide expedited shipping consistently at scale without either charging customers more or reducing your shipping costs. With ShippingTree, you don’t have to make the tough call – you can make the right one instead.
Third-party logistics companies can be great growth partners that help you scale sustainably as your business expands. A reliable 3PL partner can help you keep up with consumer demand, offer expedited shipping, increase cost savings, and streamline your logistics operations.
However, because of how important a 3PL is to your business, it’s crucial to choose the right partner. You should only partner with a 3PL provider that understands your brand’s needs and has the capabilities to deliver.
To learn more about how ShippingTree can help you with fulfillment, contact us.