It’s no secret that one of the most costly aspects of running an ecommerce business is order fulfillment, and it’s important to make sure your dollars are spent efficiently when executing your fulfillment strategy. One of the steps you can take to ensure you are maximizing your budget is to outsourcing your fulfillment to a third-party logistics provider (3PL). With their experience, size, and fulfillment center locations a 3PL partner can be a great option for any business. Here are 10 ways that working with a 3PL can help you save money.
1. Reduce Capital Investment
While it might make sense at first to operate your own warehouse and manage fulfillment yourself, ultimately it can be a very expensive undertaking. With any growth you will inevitably incur increased costs—of security, labor, rent, materials, among other things. It will be more cost efficient to put the capital you would spend on warehousing into a 3PL service that will likely include more value than just the warehouse and daily headaches of managing it.
If you are handling your own fulfillment you won’t have the advantages that a 3PL does. A 3PL has daily relationships with all shipping carriers, and as such know intricately the best carriers for certain locations, sales channels, or times of year. Because they are shipping thousands of products from multiple companies a day, a 3PL also has the scale to be able to negotiate discounted rates with many of the largest shipping carriers. Just a small amount of savings per package may seem insignificant, however as your business grows it can quickly add up and be a boon to your bottom line.
3. Seasonal Flexibility
Chances are you will experience spikes in sales multiple times a year—whether it is due to seasonality like the winter holiday rush, or special promotions. With these spikes come the need for extra staff to expand your operational footprint. What goes up, must come down, and at the end of these seasonal growth spurts, you will have to let the extra staff go with the right timing for your payroll budget as well as your fulfillment needs. A good fulfillment partner will have the means to scale both up and down to meet the unique needs of your company, and you won’t have to absorb the additional margin of costs.
Chances are you didn’t start your business with the idea of managing order fulfillment and logistics. You started it because you were passionate about an idea, product, or solved a problem in the market. Having a true expert on your team who knows logistics in an out, is probably the biggest value-add to outsourcing to a 3PL. 3PLs exist because they are passionate about the fulfillment and logistics industry. With their experience, sometimes decades of time doing what they do best, they are fully equipped to handle logistics and fulfillment in the leanest, most cost-effective manner possible.
5. Warehouse Safety
There are numerous health and safety compliance standards that need to be addressed when running a warehouse. This includes things like training, certifications, and equipment checks that need to be kept up-to-date, which requires extra cost. It also requires a considerable about of time, both of your staff and away from business-as-usual processes in your warehouse flow. Outsourcing your fulfillment gives you access to a 3PLs own specialists, its existing safety infrastructure, and ability to maintain all workflows while doing necessary updates at the same time.
6. Customer Satisfaction
If you find yourself taking on fulfillment issues, shipping errors, and daily logistics operations tasks, you will find yourself spread incredibly thin. This can lead to an increase in errors and wind up costing your company loyal customers and regular profits. Customer satisfaction is paramount when it comes to retaining existing customers, and growing your customer base. By using a 3PL to handle your fulfillment you will likely eliminate most simple mistakes, like missed or late deliveries, incorrect orders, mixed up labeling, and more. By reducing these issues, your company is more likely to have increased customer satisfaction, which is one of the greatest benefits (and money makers!) you can hope for.
There are many unforeseen costs when it comes to running an order fulfillment operation, and one of the biggest is all of the various equipment that is required. From pallets to forklifts, and conveyor belts to barcode scanners, these costs can quickly add up. Many of these items not only involve the upfront cost of purchasing them, but also the ongoing cost of service and maintenance. A 3PL will have all of the necessary equipment already on-hand so you don’t have to worry about buying and maintaining your own.
8. IT Capabilities
Order fulfillment requires a lot of software and hardware to ensure that it runs smoothly and efficiently. When you partner with a 3PL you don’t need to worry about purchasing physical hardware, servers, or software subscriptions. A 3PL will also have a warehouse management system (WMS) and an inventory management system (IMS) in place. Aside from the upfront cost of all of the necessary IT components, you would also have to train employees on how to operate your systems, as well as purchase the necessary updates that happen when your software becomes obsolete. These are all included when you work with a 3PL.
9. Opportunity Cost
When you are spending your time dealing with order fulfillment, it means you are taking time away from other core business responsibilities. Being able to delegate fulfillment to a 3PL not only frees up capital that can be reinvested into your business, it also lets you concentrate your time and energy on what you do best. This opportunity cost is even more important if your business is an ecommerce startup; in order to foster all aspects of your business it’s likely that you’ll need to focus on more traditional operational duties to ensure that your business is able to grow into a long term success.
If you handle your own self fulfillment chances are that you are only shipping from one location. Depending on where your customers are, limited distribution centers can increase the time it takes for your products to be delivered, which in turn increases the cost of shipping. Because 3PLs operate multiple fulfillment centers in strategic locations, their larger reach and footprint can drive down your shipping expenses overall.
Handling order fulfillment can be a time consuming and costly undertaking if you choose to do it yourself. However if you choose the right 3PL to partner with it can wind up saving money in many ways. And potentially more importantly it can save you the time involved, which can be better spent elsewhere.
If you are considering partnering with a 3PL to outsource your fulfillment we would love to hear from you. Send us a note to connect about how DCL Logistics can help your company. You can read DCL’s list of services to learn more, or check out the many companies we work with.