By Jake Rheude
When you start an eCommerce business, you’re usually going at it alone.
That means that every task on the docket is yours to complete, and you end up sourcing suppliers, researching marketing strategies, setting up your website, and packing and shipping orders (sometimes all in the same day, if it’s one of those kinds of days). However, as your business grows and gets more successful, this becomes less and less feasible. As your garage, office, and dining room table start to accrue piles of inventory, and you work late into the night to get orders boxed up, you know something needs to change.
It’s tough to take that step of forking over some hard-earned cash to outsource a job to someone else instead of figuring out how to do it yourself. So let’s focus on the benefits a 3PL can bring to your business and look at why you should invest in one.
First, What Is a 3PL?
Short for third party logistics, a 3PL is a fulfillment center that completely takes over the order fulfillment side of your business. Typical 3PL services are storing and managing inventory, packing and shipping orders, and even processing returns. If you’re picturing all of that suddenly being erased from your to-do list and breathing a huge sigh of relief, that’s probably a sign that it’s time for you to invest in a partnership with a 3PL. So what can they do for you?
Faster Processing Times
We all know about how Amazon has affected customer expectations when it comes to shipping times – many customers expect their order to land on their doorstep two days after they click the buy button. While customers expect shipping that is fast and cheap (or even better, free), most businesses have to choose one or the other. For Amazon to make that possible, they not only use 2-day shipping, they also have same-day processing. For many businesses, especially those managing their own in-house fulfillment, this is just not feasible, but with a 3PL it can be.
Because a 3PL’s raison d’être is to pack and ship your items as quickly as possible, you can get access to faster shipping and processing times than you could ever accomplish on your own. Many warehouses even have a same-day pick and pack policy, where all orders placed before a certain time get packed and shipped the very same day.
Operating on a shoestring budget usually means taking advantage of labor you don’t have to pay for (your own). So while working with a 3PL can seem like an expense that you just can’t afford right now, the time you will gain back can be a lot more valuable.
While packing and shipping orders is crucial to your business, it is not a task that can only be done by you. And as your business grows, other areas should take your focus, like improving your marketing strategy, doing outreach, even adding new products to your lineup. Every minute you spend taping up boxes is a minute taken away from other, higher ROI areas of your business.
Cheaper and Faster Shipping
Not only can 3PLs process orders faster, they can actually make faster shipping cheaper for you. Because fulfillment warehouses ship in such high quantities, they can get better deals on 2-day shipping than you ever could. A major pain point for many businesses is the cost of shipping, and whether you’re offering free slow shipping and building it into your margins, or risking losing customers at checkout by charging for shipping, the cost is cutting into your profits either way. By working with a 3PL you can save money on your shipping costs and even get shipments to your customers faster; a win-win.
Another facet of faster shipping through a 3PL is their strategically located warehouses. A 3PL will have one or more warehouses, typically close to a major airport that can reach other cities quickly and efficiently. If they have multiple warehouses, you can spread out your inventory and be strategically located closer to your customers, which means their orders reach them even faster.
When you’re fulfilling your own orders, it doesn’t make sense to invest in any technology to improve your inventory management – that’s what Excel is for, right? When you’re starting and growing a business it makes sense to use cheap and free technology to cut costs.
However, a 3PL will have access to an incredible array of technology that will benefit you and your business. You’ll not only get real-time inventory numbers, but other analytics that can help you pinpoint trends and get a better idea of where to invest. This can include insights like order accuracy rate, inventory turnover rate, even what percentage of orders were delivered on time.
If your business has grown enough that you’re considering a 3PL, you’ve probably also considered renting out a warehouse space and hiring your own workers. However, the overhead cost of this option is high, and while using an already existing space like your home is (sort of) free, there comes a point when you have to expand. A 3PL will often have multiple enormous warehouses, specialized workers, and (as mentioned above) valuable technology. They can spread out their costs to make it worthwhile for all their clients to use, whereas all those benefits would cost you a pretty penny.
No Growing Pains
An unexpected spike in demands can be a blessing and a curse – especially if you’re running a Just-In-Time inventory model and fulfilling in-house. Trying to fulfill all those orders while also adjusting your ordering and trying to get your hands on more inventory is a lot to juggle, and you may run into delayed processing and shipping times. However, when you’re working with a 3PL, not only can they help you identify ordering trends, they can easily handle fulfilling orders from a demand spike so that you can spend your time elsewhere.
A 3PL is not a money pit, it’s a hugely valuable service and can be an amazing investment in your business. Growing so big that you can’t manage it all yourself is quite an accomplishment, and to keep that momentum growing, you need to outsource work that is not related to the core competencies of your business.
About the author:
Jake Rheude is the Director of Marketing for Red Stag Fulfillment, an ecommerce fulfillment warehouse that was born out of ecommerce. He has years of experience in ecommerce and business development. In his free time, Jake enjoys reading about business and sharing his own experience with others.