Companies use third-party logistics providers (3PLs) most commonly for core fulfillment services like warehousing, transportation, and shipping. With today’s fast-paced and on-demand business needs, 3PLs are offering a multitude of more modern amenities, often known as “value added services.”
Due to consumer demands, tastes and preferences, the need for ecommerce companies to stand out in their field, often comes down to the finer details in product delivery and order fulfillment. These value added services can include anything from specialized distribution, to customized labeling or final assembly. Because 3PLs are set up to handle end-to-end fulfillment needs, offering value added services can be an easy add-on for their clients.
When working with a 3PL, it’s important to sync your brand needs with the value added services your 3PL provides. Below are some of the most common value added services and reasons why they might be a good addition to your order fulfillment strategy.
Common Value Added Services
Kitting takes multiple products and combines them into a single easy-to-pick package and easy-to-track SKU. Whether taking two of the same item and banding them together for a “two-for-one” sale, or creating an integrated solution combining products commonly purchased together into a single package, kitting makes the picking aspect of the supply chain more efficient.
Blister packaging is a broad class of items that can protect items during shipping. Often used for valuable, perishable, or fragile items, having blister packaging done by a 3PL close to the point of sale can lower shipping costs, while also limiting the distance that the relatively fragile blister packages need to be shipped.
Adding initials or a laser-etched inscription to the back of an electronic item can increase its perceived value. Some 3PLs have the ability to personalize items before they leave the 3PL warehouse, which means less time that you are involved in the supply chain operations.
When products need specialized labeling, for different retailers, or government regulatory systems, having a 3PL do it can save time and money.
There are many reasons a brand may want to do this; one is if the company may want a specific branding to be in stores versus sent direct to consumers.
Another use-case for re-labeling is international shipping. Many markets abroad have different label requirements, so a 3PL will need to make sure the products have the correct label based on which country they are being shipped to.
Also called returns management, with reverse logistics a 3PL can work with you to determine if damaged products can be repaired, or flagged to go all the way back to the manufacturer. They can also store extra packaging so that refurbished units can be sent out looking their best. Some larger 3PLs will even offer repair services when it is a simple problem to address.
When items get returned there are many pathways they can take. One of those is getting restocked to be counted as sellable inventory again. Rework is the process of inspecting and repackaging returned merchandise to go back into “good stock” for resale.
This is sometimes a long and arduous process. It requires sorting through returned items, conducting a thorough inspection, then completely repackaging. Items that are returned may not get back into the inventory cycle for days or weeks.
Disposal or Product Distruction
3PL value added services don’t only encompass adding items to your packaging, and another pathway returned items can take is disposal if they cannot be reused or resold due to damage. Sometimes companies also need to get rid of damaged or obsolete products. 3PLs can add value by breaking down those products, recycling them, or disposing of them safely and cost-effectively.
It’s not light work to dispose of some types of products (think batteries, perfumes, other dangerous goods). Disposal might be a higher-cost VAS, but one that is important for your brand.
Automate Business Rules for Returns
Processing returns is complex, it requires an experienced operations team and sophisticated technology integrations.
Business rules are determined by the brand. They are a set of specifications so that the 3PL knows what to do in certain scenarios. The 3PL will work with your brand to ensure operational continuity and speedy resolution when common things arise.
For retail or B2B accounts, a return might not indicate that the customer doesn’t want the merchandise, rather that it was sent incorrectly. A 3PL can trigger an automated flow for a new order to go out immediately when a return comes back.
Postponement is the process of bringing multiple individual units together in the fulfillment process to create one unique SKU.
For example, a video hardware company can allow customers to purchase their product with three different sizes of memory cards, which are easy to insert once an order is placed. If of the video devices and all sizes of memory cards are shipped from the manufacturer to the fulfillment provider, the postponement work is to insert the correct memory card based on each customer order.
It’s easier for the company to update and manage their SKUs this way because the only difference between the different SKUs is the size of the memory card in the camera.
This is a technique where goods are packaged for bulk shipping and delivery in a way that looks different from when the customer gets their final, single product. Your logistics provider either can ship or accept a shipment of goods packed in larger containers while packing materials such as specialty boxes are shipped separately. At the fulfillment center, the 3PLs staff will assemble the product and packaging into the final single-product package. This generally saves you on labor and shipping costs, plus it can allows changes like adding new combinations or packaging design easier.
“Willow did an exhaustive search of 3PL partners. We felt our needs were unique in that we required a partner with consumer medical device experience, DTC, Amazon and retail fulfillment capability and value added services which included the ability to do late stage product differentiation and product rework. DCL was chosen because of their employees, capabilities, flexibility and cost.”
Preparing a product to be shipped to a retailer most often requires both kitting and re-labeling. This means specific products are placed together in a box, in a certain way. And they are also labeled with the correct retail label.
The fulfillment for retail accounts is complex and detailed because retailers have very strict and specific requirements. If your products need to go to retailers, it’s important to work with a 3PL with a great retail track record.
Sorting and Inspection
Sorting and inspection services fall under quality assurance. This is a less common VAS that often goes together with procurement. Sometimes component parts need to be separated or joined after they are manufactured. Sometimes products need to be inspected for very specific tasks or capabilities (like medical devices).
While sorting and inspection are usually provided by a manufacturer, companies can instead have product parts shipped to their fulfillment provider to do this as part of their fulfillment. The caveat is working with a 3PL with enough space to store parts and the correct certifications to do thorough inspections.
International Trade Compliance
Ecommerce is creating more global business opportunities for products of all shapes and sizes. This is great for expanding your customer base and adding additional revenue streams. Unfortunately, expansion can mean a lot of time and expertise needed to understand the complex trade requirements and legal compliance needed in each market. A 3PL that already works with international trade organizations can help you navigate the landscape, and provide the tools or make suggestions to ensure that you are operating in compliance with applicable laws and restrictions.
Call Center Management
Customers are at the heart of all things fulfillment. Some 3PLs will manage a call centers or inbound customer emails on behalf of the seller. Many calls might be fielding returns information, so making sure your 3PL is equipped to help the customer is important. They may need to let the customer know their order was received and help facilitate processing their reimbursement.
Firmware Testing and Re-flashing
If you sell consumer electronics, does your 3PL able to help the technical aspect of your product journey? This is a rare value-added service because it’s so niche.
This can happen on outbound products or returns. Here are two main use cases for this VAS:
- Outbound: if your product has firmware that goes through upgrades, you may need to ask your 3PL to test or update the firmware for you.
- Returns: if you sell refurbished products (whether they are returns that are undamaged, or used goods), you need a process to ensure the firmware doesn’t have any of the original customer’s information on it—you need to wipe the memory, which is also called re-flashing.
Firmware updates and re-flashing are specific to hardware products in the consumer electronics space, most often smart products or items that have a connectivity component.
How this is set up is a bit intricate, and it requires the brand’s initiative. The brand will need to build a simple system for testing. Often it’s a laptop built specifically to read the product’s viability. The 3PL will then be instructed to take each product, plug it into the pre-built laptop, and see if it says “green – it’s good to go” or “red – not correct.”
Vendor Managed Inventory (VMI)
If your 3PL has the capacity for a large amount of inventory to be stored, you may consider using your fulfillment provider for this. It is more common for larger companies whose products are manufactured in another country.
How VMI it works: A brand will instruct their manufacturer (also known as a vendor) to ship products directly to their 3PL. Products are shipped under the manufacture’s name, because the products are technically still owned by the manufacturer. The brand can then buy inventory as they want from the manufacturer, despite the fact that the products are already being stored by their 3PL.
The benefits of vendor managed inventory include:
- Your products are closer to the fulfillment process, which saves time, especially at peak season.
- You don’t have to have much inventory on the books, but it’s still guaranteed that it’s ready to be purchased when you can.
- The 3PL benefits because it’s a harder system and contract to step away from once it’s all set up.
- The manufacturer benefits because they have more space to manufacturer more products and also the guarantee of products being sold even after they leave their facilities.
Benefits of a 3PL that Offers Value Added Services
One of the most significant benefits of using a 3PL is that they will have more flexibility in the space, labor, and equipment they have to respond to fluctuations in orders and meet consumer needs. Some 3PLs can offer a client extra physical space for a limited time as a value added service—this may be in the warehouse for a rush of inventory, or a meeting space to make last minute software updates. Labor resources might be an available value added service when a product campaign might entail more involved attention—a 3PLs ability to quickly shift staff to the project will keep your company labor costs to a minimum.
3PLs usually have the necessary equipment to help complete value added tasks, including conveyor belts, shrink-wrapping machines, automated assembly lines, pallet wrappers, blister packaging machines, box taping machines, and so many more. An experienced 3PL will have these tools on hand and staff trained to use, which affords them the flexibility to add any of these services when a client has a specific need. By using a 3PL for these value added services, your company resources can be allotted to other aspects of your business: sales and marketing, or other important areas.
The value-added department of a 3PL is usually a team specifically trained to help execute specialized projects. With a dedicated team working to oversee any customization, this brings a focus of quality and efficiency of work. The value-added team will, they are able to work with the customer to outline the project, create the steps necessary to complete the project, and ensure accuracy and precision.
Ease of Integration
Using the value added services of a 3PL allows the seller to work with one partner for all of their logistics needs. A full service 3PL can help manage transportation, warehousing, and all value added services, making it more seamless to integrate any changes or updates along the way. Keeping your product in one fulfillment center also minimizes costs associated with transporting or moving products between facilities.
There are as many different types of value added services as there are specific ecommerce company needs. This article only touches a few of the most common types, and the benefits of working with a 3PL to provide these services. A modern 3PL can do a great deal more than simply coordinate shipments, load and unload trucks. By partnering with the right 3PL for your brand, it will allow you to scale or change with market demands in the most efficient way possible.