One of the most valuable resources available to ecommerce retailers is outsourcing their order fulfillment to a distribution center (also known as a fulfillment center). Whether you are just starting in the industry or are already a fast-growing company, partnering with a 3PL distribution center will help you fulfill orders faster, save on logistics costs, and scale your business at an incredible rate.
1. Distribution Centers Save Ecommerce Businesses Money
It’s common for fulfillment providers to manage dozens of customers at any given time under one roof. By combining all their customers, they have a lot more buying power with their vendors. From materials, including the shipping boxes, to packing materials, also known as dunnage, the fulfillment company can leverage the combined volume to get heavy discounts which they can pass along to their customers. Not to mention, the seller doesn’t need to incur the cost of managing and staffing their own distribution center.
The single largest fulfillment expense for a seller is shipping, which can be as much as 70% of the overall fulfillment costs. Larger, more experienced fulfillment companies broker deals with shipping carriers, like FedEx, UPS, and DHL, to get group discounts – again, these discounts are passed down to the sellers.
2. Inventory Storage and Management
If you are not a huge retailer shipping thousands of items a day, the challenges of managing a warehouse yourself may be more expensive and time consuming than it is worth. Allowing a distribution center to handle these tasks can be much more efficient. A good indicator that it might be time to utilize a distribution center is when a seller can no longer keep up with managing the flow of orders incoming and being able to ship them out on time.
3. Allows you to Focus on the Big Picture
While taking orders, picking out products, packing boxes, and shipping are critical components of a product company’s bottom line, these tasks can also be easily outsourced to an experienced 3PL. For a growing online business, giving these tasks over to an expert (the 3PL) means more time can be spent on business operations like customer service, marketing, and strategic planning.
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4. Provide Robust Ecommerce Fulfillment Services
With more customer buying habits shifting from brick and mortar stores to online, its imperative you work with an experienced fulfillment company that has the technology and operational expertise to manage their sellers’ ecommerce fulfillment. From connecting to the sellers ecommerce platform, like Shopify or BigCommerce, to having the operational processes in place to fulfill hundreds, possibly thousands, of ecommerce orders every day.
These fulfillment companies should be able to scale quickly with the growing demands of the sellers’ ecommerce business. Oftentimes, the ecommerce businesses see large spikes in sales in a short period of time due to seasonality and various promotions throughout the year. Fulfillment companies should have the adequate space and be able to flex their labor to meet the sellers’ needs without sacrificing service or quality.
5. Better Supply Chain Management
The concept of supply chain management has been changing over the past few years, which is why the role of the distribution center is very important in maintaining the proper supply chain. The primary emphasis of a distribution center is not simply the storage of the goods but the flow of the goods. Distribution centers ensure that slow-moving items are eliminated and inventory is either consumed or returned to reduce excess products. Better economies of scale are achieved for clients when outsourcing the activities of logistics to distribution centers.
6. You Don't Need to Own a Warehouse
If your company has a successful product, and you are rapidly growing your inventory to meet customer needs, you know the feeling of overflowing inventory, whether it’s in your home garage, office, storage space, or elsewhere. It’s an excellent problem to have, but strategizing solutions can be a huge hassle.
When you choose to outsource to an order fulfillment company, the 3PL can store all of your inventory for you without you having to take deliveries, handle the products, organize and sort everything. This leaves more space that might be needed for business operations (or your sanity!). It can also be a cost-effective method to help boost your bottom line.
The 3PL will help you manage the flow of inventory from the manufacturer to their distribution center; they will alert you when the inventory levels get below a certain threshold and order more inventory to be sent to their distribution centers which will decrease your fulfillment costs.
7. Distributed Inventory
One of the biggest factors in choosing a 3PL is finding out the location of their distribution centers and if they are close to the majority of your customers.
Ideally the less distance your product travels, the quicker it gets delivered to your customer and the less money you’ll pay for shipping.
Be sure you’re well aware of the extra administrative resourced needed when distributing your inventory across multiple facilities.
Today’s customers expect convenience and speed when making online purchases. Having your product stored, ready to be picked and shipped, close to the majority of your customers (or near major metro areas that can reach large volumes of customers quickly), will help ensure shoppers get their orders in the shortest amount of time possible.
8. Leveraging Expertise and Specialization
Managing logistics can be frustrating and challenging for any seller. It adds an extra layer on top of all the other business operations that need to be handled. A 3PL distribution center can handle the complex processes and all moving parts involved, with ease and efficiency. From order processing, inventory management, packing and shipping, fulfillment companies have been handling these tasks for years. They have the best technology and relationships to get products to customers (or businesses) quickly and cheaply. In the long run, outsourcing fulfillment and logistics to an experienced 3PL is very cost-effective for the seller.
9. Automate the Fulfillment Process
Modern 3PL fulfillment companies utilize the latest technology for their operations. This allows every step of the fulfillment process to be captured and documented in real time. Each customer order is automatically sent from the ecommerce shopping cart to a distribution center to get picked, packed, and shipped. And once the order is shipped, tracking information can be sent back to the seller as well as the customer to ensure that all goes properly.
By having logistics management software a 3PL can track and collect data on a seller’s inventory through the year. This information can be helpful to predict business, or benchmark growth.
Often a 3PL also has the technology infrastructure to share their digital tools with sellers. DCL, for example, has a mobile app called eFactory, in which sellers can see the status of their inventory, monitor orders, and get updates more easily, and at their convenience. Being a small business owner is a 24/7 job, and being able to check on shipping costs, fulfillment and inventory from a smartphone is so helpful.
10. Value Added Services
While the primary focus when working with a distribution center is to pick, pack, and ship their orders, you can leverage their fulfillment partner for other related services, often referred to as value added services. Value added services include things like kitting, assembly, and returns management (or reverse logistics). Having these services available at your fingertips is invaluable as sellers can quickly adapt their customers’ needs and market trends.
Here are some examples of projects that would fall under value added services:
- Custom packaging and labeling
- Assembling products to create a new SKU
- Branded tape and marketing inserts
- Lite testing of products (electronics)
- Returns management and automation
11. Enhanced Customer Satisfaction
All the benefits mentioned above are bound to improve your entire order fulfillment process, which will lead to the on-time delivery of products for your customers. As we all know, timely deliveries are one of the primary reasons customers keep coming back to a store. Therefore, outsourcing your distribution to a 3PL will improve your customer experience, ultimately leading to increased revenue.
There can be perceived disadvantages to 3PL; the primary concern being that outsourcing your logistics and distribution services can mean that an element of control over your business is lost.
However, by choosing a reputable 3PL partner, you can alleviate these concerns. A 3PL will provide appropriate handling of your inventory and on-time delivery to your customers so that you never again have to worry about your order fulfillment needs.
Bottom Line
Establishing an efficient fulfillment operation should be one of the most important aspects of your business. With the right planning and systems in place you can eliminate some of the most costly and time consuming aspects. Working with a third-party logistics provider (3PL) is a great way to provide a seamless ordering experience for your customers, and take the hassle out of managing the logistics and fulfillment process yourself. If you are fulfilling orders yourself, take the time to ensure that you have the right systems in place and reduce the chances of any errors occurring that could lead to disruptions.
Do you need help with your order fulfillment process? Send us a note to connect about how DCL Logistics can help your company with fulfillment. You can read DCL’s list of services to learn more, or check out the many companies we work with to ensure great logistics support.
Tags: warehouse management
