2PL vs 3PL - Which Fulfillment Partner is Best?
3PL vs 2PL - Which Fulfillment Partner is Best?
If you are a growing eCommerce business that has been handling your fulfillment needs in-house, you might be wondering how to scale. Determining your needs, time constraints, and growth trajectory will be key in determining whether a 2PL vs a 3PL works best for you. The best fulfillment partner will be one that meets the needs of your business and your consumer. In this article, we will define and outline the pros and cons of utilizing a 2PL vs a 3PL partner. Which fulfillment partner is best for your eCommerce?
What is a 2PL
2PLs, second-party logistics, are asset-based carriers responsible for the method of transportation. This would include shipping lines, air freight providers, and van lines to name a few. 2PLs own the transportation assets that are responsible for delivering products from one place to another. Said another way, they are the airlines, sea-faring cargo ships, and rail transport companies that are contracted to fulfill product delivery. They are sometimes called “forwarders” due to the fact they mainly control one leg of the transportation journey. Whether the 2PL handles a portion of the whole delivery depends on the company and its resources. Some larger shipping lines like Maersk, handle primarily large, heavy, or wholesale deliveries. Other global 2PLs like FedEx can handle larger shipments and almost everything in between.
Pros
- They provide lower overhead than shipping the product(s) yourself.
- They offer simple contracts
- It is easy to track goods
- You have the freedom to choose the mode of transportation
Cons
- Provides a basic level of delivery
- Harder to scale
- Relationship is transactional
- Is not invested in your eCommerce success
What is a 3PL
3PLs, third-party logistics, are organizations that specialize in integrated fulfillment. eCommerce businesses outsource their supply chain and order fulfillment through these entities. 3PLs provide services that include: warehousing, receiving, storage, and shipping. Some 3PL companies provide value-added services that include: inventory management, kitting, assembly, and custom packaging options. eCommerce as an industry and been growing steadily over the past decade and so has the rise in 3PLs. In fact, most fortune 500 (86%) and 100 (96%) companies use a 3PL fulfillment partner. Here are a few reasons why.
Pros:
- They help simplify the fulfillment process
- Faster delivery, fewer mistakes
- Greater scalability
- Relatively low capital investment required
- Save money and time in the long run
Cons:
- You give up more control of the supply chain and fulfillment process
- Businesses can become dependent on their 3PL partners
- Higher upfront costs initially
If you are a growing eCommerce business and you are at the growth apex where managing the logistics has become a part-time gig. It might be time to consider outsourcing your fulfillment to an expert. Falcon Fulfillment specializes in high-volume eCommerce fulfillment. From receiving to final delivery, we can help to refine your supply chain process and create a workflow that will alleviate time constraints and still give you the insights to grow your business your way. Reach out to an agent today to discuss how we can help.
The Oceanic Effects of eCommerce
We’ve talked about the environmental impact of eCommerce in other articles and in what ways businesses can reduce their own negative impact on the earth. Today, we’ll be discussing the effect that eCommerce has on the world's oceans and water supply, and how we can do better.
Oceanic Pollution
Human activities on land are responsible for over 80% of oceanic pollution. While the majority of it is attributable to nonpoint source pollution, which is pollutants that fall into rivers and inevitably end up in oceans, river-borne litter and plastic account for a significant fraction of the pollution in our seas. Excessive packaging, tags, plastics, textiles, and microplastics from eCommerce retailers often end up in storm drains, gutters, canals, rivers, and, the open sea.
This debris not only pollutes our water but also grinds together to form microplastics and micropollutants that marine life consumes. When this occurs, aquatic species become vulnerable to fatality and other serious health issues. Some contaminants, such as microplastic, cannot be digested by other creatures which leads to contaminated marine food. These contaminated food sources ultimately make their way to us and other animals.
Ocean Acidification Caused by Emissions
The ocean provides one of the most significant benefits to the earth in terms of climate change. It absorbs 30-50% of all CO2 created by fossil fuels each year, keeping our environment healthier for longer. The three major sources of greenhouse gas emissions are electricity, transportation, and landfills. Together they contribute almost 36,000 billion tons of emissions per year.
This becomes problematic when roughly half of these emissions are absorbed by plankton, algae, and other marine plants through atmospheric diffusion and photosynthesis. This alters the total pH of the ocean's surface water, accelerating acidification. The more waste we generate, the more emissions are released, the more the ocean absorbs, and the more acidic it becomes.
With the ocean acidifying quicker than it has in millions of years, species with calcium carbonate shells and skeletons are dissolving. As a result, organisms attempting to adapt to increasing acidity levels have a very narrow window of opportunity. Adaptation in such a short period of time causes slower reproduction as well as fewer and smaller offspring. Causing significant disruption across the ocean's food chain.
Ocean Noise
Sound travels faster and farther under the ocean's surface than land or in the sky. Many marine species rely on sound for communication, navigation, and other survival purposes. With an ever-increasing number of shipping containers transporting the world's eCommerce goods from shore to shore, the ocean has become a cacophony of sound, interfering with marine life's habitats and welfare. The incessant noise created by cargo containers, boats, ships, and other sea-bearing machines generates an auditory "smog" that reverberates throughout the ocean. This has a knock-on effect of limiting marine life's sensory range. This has been related to a large number of whale strandings, aquatic species abandoning their habitats, and the death of various invertebrates such as scallops, crabs, and squid.
It’s no surprise that oceanic pollution has a significant influence on the environment. With the right information, eCommerce can help reduce oceanic pollution, by selecting sustainable packaging, creating environmentally friendly products, and streamlining the fulfillment of transportation needs. It is important to be aware of the environmental effects we observe around us in order to better assist the environment and increase the sustainability of your company. Partnering with a 3PL that specializes in creating sustainable solutions is a great first step. Follow Falcon for the most current information about eCommerce, the environment, and how you can help.
The Pros and Cons of Dropshipping for eCommerce
What is Dropshipping?
Dropshipping is a retail fulfillment strategy for online businesses in which eCommerce acquires merchandise from third-party suppliers as shoppers place orders in real-time. For the merchant, inventory, shipping, and fulfillment is a hands-off process managed off-site by a third-party vendor. When a customer places an order, a dropshipping supplier will manufacture and ship products on a seller's behalf.
What is a Dropshipper?
A dropshipper is a manufacturer or supplier overseeing a retail merchant's inventory and order distribution. Because the bulk of running a business is managed by the dropshipper, the merchant’s main responsibilities are marketing their brand, attracting customers, and pricing items for a healthy profit margin.
How Does Dropshipping Work?
Dropshipping is relatively simple and consists of two steps.
- Dropshipping is an online business model that provides inventory, warehousing, packaging, and shipping on behalf of a seller.
- When a shopper places an order, that order is relayed back to a seller's dropshipper. The seller will purchase said product(s) in the order, and the dropshipper will manufacture/create the order, package it, and ship it directly to the customer.
Learn How Dropshipping Compares to a 3PL
The Advantages of Dropshipping
It’s likely that start-ups and first-time business owners are interested in the dropshipping business model because of the seemingly off-the-bat benefits. Let’s take a closer look at the pros and cons of dropshipping.
No In-house Inventory
Managing your own inventory is stressful. Fulfilling orders, managing returns, and overseeing customer service consume a lot of time and focus. With a dropshipping business model, the inventory of a seller is directly managed by the dropshippper’s warehousing facility, along with order returns and basic packaging needs. This reduces overall costs by eliminating personal fulfillment expenses, the need for employees, and the need for inventory space.
Little Start-up Costs
A huge green flag for start-up eCommerce is the little to no start-up cost that dropshipping provides. To get started, simply choose your products, connect them to your store, and pay once a product is sold. With no fulfillment processes or inventory to worry about, start-up costs are low and it’s relatively quick to get the ball rolling.
No Fulfillment Responsibilities
Compared to other eCommerce, sellers who are using a dropshipping business model do not have to worry about other areas of fulfillment. With no inventory or packaging to manage, sellers can focus on creating products and advertising them to the right audience while their dropshipper does most of the work. This appeals to first-time sellers, new entrepreneurs, and those wanting to sell with minimal responsibility.
The Disadvantages of Dropshipping
While there are many benefits to dropshipping, it has its equal share of disadvantages. Let’s consider a few examples and how they compare to the upside of dropshipping.
Loss of Control
One of the disadvantages of dropshipping is the seller's lack of control. Since brands do not have to manage their own inventory, fulfillment, and order shipping, they lack the means to customize the customer’s shopping experience. This often results in generic packaging, average or extended delivery times, and possible quality control issues.
Quality Control
With a lack of control, comes a possible lack of quality. If a seller is unaware of the quality of product their dropshipper is providing, a customer may contact a seller over a quality issue the seller never even knew about. Additionally, there is no way for sellers to quality control any inventory being sold to customers beforehand. This could result in damaged items, damaged packaging, complaints, and possible unhappy customers.
Branded Shopping Experience
Yet another downside of loss of control over certain areas of your business, is missing out on providing a branded shopping experience to your customers. Although some dropshippers allow for some package customization, there are few options when compared to fulfilling on your own or with a 3PL. Limiting branding limits the perspective your customers have of your company. What is to distinguish you from millions of Amazon sellers?
At the end of the day, dropshipping is the perfect fit for many people and night quite the right one for others. Understanding and deciding the pros of cons of dropshipping and in what ways dropshipping could affect you and your business is important when deciding on the future of your eCommerce. If you’ve outgrown your dropshipping business model, you’re looking to scale, or are interested in discussing what a 3PL can do for you, contact one of our agents today.
3PL VS. 4PL, What Are They?
3PL VS 4PL, What Are They?
3PL vs 4PL, what are they? How do they differ? What can eCommerce businesses stand to gain or lose by using one over the other for their fulfillment needs? We hope to shed a little light on which type of fulfillment company you should choose for your business needs.
What is a 3PL
Third-Party Logistics is an industry term most are familiar with. For companies looking to outsource their entire logistics process, 3PLs are the answer. They are able to handle the management of receiving, inventory warehousing, packaging, and shipping services, letting eCommerce businesses focus on other important areas of their company. Some 3PL businesses offer additional logistics services known as value-added services. These include inventory management, kitting, assembly, and more.
What is a 4PL
Fourth-Party Logistic Providers act as consultants. While their services are similar to a 3PL, they lack the physical means to move inventory through the supply chain themselves. Instead, a 4PL will contact and negotiate services between the necessary companies on your behalf. 4PLs are often used when an eCommerce does not have staff to oversee transportation and logistics operations.
3PL VS 4PL: Main Advantages
The primary distinction between 3PL VS 4PL is that a 4PL manages the whole supply chain and does not provide any physical warehousing or assistance. A 4PL will instead coordinate multiple services, including 3PLs, to aid your eCommerce. A 3PL, on the other hand, is primarily focused on the logistics management process and personally provides physical warehousing, logistics, and value-added services.
3PL VS 4PL is a heavily debated topic within the eCommerce and logistics industries for which option is ultimately better. The truth is, each one is meant for different situations and business needs. Understanding the key differences between 3PL VS 4PL will ultimately affect your company on the bottom line.
The Benefits of a 3PL
There are several benefits to working with a 3PL partner. Firstly, they provide the skills and expertise required for enhanced performance in areas like fulfillment, transportation, and logistics. Through established networking relationships and expert knowledge in the fulfillment sector, 3PLs can upgrade your systems and simplify your overall operation in terms of efficiency and cost. Additionally, 3PLs can provide insight into obstacles that arise during shipping operations, day-to-day fulfillment, or even customer service.
Scalability
Partnering with a 3PL provides flexible warehousing that can scale according to the needs of your eCommerce. Depending on your order volume, a 3PL partner can scale operations and inventory space up or down to provide everything your eCommerce needs, and nothing of what you don’t. This is essential for seasonal eCommerce businesses.
Shipping Solutions
With networking partners and insider shipping solutions, a 3PL can provide the best bang for your buck when considering order shipment for your business. Your 3PL partner can negotiate better pricing based on their high-volume purchasing power. Without a 3PL partner, your eCommerce faces stiff prices named by private shipping companies and little to no cost advantage over competing eCommerce.
Control
A 3PL partner offers a balance between management and personal control over your eCommerce. Your business can fully automate the fulfillment process without sacrificing customization or control. Work with your 3PL to personalize your fulfillment process and make it the perfect fit for your eCommerce while maintaining package customization, person-to-person communication, and brand experience.
Although partnering with a 3PL can result in considerable time and cost savings, giving up control of the delivery process can be tough for some eCommerce owners. Similarly, a 3PL partner can save businesses money in the long run, however, they often have larger upfront costs compared to in-house fulfillment and other options.
The Benefits of a 4PL
Many 4PL partners provide comprehensive technology solutions which can be a critical component for eCommerce and their supply chains. Knowing that your entire logistics process is handled by a single point of contact allows you to sit back and truly watch the backend of your business seemingly run itself.
Vendor Management
A 4PL partner serves as a single point of contact for your entire supply chain. This means there is no coordinating between multiple suppliers, waiting on hold, resolving issues, or finding new partners when one falls short. Instead, your 4PL partner will do all the planning and communication on your behalf while you focus on other aspects of your business.
Supply Chain Visibility
A 4PL can assist you in developing and implementing cloud-based systems that collect data from a variety of external and internal sources. This sort of system offers valuable insight into all aspects of your supply chain from a single dashboard. End-to-end supply chain visibility allows you to know where your inventory is at all times and provides transparency over each of your supply chain partners.
Data Solutions
Data solutions are used by 4PL partners to track fulfillment and monitor conformance to standardized regulations, ensuring efficiency from on-the-road operations via invoice accuracy and payments. Additionally, 4PL partners contribute to the overall quality and accuracy of shipping data via data certification, data integrity checks, and ongoing data maintenance. One of the most significant downsides of utilizing a 4PL partner is how much eCommerce must rely on their 4PL once integrated. Typically, these suppliers provide key services that, over time, may reshape an organization's entire supply chain and build a reliance on them. Working with a 4PL can also be costly for small and medium-sized eCommerce businesses.
At the end of the day, it’s important to look at your business and determine which logistics partner would be the best fit for you. Although both are great options, one provides advantages the other will not. A 3PL works well for growing businesses interested in working alongside a single logistics partner while still maintaining adequate control and personalization. A 4PL is geared toward established eCommerce businesses looking to fully automate their entire logistics platform through a single point of contact. What businesses sacrifice in control and personalization, they make up for with efficiency and optimized supply chain performance. When partnering with Falcon, you receive full transparency, professional fulfillment services, and above all else, you retain control. Talk with one of our agents today.
How a 3PL Partner Helps Create a Sustainable Business
How Does a 3PL Partner Create a Sustainable Business?
Sustainability has been a growing concern for many consumers and companies alike. Fortunately, the 3PL industry has been paving the road toward sustainability in an easily obtainable way. In this article, we’ll be outlining how a 3PL partner can create a more sustainable business for your eCommerce and save you money in the long run.
Reduce Transportation Emissions
Transportation contributes significantly to growing greenhouse gas emissions. A 3PL partner can provide strategic transportation solutions for eCommerce. 3PL partners help eliminate unnecessary transportation stages. They have the ability to convert transport from air freight to sea freight—by shifting inventory to more optimized locations and using the most efficient co-loading routes. Furthermore, working with a 3PL boosts the fill rate per transport unit per tank of gasoline. This allows you to use higher capacity trucks and offset routine vehicle maintenance that would otherwise fall on your shoulders.
Learn about Falcon's eCommerce Shipping Solutions.
Transition to Sustainable Packaging
While cost-effectiveness and safe delivery have traditionally taken precedence over sustainability, many eCommerce businesses are rapidly resorting to eco-friendly packaging to reduce their environmental impact and fulfill rising customer expectations. A 3PL partner can help eCommerce by sourcing packaging materials that are optimized, greener, recyclable, and responsibly sourced. With the expansion of eCommerce shipping, it's critical to work with a 3PL that adheres to environmental standards, assists in lowering packing and disposal costs, and helps your eCommerce meet and hold the same standards as your shoppers.
Learn more about transitioning to sustainable packaging.
Optimize Energy Usage
When operating a warehouse, significant amounts of energy are used. Lighting, extensive warehousing equipment, IT infrastructure, temperature regulation, and other elements are included. All of these factors lead to high energy usage, operating costs, and an expanding carbon footprint. The right 3PL partner will aid eCommerce companies in reducing their environmental impact via optimized warehousing. This includes; energy-efficient floor designs, solar panels, sustainable packaging alternatives, responsible waste removal, and much more.
Learn how Falcon optimizes energy.
Aid in Reverse Logistics
All procedures involving the reuse of products and materials are referred to as reverse logistics. This includes recycling, refurbishing, and reselling returned items. In reverse logistics, the product is transferred from the buyer to the manufacturer before being disposed of or repurposed. Working with a 3PL can help your company practice reverse logistics effectively and significantly minimize the carbon footprint produced by returns and discarded items.
Final Thoughts
Keeping up with the continuously evolving eCommerce industry is challenging, especially with the increasing pressure to become more and more sustainable. When you partner with a 3PL, things get easier. Knowing you have a reliable partner to help your eCommerce reduce overall transportation emissions, adopt sustainable packaging, optimize energy usage, and aid in reverse logistics is a stress relief that every business owner needs. Get in touch with Falcon today to discuss how we can help your sustainability.
Q2 eCommerce Trends of 2022
How are eCommerce Trends Changing
The pandemic of 2020 pushed the world into faster technological advancement. Typical growth rates of 13-15%, shot up to 31% growth in 2020. Now, three years later, we can expect faster advancements, delivery, and speedy checkouts. Each quarter we see a new wave of eCommerce trends that will affect the bottom line of businesses around the world. Let’s review the eCommerce trends of Q2.
Compared to eCommerce Trends of 2022
eCommerce Trends of Q2
The eCommerce Landscape is Becoming More Competitive
By the end of 2022, eCommerce accounted for 20.4% of worldwide retail sales, up 10% from five years previously. This fast expansion of eCommerce is linked to a variety of factors, however, Covid-19 is the most prominent.
When stay-at-home orders began in early 2020, businesses made a swift transition into the online world. This technological jump pushed companies and consumers alike into a buying journey they had never experienced, which ultimately ignited the ever-burning flame of digital shopping that we continue to see today.
Three years later, and despite brick-and-mortar retailers are making a comeback, eCommerce remains supreme. Because of the rise in online shopping, thousands of eCommerce retailers sprung up almost immediately after the pandemic began. This trend shows no signs of slowing and with each passing year, the eCommerce sector becomes more crowded and more competitive than ever. Successful startups are becoming more difficult to manage, and established eCommerce are encountering more frequent and aggressive competition. As newcomers drive pricing down to attract buyers, established retailers struggle to maintain market share and jobs.
Increasing Advertising Costs and Reduced Campaign Effectiveness
As new eCommerce businesses flood the market, all are vying to find and attract the attention of customers. This raises the overall cost of advertising and lowers the total return on ad investments. For example, Facebook advertising costs 47% more than it did the previous year, and this trend is only anticipated to continue. Furthermore, as a result of Apple's new privacy update in iOS 14.5, cross-app data sharing is now restricted unless users voluntarily opt in. Because the vast majority of customers want to protect their privacy, data sharing is often denied. This raises the cost and lowers the effectiveness of Facebook and Instagram advertising.
eCommerce Globalization to Avoid Growth Bottlenecks
The total addressable market (TAM) is a common constraint for eCommerce growth and expansion. As companies hit their local and domestic consumer limitations, eCommerce brands will soon venture into the global arena to expand their reach. Not only will this help eCommerce reach more consumers, but it will assist shoppers in finding new and foreign brands. According to a recent poll, 76% of online shoppers have made purchases from an eCommerce site outside their own country, solidifying the future global expansion of eCommerce.
Localizing Supply Chain to Reduce Manufacturing Costs
eCommerce is seeking more cost-effective solutions as supply chain delays and interruptions persist far beyond 2020. With raw material shortages and rising air and sea freight costs, business owners are moving to a more localized supply chain. Companies are shifting from low-cost production in China and toward higher-priced manufacturing and distribution in the United States. Businesses are choosing a local distribution facility to avoid record-high freight costs, delayed inventory, and delayed shipments. Although localizing your production may cost more upfront, your customers will receive orders faster, inventory will remain stocked, and transportation and distribution expenses will be reduced, possibly saving you hundreds in the long run.
Get Monthly Updates on Supply Chain News
Partnering with a 3PL
Prior to 2020, 3PLs were leveraged by most fortune 500 companies around the world. Now, post-pandemic, not only do 90% of fortune 500 still works with 3PL partners, but small to mid-size eCommerce businesses are making the switch as well. This is due to increased awareness of the enhanced efficiency and reduced fulfillment costs that 3PLs can provide. Working with a 3PL allows eCommerce businesses to better optimize fulfillment, scale flexibly, minimize inventory shortages or delays, adopt the best shipping rates, and even provide sustainable solutions and alternatives to reduce a company's carbon footprint.
Learn more about partnering with a 3PL
Renewed Focus on eCommerce Sustainability
Consumers and businesses alike are becoming more environmentally conscientious. This has ushered in new trends of sustainability, ethically sourced products, and morally sound business models. Shoppers are are choosing more sustainable options over cheaper or faster alternatives. Because of this, eCommerce are quickly making the switch toward sustainable packaging, waste minimization, renewable energy, and a more people-focused business strategy.
Learn more about eCommerce sustainability
Alternative Payment Options
In the wake of high inflation, consumers are adjusting spending habits and shifting towards more frugal budgets. They are sacrificing non-essential items and services, leaving some eCommerce wondering what to do. Thankfully, the buy-now-pay-later (BNPL) options that appeared in 2020, are quickly growing in popularity. Afterpay, Sezzle, and Affirm are examples of popular BNPL options that are slowly taking preference for many shoppers. Whether BNPL options are used to work with inflation, offer financial flexibility, or something else entirely - any eCommerce will benefit from introducing BNPL options at checkout.
Final Thoughts
At the end of each quarter, there are bound to be new trends for your eCommerce to capitalize on. From eCommerce globalization and localized manufacturing to 3PL partners and higher competition, it’s tough out there. Make sure to follow along with Falcon to get up to speed on the latest consumer and eCommerce trends.
4 Ways Right-Size Packaging Can Boost Profitability
Selecting the right-size packaging for your eCommerce product(s) not only showcases your brand but also boosts profitability. There are several costly outcomes of poor package sizing. First, you are likely paying more for shipping. Secondly, is the excess cost of packaging materials. Lastly, you are more likely to experience returns and refunds due to damaged products. Today, let’s examine four ways that right-size packaging can boost profitability.
Reduce Packaging Spend
If you are using standardized sizes for your products, you will likely be filling the “extra air” with space-filler. Select right-size packaging depending on the weight, fragility, and value of the product. For example, swapping out expensive cardboard boxes for poly-mailers will save space and money. It goes without saying, that the smaller the package, the less filler you will need, and the less money you spend overall. Here are a few other ideas from Ribble about utilizing right-size packaging.
Reduced Shipping and Storage costs
Utilizing right-size packaging helps to optimize pallet loads, which in turn, helps save $$$ on transportation, handling, and storage costs. The more product you are able to pack into the truck the less per product you pay for the trip. When considering just how much you can save by selecting smaller packaging, you must verify how you are being charged for shipping. Most transportation companies calculate based on dimensional weight as well as physical weight. Calculate how much you could reduce your shipping and storage costs by eliminating a few inches per product.
Reduced Returns and Damaged Product Replacements
Less space around the product means less movement within the box. If you have shipped or received anything in the past few months, you are aware of how packages are treated. Packages show up with dings, rips, and crushed corners. However, the impact of normal shipping jostling is significantly reduced when the package is right-sized. The more consistently your products arrive in working order, the higher your customer satisfaction will be.
Make a Commitment to Sustainability
Another profit-boosting benefit of using right-size packaging is the ability to share that you are working toward sustainability. Even if you don’t swap out plastic bubble wrap for green cell foam, you will definitely be using fewer materials and less fuel. According to Deloitte research, ⅓ of consumers value ethical practices in the products and services they buy. Ensure that you are able to attract more buyers with your commitment to sustainability with a simple change to right-size packaging. You can even go a step further by creating a memorable unboxing experience. Falcon Fulfillment can offer expert advice on personalization, sustainability, and maximizing right-size packaging for your brand.
Switching from standard-size boxes to right-size packaging will boost your bottom line.
If you are interested in learning more about right-size packaging and how your 3PL can help you scale, get in touch with one of our agents today. Falcon Fulfillment are experts at packaging, sustainability, and scaling your business.
Help Your eCommerce Save Money with a 3PL
Wanting to own your own time is a common reason why people decide to launch their own businesses. They want to be the master of their own schedule. However, many business owners quickly realize that when you launch an eCommerce it can eventually begin to own you. Two of the largest and most critical elements of any eCommerce are shipping and fulfillment. Doing it yourself in-house can save you some money in the short term but it could hinder your growth in the long run. Let’s walk through a few ways your eCommerce can save money with a 3PL.
Warehousing
Whether you rent or own warehousing facilities, you will need to stage, store, and ship goods. If you own your warehouse, do you have space to expand when necessary or beneficial? If you rent warehouse space, do you have flexible options to meet fluctuating demands? The accuracy of your sales projections will determine if you’re in the sweet spot of warehousing, or whether you need to look for more financially-savvy options.
Alternatively, when you’re partnered with a 3PL, you have the flexibility and freedom to scale when you need to - and when you want to. Furthermore, a 3PL partner offers scalability options without the long-term commitments you would encounter otherwise. This cost savings and flexibility allow eCommerce to maximize sales and scale readily.
Staff
Depending on the size and quantity of your products, you will likely need a few extra hands to get them to your buyers. If you are managing in-house fulfillment, you are 100% responsible for hiring, quality control, management, and down-sizing when necessary. If you have an employee walkout mid-shift, guess who is still on the hook to get orders out the door? Yep, it’s you. With a 3PL partner, you are free to run as many product promotions, launches, and sales collaborations as you can, without the risks of personal staff or process delays. A 3PL manages all the personnel required to scale up or down as your eCommerce needs change.
Packaging
No matter what you are shipping, it must be packaged. As a solopreneur, you will likely run into MOQ (minimum order quantities) on packaging materials. This includes; boxes, filler, bags, and more. Depending on the upfront investment cost, it could limit the number of products you are able to deliver in one shipment. If you sell more than one type of product, it further complicates your packaging spend. With a 3PL partner, you are afforded much higher flexibility in packaging services due to the high volume of products purchased and strategic packaging vendor relationships leveraged by most 3PL’s. In addition, depending on the 3PL partner, they can offer personalized packaging which elevates your brand awareness and visibility.
Shipping
The least expensive way to ship most products is to do it yourself. You pick it, pack it, wrap it, drive it to the shipping location, and update the customer with the delivery details. Then you monitor tracking to ensure it makes it to the customer. Even though a 3PL partner will not necessarily lower your shipping costs, it will alleviate the cost of time. You no longer will be working IN the business but ON it. A quality 3PL will not only get your product shipped in a timely manner, they will also have an inventory management system that will inform you and the customer of the delivery status.
Returns
Every eCommerce will have to manage returns and the average percentage for eCommerce hovers between 20-30%. This isn’t a big deal if you are processing 5 orders or less per day. However, just beyond this threshold is a tsunami of returns that threatens to slow down the processing of future orders. Working with a 3PL gives you the peace of mind that returns will be received, reshelved, and reshipped when an exchange is desired. Furthermore, 3PL’s that have invested in high-tech IMS will be able to keep more accurate quantities so that you don’t miss out on sales of products that simply haven’t been added back as available inventory.
Partnering with a 3PL will save you money by giving your company the flexibility in warehousing, staffing, and packaging. It will save you time, hassle, and headaches by alleviating shipping burdens, inventory management, and dealing with returns. While the immediate costs may appear to be higher, a good 3PL partner will help lay the foundation for the next stage of your eCommerce growth and save you money in the long run.
If you want to own your time again, get in touch with one of our agents. See how Falcon Fulfillment can help you regain life’s most precious commodity.
Inflation and eCommerce
What is eCommerce Inflation?
Despite the fact that inflation has not been significant for eCommerce throughout its history, everything changed at the start of the pandemic in 2020. Since then, inflation, shortages, and supplies have only become worse, impacting most eCommerce businesses around the world.
Credit: Adobe Digital Index
According to the July 2021 Report by Adobe Digital Economy Index, online prices have increased 3.1% YoY.
“In January and February 2022, these higher costs drove $3.8 billion in online sales growth. That same rate of inflation could lead consumers to spend nearly $27 billion more in 2022 on the same amount of purchases.”
- Retail Dive
To some degree, the rate of eCommerce inflation has matched the general rate of economic inflation, which was recorded at 8.5% in April 2022.
“Consumers and eCommerce alike should anticipate inflation to linger around 4-5% over the next three years.”
- Bloomberg
How is Inflation Affecting eCommerce?
While eCommerce is experiencing an all-time high in sales growth, inflation is not linear. It ripples through the economy in various ways, affecting nearly every eCommerce differently. Inflation's impact on small to medium-sized businesses may seem negligible now, but it can quickly add up with ongoing obstacles in the supply chain.
When manufacturers are unable to retrieve the raw materials required to produce products, they suffer. Additionally, inflation increases the price of other commodities such as electricity, internet, online advertising, and computer upkeep. From reduced inventory and missing items to increased costs and longer delays, inflation is affecting businesses around the world.
Raising prices makes sense for most businesses combatting the effects of inflation. However, charging more could cause additional chain reactions. Because inflation reduces the number of products consumers can afford, we predict a heavy impact on eCommerce, especially those selling non-essential or luxury items. When consumers restrict their spending habits, businesses naturally lose profitability.
Covid and the Supply Chain
The increased demand for products rather than services reflects the significant shift in consumer behavior since the pandemic. This unanticipated demand, combined with the effects of Covid-19, had a significant impact on the already stressed supply chain.
“The shipping delays and port bottlenecks of late 2021 left businesses with insufficient supply. At the same time, Americans unleashed pent-up demand throughout last year and pushed spending above the pre-pandemic trend.”
What Can eCommerce Do?
Although the supply chain is slowly recovering, what can you do to combat growing prices, reduced inventory, and future shortages?
Update Product Offering
Is your product model reflecting the current market inflation? If it doesn't, try to eliminate underperforming SKUs, introduce private label brands, and combine items to boost the value or lower product amounts. For example, instead of a 10-ounce portion, provide an 8-ounce.
Increase Productivity
Increasing productivity may be an alternative to raising prices. Some examples of how to increase productivity are; the use of automation, marketing optimization, recruiting personnel, or utilizing a third-party fulfillment service to find you the best avenues to navigate inflation and fulfillment.
Keep a Safety Stock
Extended lead times, increased prices, and the unpredictability of the supply chain, has made maintaining healthy inventory levels more important than ever. If your position allows, we recommend keeping up to six months' worth of safety stock on hand. This may help eCommerce capitalize on additional market share during future times of inflation, delays, or shortages. For businesses that are forced to overlook this strategy, partnering with a 3PL could be the answer to reliable safety stock and affordable warehousing.
Switch Suppliers
Working with a manufacturer that can build and ship your items locally can save on high sea freight shipping costs. Most sellers find the efficiency and cost of manufacturing in China to be appealing; however, spending more on local production may prove to be a justifiable tradeoff when avoiding high and continuously climbing sea freight costs. Transitioning to a domestic supplier allows you to minimize supply chain complications and provide home-grown products to consumers.
Final Thoughts
Despite best efforts, eCommerce companies may still have to raise prices due to inflation. However, leveraging these tips could help your eCommerce business keep costs lower, which will maximize your competitive advantage.
Follow along for more as we navigate the fulfillment world and bring you insider news on the supply chain, eCommerce inflation, and more.
1PL, 2PL, 3PL, 4PL, 5PL: Logistics Providers Explained
The majority of business owners have heard the phrase "3PL" or other "PL" terminology. What most people don't realize is that there are many tiers of logistics providers, and their services vary based on the needs of your company.
In this article, you will learn the distinctions between logistics providers to help you determine which type is best for your company.
1PL - First-Party Logistics
A First-Party Logistic Provider is made up of two parties, the supplier and the retailer/customer. A 1PL logistics provider transports items from stock to shelves. In this type of relationship, the supplier manages their own inventory, storage, and delivery.
2PL - Second-Party Logistics
Second-Party Logistics Providers focus solely on the transportation sector of business. Examples of 2PLs include airlines, shipping lines, and hauling companies that operate the vehicles. 2PLs transport inventory between one or more legs of the fulfillment journey.
3PL - Third-Party Logistics
Third-Party Logistics is an industry term most are familiar with. For companies looking to outsource their entire logistics process, 3PLs are the answer. They are able to handle the management of receiving, inventory warehousing, packaging, and shipping services, letting eCommerce businesses focus on other important areas of their company. Some 3PL businesses offer additional logistics services known as value-added services. These include inventory management, kitting and assembly, and more.
According to Armstrong and Associates, 90% of Fortune 500 companies use a 3PL.
4PL - Fourth-Party Logistics
Fourth-Party Logistic Providers act as consultants. While their services are similar to a 3PL, they lack the physical means to move inventory through the supply chain themselves. Instead, a 4PL will contact and negotiate services between the necessary companies on your behalf.
5PL - Fifth-Party Logistics
A Fifth-Party Logistics Provider is a consultant one step above a 4PL. 5PLs act as aggregators for 3PLs by bundling the needs of multiple 3PL businesses to get better rates on services. Working with a 5PL involves a fully integrated logistics solution to encompass the entire supply chain from beginning to end through multiple outsourced logistics providers.
The Sweet Spot
Similar to the story of Goldilocks and the Three Bears, supply chain providers are their own metaphorical bowls of porridge. Some are too cold, simple, and bland. Others are too hot, complex, and hard to understand. However, there is one porridge that comes at just the right temperature, provides just the right amount of support, and allows your eCommerce to successfully grow and scale. 3PLs are the sweet spot of supply chain service providers. With full control mixed with the support you need from fulfillment experts, you’re free to focus on more important aspects of your business while your fulfillment seemingly manages itself.
The Bottom Line
A 1PL partner is the simplest system and doesn’t require excessive integration or networking. Your business has full control over the supply chain process, however, your ability to scale will be limited and the risk of supply chain obstacles will increase.
A 2PL also uses a simpler system, but it does not offer as many logistics solutions as other supply chain providers.
Once your company is in a position to consider 3PL services, it’s time to transfer some aspects of your business over to the experts. These aspects are various parts of the fulfillment process that take the most time and precision, including but not limited to warehouse storage, inventory management, order processing, and order assembly. While these aspects are outsourced, your business still retains control and final say.
If you’re interested in outsourcing your entire supply chain process, a 4PL or 5PL are great options depending on the needs of your company. However, businesses that outsource with a 4PL or 5PL tend to have less control over their supply chain and final-say decisions.
If you’re looking for a 3PL, we own and operate dual warehousing facilities in Utah and Kentucky. Our multisite infrastructure allows us to distribute inventory nationwide with reduced transit times and shipping costs. Talk to one of our agents today!