Logistics can be one of the most important, and often complicated parts of operating a business. The complexity and increased consumer pressure and expectations that ecommerce businesses need to meet makes managing the logistics process even more significant in today’s marketplace.
For a small company that is just getting off the ground, it can be possible to manage it yourself. However as you grow and demand increases it might make sense to consider outsourcing shipping and supply chain management.
This guide will help explain product fulfillment, why sellers choose to outsource to an order fulfillment company instead of managing it themselves, and whether working with a third-party logistics provider (3PL) to outsource ecommerce fulfillment might be the right option for your business.
What exactly is outsourcing order fulfillment?
Outsourcing fulfillment means hiring a third party to manage parts of the order fulfillment process; this might include warehousing inventory, packaging items, or shipping orders out to customers. Depending on your order fulfillment needs, and which company you choose to work with, other services like inventory management, kitting, reverse logistics, and many others might make sense to outsource as well.
Third-party order fulfillment providers
If you choose to outsource order fulfillment processes to a third-party logistics (3PL) provider it means that they will handle the services below on your behalf using their own fulfillment centers, staff, and technology:
Benefits of outsourcing logistics to a 3PL
There are numerous reasons why ecommerce businesses choose to have a 3PL handle their ecommerce fulfillment processes instead of trying to manage them in-house. Below is a list of fulfillment solutions that you can expect from a good 3PL.
1. You don’t need your own inventory storage
If your company has a successful product, and your 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 manufacturer to their fulfillment centers; they will alert you when the inventory levels get below a certain threshold and order more inventory to be sent to their fulfillment centers which will decrease your fulfillment costs.
2. Avoid the hassle of packing and shipping operations
There are many steps to successfully getting products sent to customers, each step can be time consuming, costly, and require significant industry knowledge to do them well. For example, finding the right sized boxes and protective packing material, printing labels, and coordinating with the carrier or warehouse staff are all important to keep your ecommerce fulfillment and logistics operation running smoothly. These tasks have large margin for error. Packing your products poorly can lead to damaged goods, and unhappy customers. Not to mention the hassle of return logistics, at scale. These are what a 3PL does! Leave the hassle to the experts who know the latest eco-friendly packaging, best ways to get your branding into all aspects shipping, and cost-effective options when it comes to carriers and delivery options.
If you choose to rent a warehouse space, that is also costly and time consuming. It needs to be staffed, equipped, insured, as well as set up with necessary technology to operate and coordinate in our fast-paced age of information and 2-day shipping standards. And that is only to get it ready to operate. It is a long term commitment that requires knowledge and tremendous resources. Outsourcing fulfillment to a 3PL can take all of those problems off your hands. Plus the right 3PL will have the latest technology to ensure speedy and accurate communication between the many players in the supply chain. Plus they can likely arm you with data to help optimize your products and logistics.
3. Keep your focus on your business
Order fulfillment and logistics are undoubtedly significant to any seller, but they take up valuable time and energy that can be better spent in other ways.
If you’re tasked with managing inventory, warehouse staff, packing and picking, you can lose focus on scaling your business, generating sales, and growing your customer base.
Any seasoned business owner knows that is important to know when it is time to pass tasks to other people, delegate so you have the capacity to make decisions for the business at large. There can be a critical point when outsourcing order fulfillment processes to a 3PL is crucial to growing your business.
It can free up time to improve and develop products, build your brand, and other important aspects of your ecommerce online store that you have the first hand knowledge to lead.
“That’s the beauty of our decision to outsource our 3PL needs to DCL because it’s not a headache that I need to deal with on a daily or even monthly basis.”
4. Add industry experts to your team
Successful order fulfillment entails coordinating many fast and accurate tasks across various people. Because of this, issues can quickly bubble up and become overwhelming to any business owner. These only increase as order volume and customer demand grows.
A 3PL is the industry expert on all things fulfillment and shipping, working with hundreds of various sellers and handling hundreds of thousands of orders, if not more. This allows them to negotiate with major shipping carriers and provide steep discounts on shipping costs that they then can pass on to sellers.
An established and successful 3PL has the infrastructure to handle complicated needs as they arise, and mitigate issues quickly, which leads to more efficient scalability as your business grows. They can also provide lower shipping options than you likely could access on your own.
If you find the right 3PL for your business, inherently they will become a close partner in making your ecommerce business successful. It means you basically have an industry expert on your team. You can rely on your 3PL to send updates (of inventory or current industry trends) that keep you informed and help you navigate the shipping and logistics of your product. This can also help to enhance the customer experience, leading to repeat customers.
5. Cut costs by utilizing a 3PL’s multiple fulfillment center locations
If you are self fulfilling your orders, chances are they are only being shipped from one location. This can be more expensive and lead to increased transit times as you ship across multiple shipping zones to get your products to customers who are farther away from your single location.
Most 3PL’s have multiple fulfillment centers located in strategic areas across the country, allowing for products to be shipped out cheaper and faster than doing it in-house. By distributing your inventory between various warehouses it ensures that they can be stored closer to your customers, allowing you to provide two-day, next day delivery or even same day delivery that has more and more become the standard for most businesses. They can also help to decrease your shipping rates to provide cost savings.
6. Fill and ship with top speed and accuracy a 3PLs technology and analytics to help your business
If you are self fulfilling orders it usually involves a time consuming manual order management process. If you outsource to a technology focused 3PL you aren’t simply getting their order fulfillment services, but additionally the top technology to help the speed and accuracy of your fulfillment and shipping. A 3PL should have tools that can lend data and analytics to help inform your future decisions to grow your business, decisions based on aggregated customer locations. By working with a 3PL to generate this data, you can boost revenue, reduce cart abandonment, and meet higher customer expectations.
A 3PL should be able to integrate into your existing systems to connect your entire supply chain and provide the following:
- Real-time tracking
- Forecast inventory
- Data driven decisions
- Route orders to the fulfillment center closest to your customer
- Offer expedited shipping
- Additional services as needed and available
“eFactory is one of the most complete warehouse management solutions I’ve been given by a 3PL partner. It gives me full, real-time visibility of my own inventory and allows me to pull any data I could want for my offline analytics needs.” Johnny Shi, Essential
If you are considering outsourcing your order fulfillment process, finding the right 3PL as a fulfillment partner is one of many critical decisions you will need to make to ensure the long term health of your business. The right 3PL partner will properly support your businesses’ growth, become like a team member, help you navigate the complexities associated with logistics and supply chain, and ultimately, keep your customers happy by getting your products in their hands quickly and accurately.
While it may seem like a daunting task, it shouldn’t be. With proper preparation and asking the right questions, you should easily be able to identify the 3PL partner that’s right for you. Hopefully, these tips will help you with your preparation and decision making process.
If you have further questions, contact our support team here. We’re happy to help you make the best decision for your business. 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.