3PL Fulfillment 101: What is it and How Can You Benefit from It?
Growth comes with opportunity. Unfortunately, growth also comes with growing pains. The global logistics industry is worth $8.6 trillion USD, with these numbers expected to grow in line with the surge in eCommerce.
3PL fulfillment is a concept embraced by everyone from small one-person operations to 90% of Fortune 500 companies. Knowing why you should be using 3PL shipping instead of trying to handle everything yourself can help you take your business to the moon.
Let’s jump into why getting a 3PL partner is something you should consider.
What is a 3PL?
3PL stands for third-party logistics, a partner, or a service that supports eCommerce providers in managing their supply chains. It could include inventory management, warehousing, coordination, 3PL distribution, or 3PL eCommerce fulfillment.
It’s a service that allows for full-service and a la carte solutions. The main advantage of a 3PL partner is it will enable you to focus on other parts of your business.
3PL also allows you to save money because you’re not relying on renting out warehouses or hiring a shipping and distribution team. Instead, when a customer places an online order with you, that order goes direct to your partner, where it’s picked, packed, and shipped.
Countless eCommerce businesses have relied on 3PL fulfillment as their secret ingredient for growing their businesses and mitigating the problems of today’s global supply chain crisis. Moreover, third-party logistics is only expected to grow in importance, with retail experts predicting disruptions to the global supply chain every 3.7 years.
If you’ve not yet thought about a 3PL solution, there’s never been a better time.
2PL vs. 3PL vs. 4PL vs. Freight Brokers
You may have heard several abbreviations while planning and managing your supply chain. Many of these terms can be confusing, so you must understand them and know which solution is right for you.
Here’s a short breakdown of some of the other logistics services offered:
2PL – You rent your warehouse, and a courier collects orders and delivers them to the customer.
3PL – Your inventory is stored, picked, packed, and shipped by your partner.
4PL – A provider manages fulfillment partners on your behalf. You outsource your logistics to a partner who negotiates, solves problems, and communicates in your name.
Freight Brokers – Brokers are intermediaries between drivers and businesses. Freight brokers are different from 3PLs because their sole purpose is to match carriers and brands.
Your choice of service depends entirely on how much of your supply chain you want to manage in-house.
What Services Do 3PLs Provide?
Full-service solutions will handle every aspect of getting your products into the hands of your customers. However, some businesses have opted for a hybrid approach, running some parts of their supply chains while allowing the experts to manage other aspects.
So, what are some of the services a 3PL provider can offer?
The receiving process involves getting your product into 3PL warehouses. Your partner will receive your products and store them correctly in their facility. In addition, they will coordinate inbound shipments and manage the challenges of bulk shipments.
Once you receive an order, your partner can manage the picking process. Your partner gets the customer’s order and sources the product within their facility. In other words, they “pick” them from their storage.
Your partner needs to be equipped to handle all manner of orders, from bulk orders from retailers to individual customers.
Packing is more complex than it looks. Your partner needs your customized packaging and must assemble it correctly. Poor packing means your products could get damaged when it ships, leading to angry customers and a spike in your returns.
You’ll need to provide your partner with clear business rules on how to pack each product to ensure the best possible experience for the customer.
Shipping is easily the most complex part of your supply chain. With so many shippers, options, locations, and cutoff times, you need someone with the experience to navigate the landscape as it is today.
A shipping partner can either save you money or cost you money. Remember, it all goes back to the customer experience.
Product returns are a reality for every eCommerce business. Third-party logistics in the returns department will ensure items are received back and restocked without them becoming damaged.
You need a streamlined process for receiving returns, documenting those returns, and identifying what to do with those returned orders.
What is the 3PL Process?
Every 3PL fulfillment process differs based on the provider and the services you need to run your supply chain. You’ll agree on the finer details when you make contact with your partner, but there’s a general process most providers will follow.
A typical 3PL process will look like this:
Step One – Your partner will receive your inventory and organize it according to the SKU number at their warehouse.
Step Two – New orders through your eCommerce site will be forwarded manually or automatically to your partner.
Step Three – Warehouse staff will receive a pick list and collect the required items, which will then be packed into your custom packaging.
Step Four – Each order will have all the details and a receipt attached. This documentation is required to print the correct shipping label.
Step Five – Your order will be offloaded to the shipping partner from a distribution center.
Step Six – The shipping carrier delivers the item to your customer.
Step Seven – Any good partner will have integrations to ensure tracking information is uploaded to your business’s order management solution.
Partnering with the right 3PL fulfillment provider guarantees that this process is streamlined. It also ensures that the process is an asset to your business rather than a hindrance. Taking the time to find a partner with a solid reputation and a frictionless, scalable system is an investment that will help you negotiate the growing pains inherent within your growing organization.
What are the Benefits of 3PLs?
Why should you work with 3PLs and not just handle everything in-house?
It’s a myth that you’re giving up control by outsourcing. Even with a third-party managing your supply chain, you’re still in complete control over how they work and how you craft the customer experience.
Let’s look up the commonly cited benefits of working with a third-party logistics provider.
Acquire the Knowledge, Expertise, and Experience of a Professional Outfit
Business owners often underestimate the complexity of supply chain logistics. Every step from receiving orders to delivering to customers comes with its challenges. There are so many moving parts to account for.
Working with a third-party logistics partner gives you access to unsurpassed knowledge and expertise. These businesses boast years of experience in the business, along with vital industry connections.
Your partner can provide unique insights into the issues that occur with domestic and international shipping. In particular, they can handle customs, duties, and local shipping regulations.
Relieve the stress of trying to manage the protocols of different markets by yourself.
Save Time and Money
3PL warehouses enable you to avoid the hassle and expense of finding and investing in your own storage space. Running a warehouse is not only about the space but also the technology, transportation, and employees required to make it function.
Allow yourself to focus on other critical aspects of your business while a third-party logistics organization takes care of everything.
Note that these partners also advise on how to avoid critical supply chain mistakes that could impact the efficiency of your brand. Professional industry forecasting from your partner can enable you to optimize your inventory, reduce your holding costs, and avoid bottlenecks during peak demand periods.
Scale Your Operations
Any successful eCommerce business knows that growth can happen anytime. A single viral social media post, new product, or endorsement can lead to a small business receiving thousands of unexpected orders within a few hours.
3PLs can quickly scale your operations because they already have the space, workforce, and transportation to manage everything. They can also spot the trends within your industry and seasonal periods.
Expanding into new markets and demographics can create unexpected problems in your supply chain. A reliable partner allows you to weather the storm and avoid disappointing your customers.
What to Look for in a 3PL Provider
A quick Google search will reveal hundreds of different providers specializing in particular industries and markets.
Naturally, partners will vary in quality, affordability, and services offered. The wrong partner can be even more damaging than not having a partner. Here are the crucial aspects to focus on when selecting a 3PL fulfillment brand.
Check Existing Operations
The benefit of hiring someone else to manage your supply chain in the first place is they have an existing setup. The first step is to examine a potential partner’s existing operations for efficiency, scaling, and flexibility.
Questions like the number of warehouses they operate, where they are located, and their maximum capacity are essential for deciphering the true quality of that business.
It’s also vital to ask them about their experience in your industry. Ideally, they’ll already know your industry and the challenges you’re likely to face. Every industry faces its unique challenges in its supply chains.
How Much Does it Cost?
You should already have a budget worked out. One of the few disadvantages of partnering up with a third party is you will need to come up with an investment upfront. Over time you can expect to save money on labor and overheads.
Get quotes from a range of partners and calculate your expected savings. Smaller businesses will find this more complex than those transitioning from in-house to outsourced logistics.
Some partners may even price match if you find a cheaper quote from a competitor.
Outsourcing means you likely have expectations regarding the level of communication you receive from your partner.
Many of the top 3PL fulfillment companies will use state-of-the-art technology to provide you with real-time updates on what’s going on with your shipping process.
Ask them how they communicate with the businesses they work with and what you can expect updates on throughout the process. Ideally, you’ll also want metrics in real-time relating to delivery timeliness, delivery accuracy, and damages relating to shipping.
Any good partner should be willing to provide you with critical insights into how they do business and their past success.
Request customer references and their financial track records. You should also ask about how they compensate for delays they were liable for and the strength of their non-disclosure agreements.
Too many eCommerce businesses make the fatal mistake of not thinking about the contract details until they have signed an agreement with a partner. Getting locked into an unfavorable deal with an untrustworthy company can damage your company for years to come.
The top providers of these logistics services are effective because they leverage cutting-edge technology to achieve results.
Confirm whether your partner can adequately integrate and synchronize their systems into your existing order management systems. Everything from inventory management to order processing should be compatible with your potential partner's software.
See if you can obtain a free demo of their dashboards so you and your team can easily plug themselves into your supply chain.
Examine Customer Reviews
Ultimately, the best way to learn about a logistics management company is in the court of public opinion. Speaking to several candidates and asking them in-depth questions is essential, but you need to go further.
Look up each candidate on your shortlist and see what other businesses say about them. Do they have a stellar reputation, and are the reviews genuine?
Sadly, not every fulfillment provider is trustworthy. Protect yourself and your business with in-depth research into their backgrounds.
Myths and Misconceptions About 3PL eCommerce Fulfillment
Some entrepreneurs may balk at outsourcing any aspect of their business. Let’s examine some of the most common myths and misconceptions regarding third-party eCommerce fulfillment providers.
You Loss Control Over Your Business
Your products will not be immediately accessible to you because they’re sitting in somebody’s warehouse. However, this doesn’t mean you lose control. If anything, you gain more control over your supply chain.
The pressures of shipping and fulfillment are now somebody else’s problem. Doing so limits mistakes and lets you spend more time on other aspects of your business.
Moreover, you still control your supply chain, albeit remotely.
You Need to Be a Large Business
Small businesses have more to gain from partnering with a third-party provider because they lack the budget and the resources to invest in their warehousing, management, and shipping solutions.
Third-party distribution and management are more affordable than you might think. The slew of newcomers into the industry has only led to declining prices. Outsourced logistics is an option for everybody.
You Will Fall Victim to Hidden Fees
The low prices you see are punctuated by hidden fees you only discover later.
Pricing can be complicated and may feel overwhelming. There are additional fees associated with storage, customs, and company-specific packaging. However, no reliable partner will hide these fees. They will lay them out, and you will choose whether you want to pay those fees.
High-Quality Packaging Tailored for You
Third-party logistics is an opportunity to streamline services while saving time and money. The most significant benefit is the chance to enhance the customer experience with faster and more accurate shipping.
The customer experience is pivotal to the success of any business. Epic Packaging understands this, and we help businesses of all sizes create a genuinely epic experience, ensuring that you feel empowered through the entire fulfillment process. We offer high-quality packaging tailored to your brand and its story.
To learn more about overcoming the competition with custom, contract packaging, get in touch with the Epic team today.