Are You Ready for 3rd Party Logistics?

As an e-commerce business, inventory management and order fulfillment are two essential tasks that must be performed daily. As your company is first starting out, you’re likely managing these operations via self-service fulfillment, meaning you are executing every aspect of fulfillment on your own. Or, you might be considering having your operations handled via a 3rd Party Logistics, or 3PL.

If you’re considering having your operations handled via a 3PL, you might wonder if it’s the right time to make that switch. So, how do you know if you’re ready for a 3PL, or which 3PL is right for you? This article will guide you through every step of considering and picking a 3PL service.

What is a 3PL?

If you’re familiar with 3PLs, skip this paragraph. But for those who aren’t familiar, 3PLs allow you to send your products to someone else’s warehouse and have them fulfill your orders and manage your inventory. If you don’t want to fulfill or want to scale up your fulfillment but don’t have the means to manage it on your own, this is a great option. You’re still in charge of sales and front-office customer support while the 3PL takes care of everything else, including managing your returns.

What are the Benefits of Using a 3PL?

As you consider whether it’s time for you to use a 3PL, think about the benefits of using the service to manage your fulfillment:

Freedom From Fulfillment

With a 3PL, you don’t have to manage any part of your fulfillment. Once you send your items to the warehouse, you’re done when it comes to inventory and fulfillment.

Saves Time

By allowing a 3PL to manage your inventory and fulfillment, your time will be freed up. This will allow you to focus on other aspects of your business.

Saves Space

If you’re storing inventory in a spare bedroom, garage, or storage unit, that space is now free for other use.

Scale Your Business

3PL means that you are no longer limited in the inventory and fulfillment you can handle. As a result, you can grow your inventory size, where you’re selling, and what items you’re selling.

Distribution Network

When it comes to specialty items, like foods and beverages, perishables, and oversized items, a 3PL can help to manage all of the related logistics. There are even specialty 3PLs designed to distribute these items specifically.

Shipping Discounts

With a 3PL, you have the opportunity to leverage their shipping services and receive volume discounts. As a small business, these discounts are impossible to achieve without the help of a 3PL.

Is a 3PL Right for Me?

Below are two key factors to consider when deciding if a 3PL is right for you: order volume and cost.

Order Volume

A key factor in determining if your business is ready to take on a 3PL is your volume of orders. Does it make sense for you to ship out your fulfillment, or does it make more sense for someone else to do it? Typically, once you are receiving around 10 orders a day and 300 orders a month, this is when a one-person team should consider outsourcing fulfillment.

However, this number is flexible. At the end of the day, it depends on what you can manage on your own. For example, if you’re selling something that’s large and difficult for you to manage, it might be worth considering a 3PL at 3-5 orders a day. Similarly, if you have something smaller and easier to manage, like cosmetics or apparel, you could potentially manage up to 50 orders a day before considering a 3PL.

Cost

Is a 3PL worth the cost for your business? In general, the cost for a 3PL is around $5 per unit. This includes expenses like receiving, storage, picking, packing, labeling, forwarding, and supplies. From a small business perspective, if you have 100-1,000 orders a month, you should expect to pay, just for the 3PL service, between $5-8 per order not including shipping. So, if you have to take that $5-8 off of each sale and give it to someone else to fulfill your orders, is that $5-8 something that you can afford to give away?

If fulfillment is manageable for you to do yourself and it doesn’t become intrusive to your life, then generally, our advice is that you should continue to do it on your own. However, some people have multiple businesses and lines of work. Many business owners also start their e-commerce store as a hobby. If you want to minimize your stress and keep your business feeling fun, these are all things to take into consideration as well.

At the end of the day, ask yourself this question: Is the money lost worth the time gained?

How Can I Pick the Best 3PL for Me?

If you’ve decided that a 3PL is the right step for your business, how do you pick the right provider? Below are 6 important features to keep in mind as you pick your service provider:

Trustworthy

When you’re working with a 3PL, you have to trust them. You’re putting your products and livelihood into the hands of strangers, so make sure that the company is reputable and will treat you and your products right.

Service Levels

Service levels define the goals that the company will meet when it comes to handling your products and fulfillment. When an order is placed on your site, the 3PL should be shipping out that order within 24-48 hours.

Accountability

If something goes wrong, your 3PL must take responsible actions to address the issues. If a package is lost, an order is fulfilled incorrectly, or your inventory numbers are off, you need to make sure that the 3PL will do everything they can to right that wrong.

Transparency

You want to find a 3PL that allows you easy and available access to your inventory and order fulfillment. While you are not responsible for anything beyond sending the 3PL your products to manage, you still want to be involved in the process and allowed to know the status of your orders, inventory, shipping fees, and more.

Security

Having the warehouse where your inventory items are located robbed is everyone’s nightmare when it comes to using a 3PL. A location with onsite security personnel, cameras, and other security precautions is important in ensuring your inventory items are secure.

Reasonable Cost

3PL services are all more or less the same, so the costs should also be more or less the same. Be wary of 3PLs advertising prices far lower or higher than the surrounding competition.

Final Advice

If you can, take a virtual or in-person tour of the 3PL’s warehouse. Your products will live here until they’re purchased, so make sure the space is clean and follows standard safety measures. Additionally, never pay for a buildout. Many 3PLs will offer to build out specific fulfillment functions for you, and this is simply not necessary. And finally, it’s important to make sure that you don’t settle. Don’t use a service if it seems just “okay” to you. Take the time to browse all of your options, and don’t go with an option that seems uncertain to you for whatever reason.

Have any additional questions about 3PL services? Contact us at contact@soap-bx.com!