As per Allied Market Research, the global 3PL market is exploding and estimated to cross 1.79 trillion valuations by 2027. It is expected to grow at a 7.1% CAGR.
The ecommerce business is an exciting world but comes with its share of pains. Logistics is one of the primary areas of concern, especially when you are in the scaling phase.
With more and more businesses moving online, the greater focus has been on streamlining the digital processes, but fulfillment has been left behind by many in their tryst to remodel themselves.
When organizations struggle to fulfill orders in-house because of scaling or issues surrounding their existing structure, they tend to move to 3PL or third-party logistics partners. While it allows you to improve your resource allocation, you can run into a frenzy if you end up choosing the wrong 3PL partner.
This article discusses the basics of 3PL fulfillment and lists pointers to help you find the most reliable partner for your ecommerce business.
What is 3PL fulfillment?
Today, over 86% of Fortune 500 and 96% of Fortune 100 organizations use external logistic services to improve their overall supply chain process.
A 3PL partner is an organization that helps improve your ecommerce business’ supply chain. They provide outsourced logistics services, an umbrella of offerings that involve management and facilitating one or several aspects related to procurement and fulfillment.
How does a 3PL work?
In a 3PL arrangement, instead of using owned warehouses and undertaking in-house distribution, you can ask the 3PL partner to stock your stocks in their warehouse.
As soon as a customer places an order, the items are automatically shipped by the 3PL vendor. 3PL fulfillment also finds usage in retail distribution and returns, with vendors offering to handle your stock on your behalf.
3PL vs. 4PL
With businesses looking to outsource fulfillment tasks, we have seen the rise of concepts like 3PL and 4PL.
4PLs are a type of logistics company that manage the same roles as that of a 3PL but with more accountability in the process. They take up additional roles like delegating parts of the supply chain, and also sometimes, managing multiple 3PLs.
There can, therefore, be multiple 3PLs being managed by a 4PL network.
So with a 4PL, there is an extra line of separation between the merchants and the 3PL. Here, the merchants do not deal with the 3PL. Instead, the 4PL company does it on their behalf.
There are both, advantages and disadvantages of working with a 4PL. They are great in terms of scalability and can quickly add warehouses, etc to their network. This means merchants have the comfort of expanding their distribution network as and when they want. However, some key disadvantages include lack of quality control, poor customer support, etc.
How does 3PL meet ecommerce needs?
The work profile of a 3PL extends beyond mere dispatching orders to the final customers. Today, many third-party logistics partners offer shipping services along with warehousing and commodities, and freight consolidation.
Some of them also focus on specific regions and product types.
Given the pervasive impact of data on the ecommerce ecosystem, a few 3PL vendors are also offering advanced analytics derived in-house to the businesses.
Services offered by 3PL fulfillment companies
Here are the services offered by a full-fledged 3PL provider –
1. Warehousing
In most likelihood, an ecommerce business is unlikely to have brick and mortar stores, but that doesn’t mean that it won’t have inventory that requires storage. 3PL partners are responsible for taking over your warehousing needs.
They do so by investing in the space and technology needed to maintain these warehouses to cater to the diverse needs of their clients.
2. Supply chain management
The 3PL partner is responsible for managing the supply chain on behalf of their ecommerce clients. It allows the ecommerce players to focus on sales rather than deliveries.
3. Order picking and packing
These partners are also responsible for order picking and packing services. It includes receiving orders from customers, picking and packing, and ensuring they are completed and sent out within due dates.
4. Shipping
They are also responsible for the consolidation, deconsolidation management, and transportation of offerings to the final customer.
5. Order tracking
Modern 3PL providers also offer real-time order tracking, allowing ecommerce businesses to inform the final customer in advance in case of an unfortunate delay in delivery.
6. Order returns
Third-party logistics services also handle customer returns. In case the issues are not too technical or the return is routine in nature, they can do the needful to ensure that the returned goods are soon part of the supply chain.
Why do you need to partner with a 3PL ecommerce fulfillment company?
For starters, who haven’t had the experience of working with 3PLs before, the idea may sound exaggerated and costly. It is inadvertent for you to feel that you can do the picking, packing, and dispatching yourself cheaper.
While we cannot deny the same but is it your core competency? Can it scale as fast as your other business functions when they need be? You know the answers.
Here are some common circumstances when you need to partner with a 3PL ecommerce fulfillment provider –
You are unable to manage your customer base
Once you have run an ecommerce business for a considerable time, things start getting murkier unless planned for. We all would love to have a steady customer base, but it often gets challenging to manage their level of expectations, especially if you handle everything on your own.
Bringing in a 3PL and outsourcing the logistics part becomes vital when you have a growing customer base, and your current resources are not enough to suffice with their expectations. Letting them handle a significant portion of your supply chain process gives you additional leverage, allowing you to handle more customers with aplomb.
Your order fulfillment process is suffering from continual delays
69% of customers are less likely to shop with a business in the future if the items they purchase aren’t delivered within two days of the expected delivery date mentioned by the vendor.
55% of them will stop shopping from you altogether if they receive late deliveries more than once or twice.
Delays in customer order fulfillment have a significant impact on loyalty and trust. If you are experiencing delays in order delivery beyond your control, it is probably time that you need a 3PL order fulfillment partner to take over.
Need one-stop solution for ecommerce fulfillment
There can be times when your operational structure becomes too complicated, or you are looking for a one-stop solution that can handle all your ecommerce processes.
In such cases, allowing a 3PL logistics partner to step in would allow you to manage the inconsistencies and embark on exponential growth with ease.
Benefits offered by 3PL companies
Listed below are some of the benefits of partnering with a 3PL fulfillment provider –
Cost-effective
Given that the core competency of third-party logistics vendors lies in handling shipping and logistics, it is likely that their network extends well beyond what you previously had.
In addition, these vendors also have exclusive partnerships with other key players in the logistics space, therefore enabling you to get better rates while negotiating. It makes 3PL a cost-effective solution for a significant problem of yours.
Access to experience
When you are partnering with a 3PL vendor, you are not only hiring them for handling your shipping needs but also because they bring their expertise which can be invaluable for your business growth.
These experts have experience handling a plethora of shipping-related and ancillary matters, and you can reach out to them to understand how you can scale with them effortlessly.
Access to modern technology
Technology is one aspect that is ever-evolving and requires you to keep up with it for survival. Logistics is no different, and its hardware, software, and equipment are continually evolving.
Having a third-party logistics supplier enables you to keep up with the changes without spending significantly every time upgrading.
No additional investment
Logistics, if managed in-house, is a significant contributor to total capital outflow for an ecommerce business. It requires you to stay updated with the current times, and it means your machinery and software have to be upgraded frequently. It leads to an additional burden on the team of managing the capital efficiently and can also trickle down to affect your working capital.
Partnering with a 3PL fulfillment warehouse and logistics provider would let you pay only the periodic fees as decided in the contract. Everything else is their responsibility when it comes to logistics and keeping up with the changes in technology.
Reduced risk
Third-party logistics providers are experts in their fields and are more likely to handle responsibilities better than your in-house team. It ensures lower risk associated with the overall logistics function and any other responsibility you have outsourced to them.
Scalability
A 3PL vendor usually caters to more than one customer. So, it is likely that they are only using a fraction of their resources for you.
It means that if you are planning to scale, you get the flexibility to utilize supply and distribution based on your changing needs, and the 3PL vendor would be able to match your expectations with ease.
It allows you scalability without making redundant investments or spending a ton to manage the sudden demand surge.
Faster delivery options
In most cases, third-party logistics providers have the resources to cater to your specific requests, owing to their exclusive partnerships and expertise.
It means that if you are looking to improve your delivery times for a particular region or for a timeframe, you can place a request for the same, and the vendor should be able to match your expectations with ease.
Provide real-time analytics on sales and inventory
Your in-house team can often struggle to track the right metrics and lack the resources to produce real-time analytics concerning sales and inventory.
On the other hand, the 3PL vendor is well-placed to understand your bottlenecks and generate real-time analytics that would help you get rid of your shortcomings and streamline the entire supply chain function, thereby improving the overall customer experience.
Other value-added services provided by a 3PL company
Alongside logistics management, a 3PL company can also offer other value-added services, such as –
Labeling
If your warehoused products require specialized packaging, you can hand them over to your 3PL provider to save time and resources.
Personalization
Ecommerce brands offer certain items that can be personalized. If a customer places a special order asking you to laser-etch a name on the product they have ordered, a 3PL fulfillment vendor should be able to handle it on your behalf.
Product destruction
It is inadvertent to accept that your inventory can contain obsolete items doing nothing more than raking up unnecessary space in your warehouse. In such cases, you can request your 3PL partner to recycle these offerings or dispose of them with utmost safety and care.
Reverse logistics
Depending on the size and resources available, a 3PL provider can help you manage damaged inventory efficiently.
These can collaborate with you to figure out if there is a possibility of repairing the returned items or they are to be sent back to the manufacturer. In other cases, they can also store packaging materials to help these refurbished items back to the original person who placed the order.
Most major 3PL providers also offer simple repair services to ecommerce businesses.
How to choose a 3PL provider and get started?
Now that you understand what a 3PL provider has on offer, the next step is to select the right one for your ecommerce business. Here are the aspects to look upon while selecting a 3PL fulfillment vendor for your organization –
Technological capabilities
Technology plays a vital role in efficient logistics handling, but given its ever-changing nature, it can be challenging to find the right partner who has the requisite expertise to accommodate your needs.
Make sure you choose one who is able to integrate with your existing technology ecosystem and helps bring about holistic automation and growth.
Omnichannel presence
Most modern businesses, today, are omnichannel and cater to a wide gamut of customers across channels. So make sure you select a 3PL partner that follows industry-leading practices and can cater to an omnichannel customer base with aplomb.
Financial stability
No business lacking financial stability has been able to run for long. Conversely, organizations with a solid monetary base have been able to deal with unforeseen disruptions and are best placed to take advantage of any upcoming opportunity.
So it is imperative for you to choose a 3PL partner with a proven history of financial strength and no reasons for you to believe that the upcoming days would be any different.
Superior customer service
A 3PL partner is a vital cog for your ecommerce business’ success. But for them to optimize their role, it is imperative for them to customize their solutions and adapt their operations to best suit your needs.
Choosing a third-party logistics vendor focusing on superior customer service would enable you to deal with uncertainties and find optimum ways to react and minimize their impact.
Conclusion
Whether you are partnering with a 3PL provider for the first time or you are engaging with a new one for any reason, the grind would be tough.
But once the onboarding is complete and both parties understand each other’s expectations, it would make the overall process feel much more manageable and streamlined.
The benefits of partnering with a 3PL vendor are many. But they come at a cost. So you need to balance them both and make sure you find the one who provides you with the requisite services you seek while charging a reasonable fee. In addition, it would enable you to manage your supply chain better and offer a superior customer experience.
For more fulfillment related queries, reach out to us at & fulfillment.