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The Amazon 3PL Trap

Let’s face it.

Most everyone knows about Amazon. They’re the leading e-retailer in the United States with over 136 Billion Dollars in sales in 2016 alone. Not to mention roughly 300 Million active customer accounts worldwide and an average 27% revenue growth year-over-year.

With these kinds of numbers, it’s easy to see they are a force to be reckoned with.

If you sell products online, you know Amazon runs a program called FBA (Fulfillment by Amazon). This service allows other businesses to utilize Amazon’s massive infrastructure to provide order fulfillment for their own customers. 

Basically, you ship your inventory to Amazon, advertise your products for sale on the web, and the online powerhouse takes care of the rest. Pick, pack, ship, and even customer service — all done on your behalf.

Seems like a great way for small to medium sized organizations to do business, right?

Well, not so fast. Once you stop and take a closer look, FBA may not be the all-in-one logistics answer you thought it was and here’s why

HIGH COSTS THAT CONTINUE TO RISE

When an e-tailer does as much business as Amazon, there has to be an enormous amount of people and infrastructure involved to make it happen. FBA is no exception.

At last count, there were over 100 fulfillment centers and 15 sort centers worldwide (with more on the way soon). All total, these facilities account for more than 70 million square feet of commercial space. If you think a network this size might be expensive to build and maintain, you’re right. Amazon has proved this out in the past, having announced regular periodic price increases on fulfillment and inventory storage fees. 

Because of this tremendous overhead, and the massive number of packages shipped each year, Amazon is actively looking for new ways to reduce operating and shipping costs. And with good reason — Amazon’s losses on shipping alone totaled over 7.2 billion dollars last year!

To remedy this problem, the web giant has the long term view that investing into their own private freight, air transport, local delivery options, and even drone programs will be the most cost effective strategy to offset rising transportation expenses. However effective this strategy is long term, these are obviously high-priced and capital-intensive expansions that need to be funded somehow.

You are likely paying for these shipping losses and future investments through Amazon’s FBA rate increases for sellers.

Year after year the cost of Fulfillment by Amazon has continued to rise. For example, the cost for storage TRIPLED during the 2016 holiday season, forcing businesses to either overstock (risking added storage expense for idle inventory) or understock (saving money but possibly losing sales during the holiday rush). Fulfillment fees in 2017 have also increased significantly compared to the rates in 2016.

That’s a tough spot to be in.

Counter this with independent logistics companies who DON’T charge extra fees for busy periods and maintain more consistent overall storage pricing. Many logistics companies have in-house fulfillment infrastructures in place that are ready to grow with your business or are willing to make the necessary operational investments to support your shipping activities. As compared to Amazon, where you are just part of the machine, your 3PL will likely have a vested interest in the success of your business. They view you as a partner; not just another contract.

LACK OF PERSONALIZATION OPTIONS

With today’s savvy consumers, there are three key elements involved in the successful sale of physical goods. Think of these as the trifecta of building a strong brand.

  1. A great product
  2. The ability to ship quickly and reliably
  3. A means to differentiate yourself and stand out from the crowd

While finding/developing the right product is up to you, distribution and marketing are areas that can be outsourced to others.

There’s no denying that Amazon has their act together when it comes to order fulfillment. Their billion-dollar operation is a model of efficiency that cranks out thousands of orders every day. But on the same token, this is also one of their biggest weaknesses.

In order to handle this type of volume, Amazon’s processes have to be as streamlined as possible. That means zero deviation from center. Each item is packed, wrapped, and sent the exact same way … EVERY … SINGLE … TIME. And by default, no less, in “Amazon” branded boxes (unless you opt to pay more for a generic one).

That’s fine when you’re shipping everyday items or low-cost consumables. But NOT if you want to stand out from the crowd. For the customer experience it should be about YOUR brand — not the vendor’s. One of the best ways to accomplish this goal is to implement custom packaging, gifting or some other means of differentiation in your fulfillment process.   

Partnering with the right 3PL eliminates this roadblock. As most have white label logistics solutions, which allow you to customize your order as you see fit. Whether it is branding your shipping boxes with your logo or tagline, having a specific plan for packing filler, custom inserts, or having a special arrangement for how the contents should be packed in the shipping box, 3PLs will have experience and flexibility in accommodating these types of requests.

IMPERSONAL CUSTOMER SERVICE

While we’d like to think that everything will run smoothly once set up, most know that’s simply not the case. No matter how much you plan, build, or execute, problems are still bound to creep up.

So what happens when your customer runs into an issue? How will it be handled? Better yet, what happens when YOU have a problem and need a prompt resolution?

With FBA and Seller Central, you’re pretty much in the same boat as one of their customers. That means calling an 800 number and speaking to a lower level associate about your problem. Someone who has no clue what your business is about, your history, or how you like to be treated.

Or being subjected to a barrage of back and forth emails where your case is mistakenly “closed” before the problem is actually fixed. You get passed around like a hot potato from one customer service center to the next as you wait for a resolution that never comes.

Working with a 3PL is the exact opposite. A typical 3PL is staffed with dedicated customer service representatives located mere steps from the actual distribution floor, where your products sit. Agents who know about you and your business and understand what makes them tick. You will likely develop a close working relationship with your customer service rep and they will become your advocate within your 3PL’s distribution center.

ALTERNATIVE 3PL SOLUTIONS

Fulfillment By Amazon/Seller Central is an incredibly efficient operating model, but may not be the best choice for your business needs as covered in this article. The challenges with FBA are obvious to most all who use the program now and even those who are considering it. Because of Amazon’s omni-presence and virtual reach, many feel they need Amazon FBA for obvious reasons. In reality, the decision is not black and white. You will need to determine the right solution for your growing brand — one that gives you reach and flexibility, while doing it cost effectively. Don’t feel trapped thinking that Amazon is the end all be all 3PL solution.

 

Dave Tu

President, DCL Logistics

Meet Mannix De Leon, Director of Operations

At DCL Logistics, we recognize our employees as our most important asset. In our new blog series, Spotlight, we’ll feature various DCL Logistics employees. You’ll get to know them a bit, as well as their role within the company, and get their take on the ever evolving 3PL industry. Follow along as we introduce the dedicated people whose daily efforts make our company a recognized leader in supply chain and logistics.

Meeting the evolving needs of customers, moving hundreds of thousands of units from one warehouse to another, ensuring the company culture is upheld … it’s all in a day’s work for DCL Operations Director Mannix DeLeon.

While DCL Logistics has been his first venture into 3PL, Mannix has worked in the distribution and fulfillment industry for more than 21 years. This experience undoubtedly positioned him to seamlessly evaluate the efficiency of DCL’s operations, and ongoingly meet organizational objectives, all while keeping pace with customer needs.

In 2016, Mannix helped to convert 75 percent of DCL’s Ontario warehouse, racking from conventional wide aisles to narrow aisles. The project ended up increasing DCL’s warehouse pallet capacity, within the existing warehouse footprint, by 25 percent. Meanwhile, and also in 2016, Mannix and team transitioned a major account from DCL’s Fremont (Kato and Milmont) facilities to the Ontario warehouse. Relocating 450,000 units (2,600 pallets) ended up providing DCL with organizational agility and flexibility.

“DCL has time-tested, proven processes we are sensitive to, and we understand the ‘uniqueness’ of our customers,” Mannix said. “We’re are agile and willing to adjust our processes to meet their needs. We truly live our Core Value of ‘do it now’ and ‘get it done,’ understanding that speed and customer service are competitive advantages. It’s not uncommon to see a manager working the lines, driving equipment or putting packages in the company car to deliver to the nearest FedEx station just to make sure we stand behind our service level agreement.”

According to Mannix, the advent of ecommerce and the subsequent, slow and painful death of the “brick and mortar” business model has, more than any time in history, necessitated the need for the Supply Chain Solution that DCL offers.

“This generation’s Entrepreneurs are starting their businesses at a much younger age and although they are savvy about their products, their success is highly dependent on a supply chain solution that bests fit their needs.”

When Mannix isn’t directing employees and keeping an eye on DCL’s operations, he can be found watching a Lakers game, enjoying a good movie and of course spending quality time with his family.

DCL Logistics 2017 Trade Show Schedule

The DCL team will be hitting the road this year and visiting some great shows.
We’d love to see you there so please let us know if you’ll be attending any of them!

  • National Hardware Show (5.9 – 5.11), Las Vegas, NV
  • Internet of Things World (5.16 – 5.18), Santa Clara, CA
  • Internet Retailer Conference Exhibition (6.6 – 6.9), Chicago, IL
  • Outdoor Retailer (7.26 – 7.29), Salt Lake City, UT
  • Shop.org (9.25 – 9.27), Los Angeles, CA

DCL Logistics Supports Growth Company, Canary, Expand to 15 Countries

Canary co-founder and CEO, Adam Sager, was returning home from vacation with his family when he realized he had no idea what had happened while they were out. There could have been a fire, a burglary, or a burst pipe, and his family would have been helpless. That feeling of helplessness spurred the idea for an all-in-one product that could keep people connected to home through a smartphone app. Canary was born.

Canary has a clear design advantage over most competitors. This is backed up by a shelf full of awards from the International Forum (iF), Red Dot, Fast Company and others. However, the biggest differentiator lies in the customer experience across hardware, software and services. Instead of aggressive marketing tactics that play to someone’s fears, Canary is centered around a simple concept — giving meaningful information about what happens at home, and empowering people to take action.

Launched in United States retail, in April 2015, Canary grew quickly. Within 15 months the company had distribution at top-tier retailers across 15 countries. Its sales growth was supported by highly-engaged users, checking the app more than three times per day, and using Canary to solve a broad range of needs: from protecting home to staying connected to loved ones, and often four-legged loved ones.

Jim Franz, Head of Supply Chain at Canary, says the biggest challenge the company has faced has been managing growth.

“The company has expanded rapidly over the last three years, but progress rarely occurs in a straight line,” he said. “DCL Logistics provided the flexibility and expertise we needed to accommodate our ongoing evolution.”

Canary’s current focus is primarily on brick and mortar retail, with e-commerce and direct sales growing rapidly. These are supplemented by a few key relationships with strategic business and marketing partners. Jim says, going forward, the team at Canary expects the mix to remain the same, even as it grows to accommodate new partners in the United States and abroad.

“As a new company shipping hardware for the first time, particularly as a company that had already pre-sold more than 15,000 units, choosing the right logistics partner was absolutely crucial to our business,” Jim said. “We conducted a formal RFP process and took care to be as thorough as possible in our search. After reviewing a number of options, it was clear that DCL Logistics was the right fit — not just for our launch, but for the planned evolution of our business. DCL has grown their support right alongside us as we’ve expanded from a few hundred to tens of thousands of retail doors across not only the U.S., but Canada, Europe and beyond. There are very few companies that do everything DCL can do, especially for startups. Throughout all of our changes, DCL has rolled with us and proven their ability to deliver every time.”

Jim says the future for Canary involves continued expansion. The company now has multiple product offerings, including bundled packs that offer out-of-the-box solutions for different types of environments. These are currently being rolled out across various international regions. In addition, Jim says Canary will continue to have an unwavering focus on discovering and delivering new ways to keep families connected through hardware, software and services. Jim says he looks to DCL Logistics to help with continued support as Canary scales from startup to mature company.

To learn more about Canary, visit https://canary.is.

DCL Logistics Expands to Europe

With the increase in volume demand in Europe, DCL Logistics has expanded its fulfillment centers to now include Holland. Strategically located in Rotterdam, the largest port in Europe, DCL Logistics is able to provide reliable and on-time delivery to our European customers through our new European fulfillment center. DCL’s order routing technology will auto-direct orders to the European facility allowing customers to work with one order management system.

“After a thorough selection process, we chose an emerging European fulfillment partner who shared our values: “technology-focused, agile and customer centric,” said Mike Schneider, VP of Operations of DCL Logistics. “The new facility is perfect for anyone growing there ecommerce channel. It’s impressively equipped with a state-of-the-art goods to person automated picking system and the fulfillment center take orders until 11 PM.”

With a presence in the heart of Europe, DCL is now able to provide the quickest transit delivery times and competitive parcel costs to the biggest ecommerce market outside of the US.

 

How to Choose a Fulfillment Provider

Choosing a fulfillment provider is like choosing a car. You might be drawn to the make, model and color, but it’s what’s under the hood that keeps the car running smoothly. Pick the wrong partner and you are surely in for a bumpy ride. Choose the right partner and you will get to your destination smoothly.

Dave Tu, President of DCL Logistics, shares his insights on what he believes are the important considerations in choosing the right partner. Dave’s mission is to provide his customers with “Hassle Free Logistics so You Have Peace Mind”, which means relieving his customers of the pain and high cost of managing their own operation.

1)  Pricing – A fulfillment center’s cost structure is usually a combination of inventory storage fees plus per-order charges such as pulling, packing and shipping. Make sure to get all pricing in writing and make sure payment terms are clear. It’s a good idea to model your pricing on a typical monthly invoice that outlines the number of orders, units per order, number of pallets locations, etc. This makes your fulfillment expenses more predictable and allows you to compare your proposals apples to apples.

2) Service Levels – Compare service level agreements (SLAs) for all aspects of your fulfillment program including receiving inventory, processing orders and shipping. Does your prospective fulfillment provider offer same-day shipping? What are their cut-off times? How many days does it take them to receive and put away your inventory? Ask potential fulfillment partners to provide statistics on the percentage of same-day shipping orders, order accuracy and inventory shrinkage.

3) Warehouse Locations – Warehouse locations are key to reducing transit times and shipping costs. Seventy percent of the U.S. population lives East of the Mississippi, so shipping from an East Coast or more centrally-located facility might make sense. However, if your product is manufactured in Asia and your goods are predominantly sent via ocean freight, then a West Coast solution might have merit. Shipping from two locations could also be a viable solution, although there are added. Your potential partner should be able to help you analyze the best solution based on your unique requirements.

4) Integration Technologies – A fulfillment provider that uses state-of-the-art technology will make your life a lot easier. Look at their current technology and inquire about their future technology initiatives that both drive their operation and help enable you to do things easier. You don’t want to be anchored to a partner that is unwilling to invest in this area. Instead, you’ll want access to a robust customer portal, a platform with strong EDI capabilities, as well as an API for real-time shipping and inventory data. Not having this option results in managing your business through a rear view mirror.

5) Customer Service – Having an Account Manager who can walk the warehouse floor and act as your company’s advocate is a huge benefit to the success of your operations. This will be the most critical relationship you will have at the fulfillment center. Is this person dedicated to your account? Ask for references and customer service case studies. Speak to others who have done business with the fulfillment provider. In addition, you might want to search for unsettled complaints lodged with the Better Business Bureau to help in your decision making.

6) Flexibility – How do you fit in terms of customer size at the organization? Are you too small or large for their typical clients? Is your potential partner able to expedite an order or provide other special services like checking for defective products, repackaging an item, etc.? Flexibility, another component of good customer service, is hard to measure. Nevertheless, you will want to validate your fulfillment partner’s full scope of services by touring the warehouse, checking existing customer feedback and speaking with a few of their customers directly in the form of a recommendation.

7) Longevity – Choose a fulfillment provider with many years of experience in the business. A long track record indicates the company has effective leadership in place and the company is able to weather economic downturns. The last thing you want is a provider who closes their doors, giving you little time to transition your product to another fulfillment warehouse. This can be costly and puts you at risk of not being able to meet order commitments.

Conclusion

Picking the right fulfillment partner is critical to your company’s time, reputation and bottom line. Choose the fulfillment provider with the longevity, locations, technology and customer service you seek.

 

Dave Tu
President of DCL Logistics

Meet Doug Laidlaw Jr., Director of Strategic Global Accounts

At DCL Logistics, we recognize our employees as our most important asset. In our new blog series, Spotlight, we’ll feature various DCL Logistics employees. You’ll get to know them a bit, as well as their role within the company, and get their take on the ever evolving 3PL industry. Follow along as we introduce the dedicated people whose daily efforts make our company a recognized leader in supply chain and logistics.

With over 20 years in the supply chain and logistics space, Doug Laidlaw Jr. is a recognized leader in planning, optimization, execution, and ultimately the success of client programs and supply chain models.

Throughout his career, he has led cross-functional, inter-organizational, and global teams, creating and deploying customized, agile solutions that address highly complex programs and projects for Fortune 100 giants and fledgling start-ups.

Through his first-hand exposure to a wide variety of customers and solution providers, Doug possesses an exceptionally broad and deep understanding of client needs and myriad operational solutions. Whether leading an initial customer integration/on-boarding or the launch of a new product that enhances an existing product line … Doug and his teams listen and disseminate client’s exacting needs and requirements; monitor risk management; coordinate the smallest program details; convert chaos into stable and manageable order; and collaborate with all stakeholders. This translates into client confidence and trust. Doug and his teams serve as DCL customer’s front-line advocates to deliver to their exacting business requirements.

Bragging rights

Doug is the primary company liason of DCL’s most strategic clients, providing continuity, near-flawless execution, and solutions for our valued clientele. An example of a project this past year that reflects his role, Doug successfully led DCL’s largest-ever program implementation/integration for the world’s leading networking equipment provider.

In the late 1990s, Doug was Vice President of Operations for DCL’s Northern California operations. After a 15-year hiatus, Doug returned to DCL in his current role focusing on our clients, their needs, and the successful solutions and results that we see daily.

Quite like the DCL of the 90s, Doug comments, “DCL is far and away the best firm in our market space that delivers consistent process, near-instant and successful problem-solving, and agility.”

Doug’s job allows him to leverage his 20+ years of experience and expertise to help DCL’s clients optimize their supply chain and logistics models and drive supply chain velocity, quality, and cost savings. Doug has seen the industry evolve from a focus on software manufacturing to highly-customized logistics models.

What makes DCL a Key Player?

doug laidlaw jr.

Doug Laidlaw Jr. pictured (back row, left) with the GoPro team.

When asked recently about the industry’s landscape and why DCL remains a key national presence, Doug said, “DCL’s stability, consistency, agility, responsiveness, and flexibility at a fair cost differentiates itself in a highly turbulent, competitive, and demanding space. Executing at a near-flawless level is and will be absolutely critical to our customer’s logistics ‘last mile’. As DCL continues to be positioned as a best-in-class logistics provider, we’re well positioned to face the many known and unknown challenges our industry and customers will throw at us.”

Fun facts about Doug

As the saying goes, behind every good man is a good woman … Doug and his wife, Kathy, have been married for over 30 years. She is Founder/Executive Director of a 501(c)(3) education non-profit organization, GiveTeens20, that focuses on helping teens find their optimal direction in life and career. Doug & Kathy’s son, Douglas III (Trace), is a seasoned Corporal in the United States Marine Corps. Trace could tell you what he does in the Marine Corps, but then he’d have to shoot you. Doug spends his personal time cooking, traveling, watching vintage movies, and attempting to lower a sky-high golf handicap.

Following a passion since his son played youth soccer, Doug has been refereeing soccer in the SF Bay area for adult, high school, and youth soccer. Doug’s perfect evening is capped off with a glass of fine wine, scotch, or bourbon … a good cigar … and, of course, time with Kathy.

DCL Logistics Named Top 3PL Provider in 2017

Ecommerce, Retail and Wholesale Company Selected by Multi-Channel Merchant

Fremont, CA, February 04, 2017 — Ecommerce, retail and wholesale logistics company, DCL Logistics, was recently named a top third-party logistics (3PL) service provider by Multi-Channel Merchant (MCM). This distinction recognizes leading 3PLs in the retail industry, as selected by the editors of Multichannel Merchant (MCM). Companies that make this list have been vetted in the areas of ecommerce and value-added services for its customers.

DCL Logistics has more than 30 years of operational expertise and customer commitment, supporting industry pioneers ranging from startups to global brands in launching their products through a variety of sales channels.

“It’s an honor to be recognized by Multichannel Merchant as a Top 3PL in 2017,” says Dave Tu, President at DCL Logistics. “We continue to strive towards perfection in our ecommerce, retail and wholesale logistics business through ISO-certified execution and our leading customer technology platform: eFactory. We will continue to invest in technology and infrastructure for our customers, who find the right balance with DCL Logistics: as nimble as a start-up with Fortune 500 company resources.”

Multi-Channel Top 3PLs 2017 features an online searchable directory for merchants looking for a qualified 3PL provider. Each company profile includes key information to help merchants find their ideal provider, including core capabilities, average annual client order volume, top merchandise categories handled, facility locations and more.

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