The differences between 1PL, 2PL, 3PL, 4PL, and 5PL. Which is right for you?

The differences between 1PL, 2PL, 3PL, 4PL, and 5PL. 

Logistics management is an important component of any successful business. You must choose the best logistics provider for your business to ensure your goods and services are delivered on time and at the right cost. Most people know about 3PL (third-party logistics), but there are several types of logistics providers. Understanding the differences between 1PL, 2PL, 3PL, 4PL, and 5PL can help you make the right choice for your business.

1PL, 2PL, 3PL, 4PL, and 5PL Defined

1PL

First-Party Logistics, or 1PL, is the most basic logistics provider. The relationship consists of supplier and retailer/customer. With 1PL, businesses use their resources to manage logistics and distribution. This may include hiring in-house staff, purchasing transportation, and leasing warehouses. The shipping and receiving are between two parties. No other middlemen are involved in the process.

2PL

2PL stands for Second-Party Logistics and is an outsourced provider. Second-Party Logistics Providers focus solely on the transportation sector of business.  Examples of 2PLs include airlines, shipping lines, and hauling companies that operate vehicles. Retailers that manage fulfillment in-house will often use a 2PL to deliver products to their final destination. Two examples of 2PL providers are UPS and FedEx.

3PL

3PL stands for Third-Party Logistics and is a full-service provider. This logistics provider will handle all aspects of the supply chain, from warehousing to last-mile delivery. Services that a 3PL offers include; receiving, storing, packing, and shipping services. Some 3PLs, like Falcon Fulfillment, offer value-added services like inventory management, kitting and light assembly, and returns management.

4PL 

4PL stands for Fourth-Party Logistics and is a strategic partner that helps a business optimize its supply chain. This provider will help a company streamline its processes, reduce costs, and increase efficiency. 4PL providers are integrated into managing multiple aspects of the supply chain. Typically, 4PLs work like consultants who leverage relationships across 1PL, 2PL, and 3PL providers. They rely heavily on technology to optimize the logistics process, allowing them to offer a higher-level analysis of data and reporting. 4PLs provide everything a 3PL does but include project management, logistics negotiations, and strategy.

5PL

Finally, 5PL stands for Fifth-Party Logistics and is a logistics provider that works with multiple 3PLs to manage the entire supply chain. 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 service rates.

Differences of 1PL, 2PL, 3PL, 4PL, and 5PL - Pros and ConsDifferences of 1PL, 2PL, 3PL, 4PL, and 5PL - Pros and Cons

1PL

If you are a small business with limited resources, then 1PL may be your best option. It is a simple system that makes it easy to manage. You have complete control over the logistics process. However, this system becomes limiting as you grow and can throttle business success.

2PL 

Leveraging a shipping provider like FedEx, UPS, or USPS can provide a great network to ensure orders are received in a timely fashion. Using a 2PL provider is best for startups and organizations that can easily manage their fulfillment needs with in-house teams. However, one of the downsides to 2PL logistics is that it takes a very high quantity of shipments to earn volume discounts (a common benefit of 3PL partnership). Furthermore, 2PL relationships fail once orders overwhelm the existing team and warehousing space. If you spend more than 20% of your time fulfilling orders, it is probably a good time to outsource your logistics to a 3PL.

3PL

Using a 3PL provider is the sweet spot for many businesses because it allows companies to scale their sales, storage, and shipping efficiencies without adding tremendous overhead costs. When a company outgrows in-house fulfillment the logical next step is to partner with a 3PL. Conversely, if you have been partnering with a single 3PL and plan to launch internationally or would like to explore utilizing multiple 3PL relationships it is time to explore 4PL relationships.

4PL

Working with a 4PL has expansion possibilities beyond that of a single 3PL provider and can replace a logistics manager in-house. Depending on your specific needs and order volume will determine if this additional layer of strategy is necessary to scale your business. With the additional expertise and data-driven insight comes additional costs as well.

5PL

Finally, working with a 5PL is typically reserved for large multinational retailers who have the order volume and capital to invest in logistics expansion. For most businesses the services provided by a 5PL are simply too expensive for their needs. 


It is important to research each type of provider to ensure you are getting a quality service that meets your specific needs. No matter which type of logistics provider you choose, it is essential to have a good understanding of your business’s requirements and goals and how they are met by what the provider offers. Exploring the differences between 1PL, 2PL, 3PL, 4PL, and 5PL providers will help you select the right logistics provider to help your business succeed. If you would like to learn more about how Falcon Fulfillment can help with your logistics needs, get in touch today.

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Omnichannel fulfillment - what retailers need to know

Omnichannel Fulfillment - What Retailers Need to Know

Omnichannel Fulfillment - What retailers need to know.

As a retailer, staying ahead of the competition is an ongoing battle. One of the ways to stay ahead is to ensure that you are providing your customers with the best possible shopping experience. That's why omnichannel fulfillment is quickly becoming the go-to solution for many retailers. 

Omnichannel fulfillment is a method of delivering products to customers that are based on the unified shopping experience that customers receive when shopping across multiple channels, such as in-store, online, and through mobile apps. The goal is to provide customers with a seamless shopping experience, no matter where they shop. So, what does omnichannel fulfillment mean for retailers? Retailers must have a comprehensive fulfillment strategy to provide customers with the best shopping experience. Here are a few key things you need to know about omnichannel fulfillment as a retailer:

Know Your Customer

To ensure that you provide the best customer experience, you need to know who your customers are and their needs. This means that you must have a comprehensive understanding of their buying habits and preferences. Hopefully, you already understand who your customers are and what they are looking for, but here are some questions to consider as you build an omnichannel experience.

  • Where does the bulk of your sales come from? Online? In-store? Via mobile app? 
  • What kinds of products are purchased via each channel?
  • What are the age(s) and demographic of your primary buyers? 
  • Where do most of your buyers live? 
  • What marketing channels are having the most success in conversion and audience engagement?

Integrate Your Channels

To provide a seamless shopping experience, you must ensure that your channels are integrated. This means you must have a unified platform that links all your channels, including your website, store, and mobile app. Key features to include in your omnichannel software programs are:

  • A platform that can manage all the business’s channels, including order fulfillment, cross-channel marketing, and additional integrations like a CRM. 
  • Manage and combine customer-facing commerce channels. This would include all POS systems in-store, online, and via social media.
  • Deliver functionality for B2C or B2B omnichannel commerce
  • Maintain product availability and data across all channels.

If you work with a 3PL fulfillment partner, ensure their software will integrate seamlessly with your platform. Or if they, like Falcon Fulfillment, provide API integration tools and an account manager to assist with implementation and integration.

Streamline Processes

Because omnichannel fulfillment covers many systems, channels, and customers, creating workflows that cater to an excellent customer experience is crucial. Creating a smooth omnichannel fulfillment experience requires efficient processes. This includes automation and streamlining workflows. Start by reviewing business operations such as marketing and initial point-of-sale.

Utilize Technology

You must utilize the latest technology to ensure that you are providing your customers with the best possible shopping experience. This includes using a customer relationship management (CRM) system to keep track of customer information, analytics to measure performance, and automation to streamline processes. Here are a few specific ways to streamline processes for omnichannel fulfillment:

  • Automate Inventory management (more on this below)
  • Use automation in managing the sorting, movement, storage, picking, and packing of retail orders for last-mile delivery
  • Evaluate pick and pack procedures for inefficiencies
  • Implement effective and easier returns management

Optimize Inventory

One of the most important elements of omnichannel fulfillment for retailers is optimizing inventory. You must have an effective inventory management system to provide your customers with the products they want when they want them. This includes having a real-time view of inventory so that you can quickly adjust your stock to meet customer demand. Automation software, streamlined processes, and ensuring all systems integrate with real-time data help optimize the flow of goods in and out. Check out four ways a 3PL can help with outsourcing inventory management. 


Omnichannel fulfillment is quickly becoming the go-to solution for many retailers. By understanding the key elements of omnichannel fulfillment and utilizing the right technology and processes, you can ensure that you provide your customers with the best shopping experience. Here at Falcon Fulfillment, we specialize in omnichannel fulfillment. We provide 7-day operations, 99.9% order accuracy, and automated inventory management. We don’t believe in a one-size-fits-all approach but believe that a seamless partnership and integration are essential to success. If you want to learn more about how Falcon can help with your omnichannel fulfillment process, talk to one of our agents today.

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eCommerce Fulfillment Infrastructure that Scales

eCommerce Fulfillment Infrastructure that Scales

eCommerce Fulfillment Infrastructure that Scales

As an eCommerce business owner you are well aware of the ups and downs that coming with running a successful company. When you first launch a business you can get by with manual effort and a small team, however as you scale systems, processes, and thoughtful partners are needed to grow. In this article we are going to cover five key elements of eCommerce fulfillment infrastructure that scales as you grow.

Warehousing

Warehousing is the physical space where inventory is stored and distributed for eCommerce fulfillment. Ample storage space is a crucial component in fulfillment infrastructure that will scale. The importance of good warehousing cannot be understated. It facilitates efficient inventory management. Adequate space allows easier and faster inventory intake, storage, and order fulfillment. It provides enough room for a clean and organized stock room where products are easier counted and found as orders are received. Alternatively, inventory management becomes cramped, chaotic, and ineffective when a company lacks warehouse space. Deficient warehouse space increases the risk of stock damage, inventory shrinkage, and incorrect product reporting. As a result, customer experience is threatened.

Inventory Management Systems

Inventory management plays a significant role in meeting and exceeding customer expectations. Businesses can keep track of their inventory levels and orders in real-time. Many inventory management systems integrate with standard POS systems. It is possible to track inventory manually, but it isn’t scalable. To build a fulfillment infrastructure that scales, it is necessary to invest in an inventory management system that has the following capabilities:

  • Lot and serial tracking
  • Shipping and Receiving 
  • Barcoding and Scanning
  • Label Generation
  • Mobile Accessibility
  • Reporting Capabilities 

While these features should be available in most inventory management systems, also consider your needs. Do you want to automate inventory management processes? Do you need a Saas program or on-premise, or both? Regardless of which system you select, ensure that it will meet your current needs and provide expansion possibilities.

Shipping Platforms

Logistics or shipping platforms have become widely used by businesses of all sizes because they offer vital insight and cost savings. Online shipping platforms are used to compare shipping rates, label printing and tracking services, and other logistics services. They can help meet ever-growing customer demands, boost revenue growth, and help to stay competitive. Implementing an advanced shipping system can help you find the right carrier service at the lowest cost. Additional benefits include: streamlining transportation by leveraging zone skipping, managing compliance issues, tracking and resolving delivery problems in real-time, and helping make data-informed decisions with ease.

Payment Processors

These platforms facilitate online payments from customers, such as credit cards and online banking services. A payment processor is a mediator between the merchant and the bank by managing credit card transactions. It validates and authorizes payments by ensuring that the buyer has enough funds and that the card they use is valid for transferring the funds into the seller’s account. Additional benefits of using a quality payment processor:

  • Allows retailers to accept debit and credit card transactions 
  • Offers alternative payment methods like PayPal or Apple Pay
  • Integrates with your POS systems
  • Ensures customer payments are properly validated 

Every eCommerce business will need a solid payment processor and an integrated payment gateway to capture sales and refunds when necessary.

Returns and Refunds Management

Returns management, also known as reverse logistics, involves the same steps as “forward” logistics and therefore requires similar processes. Investing in returns management systems allows businesses to seamlessly process returns and refunds, including tracking and communication with customers regarding their orders. Handling returns well improves overall customer satisfaction, provides for faster turnaround, reduces waste, and can improve profitability.

eCommerce Fulfillment Infrastructure that Scales with a 3PL

Almost all of the systems and infrastructure pieces mentioned above are available through a quality 3PL partner. Not only can a 3PL provide ample warehousing, but they often allow flexibility in scaling up and down with storage, so you only pay for what you need. Additionally, a 3PL typically offers high-tech inventory management systems that include barcoding, automation, shipping, and receiving. A fulfillment company like Falcon Fulfillment will leverage the most advanced shipping processing to reduce costs, expedite deliveries, and ensure proper labeling and compliance. Your business could also benefit from a more comprehensive network of carriers and lower shipping costs due to volume discounts. Even returns management can be bundled into your 3PL logistics offering.

Building eCommerce fulfillment infrastructure that scales becomes exponentially easier when partnering with a solid 3PL. If you want to spend more of your valuable time building and growing your business and less time managing the logistics, let Falcon Fulfillment help. Find out if we are a good fit today.

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Dropshipping - Drawbacks and Alternatives

Dropshipping - Drawbacks and Alternatives

Dropshipping - Drawbacks and Alternatives

If you’re considering starting or expanding your current business, you’ve likely heard about the dropshipping business model. Dropshipping is an attractive option for companies that don’t have the capital to invest in inventory or the resources to manage the logistics of shipping products. But is it the right model for your company? In this article, we will share the benefits, drawbacks, and alternatives to dropshipping.

Dropshipping is a business model in which a company sells products without stocking them. Instead, the company purchases the items from a third-party supplier, who then ships the items directly to the customer. This model allows companies to offer a wide variety of products without the overhead of stocking inventory. The advantages of dropshipping are numerous.

Benefits of dropshipping

Even though dropshipping isn’t for everyone, there are some distinct benefits which include:

  • Less upfront capital is required to get started. To launch a successful dropshipping business, you don’t need to invest in purchasing or storing large quantities of inventory. This significantly reduces the resources required to launch your business. 
  • Managing orders, stock levels, inventory, and shipping are all handled by the manufacturer or vendor. 
  • A home-based or remote business possibility is readily available. Geography is less important when running a dropshipping business because you are not bound to a brick-and-mortar store.
  • Easier to test products. You can test out various products quickly and easily, allowing you to find the best-selling items fast. All this happens without investing a lot of resources in inventory.

Drawbacks to Dropshipping

Even though dropshipping is great for start-ups and smaller eCommerce brands, it can become a limiting issue. There are some significant drawbacks to the dropshipping model.

Lower Profit Margins

One of the most significant drawbacks to dropshipping is lower margins. Lower upfront investment costs mean lower returns. To make a profit, you need to sell a lot more products. Most of the margin goes to the supplier managing production and fulfillment. To overcome the lower margins, it is vital to differentiate your brand in the marketplace and negotiate profitable margins with your suppliers.

Higher Shipping Costs

Shipping costs can be high since you have products shipped from multiple suppliers. A customer can theoretically order from multiple vendors if you work with numerous manufacturers (as most dropshippers do). This means that if they ordered three items from your shop, they could incur three separate shipping fees on that single order. This is one reason why shipping charges tend to be higher with dropshipping. Another reason shipping costs are higher for dropshipping is the loss of volume discounts with fulfillment carriers. Unless you are dropshipping thousands of orders with a single vendor, it isn’t likely you will benefit from economies of scale.

Lack of Quality Control

You may also have issues with quality control since you’re dealing with multiple suppliers. And the lack of control over the customer experience can be a problem if something goes wrong. You are virtually uninvolved, from managing the supply chain to selecting last-mile delivery providers. There is a much higher chance of being held responsible for a poor customer experience that you have no power to change. Your company reputation is on the line, especially when working with average or low-quality suppliers. Often customers experience missing items, botched shipments, and product quality issues. Working with reputable dropshipping manufacturers can help, but this model falls short in managing the dirty details.

Inventory Issues

Because you don’t own your inventory supply, it can become problematic. For example, when a product becomes unavailable, you may not know immediately. This could mean you sell a product that is out of stock and will need to notify a customer of the disappointing news. Vendors and suppliers are improving their real-time inventory systems with dropshippers, but it is definitely a drawback of the model.  

Whether the dropshipping model is best for your company depends on your goals and resources. If you’re looking for a low-cost way to get started and are comfortable with outsourcing some of the customer experience, then dropshipping can be a great option. But if you’re looking for more control over the customer experience and don’t mind investing in inventory, you may want to consider a different business model. Here are some of the best alternatives to dropshipping for order fulfillment.

Alternatives to dropshippingBest Alternatives for Dropshippers

Fulfillment by Amazon (FBA)

FBA is an excellent alternative to dropshipping, as it allows you to store your products in Amazon’s fulfillment centers. This means that Amazon handles the packing and shipping of your orders while you manage the product selection and pricing. FBA is a great option for businesses that sell on Amazon, as it’s simple and cost-effective. 

Self-Fulfillment

Self-fulfillment is an excellent option for businesses that don’t want to outsource their order fulfillment. You manage the entire process with self-fulfillment, from receiving orders to packing and shipping them out. This can be a great way to save on costs, as you’re not paying anyone else to do the work. However, it does require more time and effort on your part. This alternative works best for businesses that have access to low-cost storage facilities and are shipping smaller quantities of products.

Third-Party Logistics (3PL)

3PL is a great option for businesses that want to outsource their order fulfillment but don’t want to use dropshipping. With 3PL, you partner with a third-party logistics provider who handles the entire process, from receiving orders to packing and shipping them out. This can be a great way to save money, as you’re not paying for the overhead associated with running your own fulfillment center. Furthermore, an excellent 3PL partner can provide additional services like custom branded packaging, kitting, and light assembly, as well as managing returns. If you have outgrown dropshipping and don’t want to make a significant resource investment in warehousing and staffing for fulfillment, 3PLs are a great choice. 

These are just a few of the best alternatives to dropshipping for order fulfillment. Each has its advantages and disadvantages, so it’s essential to evaluate your options and choose the one that’s right for your business. You can ensure that your customers get their orders quickly and efficiently with the right fulfillment solution.

Dropshipping has its share of benefits and drawbacks. Fortunately, there are many great alternatives that can help brands fulfill orders without stifling profitability. Falcon fulfillment is a 3PL that takes pride in superior communication, onboarding, and customer success. If you would like to learn how we can help your company scale past dropshipping, get in touch with one of our agents today.

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Things to consider when switching 3PL fulfillment providers

Things to Consider When Switching 3PL Providers

Things to Consider When Switching 3PL Providers

​​​​​​If you're a business owner considering switching 3PL fulfillment providers, you're likely well aware of the many benefits of outsourcing your order fulfillment. Working with a third-party logistics (3PL) provider can streamline your business operations and reduce labor costs while providing customers with a better overall experience.

However, with so many 3PL fulfillment providers, knowing which is right for your business can take time and effort. Here are some things to consider when you're deciding whether or not to switch 3PL fulfillment providers.

Evaluate Your Current Provider

It's important to take a close look at your fulfillment provider. Are they meeting your needs in terms of service, cost, and reliability? If not, it may be time to look for a new provider. Here are seven questions to ask when reviewing your fulfillment partner.

  • Are they meeting accuracy and on-time delivery expectations? 
  • What services are included in your fulfillment package, and are they meeting/exceeding your business needs? 
  • Are the fees you are paying in line with industry standards? 
  • How accurate and transparent is the reporting for tracking inventory and orders? 
  • Are they handling returns and refunds?
  • On a scale of 1-10 (10 being excellent), how is the communication between you and consumers?
  • Do they have the ability to scale with plans you have for the future?

Research Potential Providers

Once you've identified potential providers, it's time to do research. Read reviews and testimonials from other businesses that have used their services, comparing rates and solutions. If you don’t know where to begin, you might want to start with WarehousingAndFulfillment.com. This free service matches your specific business needs to more than 500 prescreened 3PL companies.

Consider Your Customers' Needs

Your customers should be your top priority. Think about how the new provider will impact their experience. Could they receive their orders faster? Are there more choices for delivery? Do they provide better packaging and protection for parcels? What are the unique problems you are trying to solve in your supply chain and fulfillment needs? Contemplate the solutions you will be looking for in a new partner. Here are some common customer pain points that can be alleviated by working with a 3PL partner.

  • Long lead times that result in stockouts
  • Slow delivery timelines 
  • Lack of tracking and delivery communication
  • Difficulty in making a return or exchange
  • Items arriving damaged  
  • Disconnected inventory management systems that result in inaccurate stock counts (leading to customer frustration at the POS)

Ask Questions

Before making a decision, make sure to ask any questions you may have about the services offered by the potential provider. Here are ten questions to get your creative juices flowing:

  • What is your experience in omnichannel fulfillment? In other words, will your technology integrate across my sales channels? 
  • What kind of automation do you implement within your warehouses? 
  • What other technologies do you use to streamline operations? 
  • How do you handle receiving from vendors? Will I be required to palletize or barcode my inventory before arrival? 
  • How do you handle lost inventory or incorrect orders?
  • How are your fees structured? Do I get charged for individual services like; kitting, picking, packing, and shipping or do you offer an all-inclusive option? 
  • What are your product specialties? 
  • Is there a minimum monthly order volume required to work with your organization? 
  • Do you offer same-day order processing? 
  • What kind of accuracy guarantee can I expect? 

Switching 3PL fulfillment providers can be daunting, but it is often necessary to ensure that your business is getting the best possible service. Not all 3PL companies are created equal. Take time to evaluate your current provider, research potential providers, and always keep your customers' needs in mind. You can improve your operations and provide a superior customer experience with the right 3PL provider.

Falcon Fulfillment are expert in logistics, supply chain management, and eCommerce fulfillment. We have worked with brands in the beauty, pet, and home goods industries, among many others. Our dedicated account managers make communication between your company and fulfillment teams seamless. We don’t work with clients just because they meet our criteria; we partner with them. When our customers win, we win. Find out how partnering with Falcon can help your company streamline fulfillment and exceed customer expectations. Reach out to one of our friendly agents today.

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Calculating ending inventory

Calculating Ending Inventory - What you need to know

Calculating Ending Inventory 

We are coming to the end of the fiscal year, and many retailers are planning their end-of-year inventory calculations. Ending inventory is the total value of products or goods that remain available for sale at the end of an accounting period. In other words, it’s the dollar amount associated with all the stuff you still have available to sell. Ensuring this number is accurate is a vital business operation affecting income reporting, taxes, and financing. Start your new year off right by understanding and implementing a consistent method for calculating ending inventory.

What is ending inventory?

Determining the amount of stock left at the end of a sales cycle is important. Ending inventory, sometimes called closing inventory, is the total value of unsold goods at the end of an accounting period. This valuation provides insight into assets, gross profit, pricing, ordering, and production. The simplest formula for calculating ending inventory is to add net purchases to your beginning inventory and subtract the cost of goods sold.

Why calculating ending inventory is necessary.

Calculating ending inventory is vital to know how much you are selling and for how much. It is also a key aspect of the accounting process because it directly affects your balance sheet and tax burden. Here are some reasons why getting your ending inventory valuations right is essential:

  • Verifies recorded inventory matches, actual physical inventory counts
  • Highlights inventory shrinkage issues due to human error, theft, or other reasons. 
  • Reveals how much revenue you are making on what you are selling.
  • Minimizes overstock by providing accurate inventory counts. 
  • Delivers excellent insight and control over stock-related and financial decisions
  • Impacts gross and net profits as well as tax liabilities. 
  • Allows investors and financial institutions to evaluate for funding events
  • Selecting the best method and staying consistent with that method will provide insight into the health and profitability of the company.

Selecting the best method to calculate your ending inventory and staying with that method is imperative to minimize accounting errors and meet company needs. The choice can affect the stated value of the company’s assets, profit, and tax liability. Before filing your income or end-of-year taxes, it is necessary to calculate your ending inventory correctly.

What are the different methods to calculate ending inventory?

Knowing your ending inventory gives you insight into how to make necessary business decisions related to stock, finances, and even fulfillment needs. Here are a few standard methods to calculate ending inventory.

FIFO (first in, first out) method

FIFO is a valuation method that assumes the first purchased inventory was sold first. The COGS (cost of goods sold during the period) is based on the stock bought earliest in the accounting period. This approach is suitable for many companies because it follows common operations strategies where older items are sold to make room for newer goods. This method is commonly used during an inflationary period. However, it can produce lower COGS and higher gross profits. This calculation often results in higher income tax burdens for the period.

LIFO (last in, first out) method

LIFO is another valuation method that assumes the most recently purchased goods are the first to be sold. This method closely reflects the actual cost of replacing the current inventory. It is typically used during periods of increasing prices. Companies can report higher COGS and lower gross profits, reducing the tax liability during the period. A significant drawback of this method is that it is rarely accepted outside of the US because it is not allowed under International Financial Reporting Standards (IFRS).

Weighted average cost method

The weighted average cost method (WAC) is where a business average all inventory costs to calculate COGS and ending inventory. Calculate it by dividing the total amount you spent on your inventory by the total number of items.

Here is a simple example. Let’s say you started your fiscal year with an inventory balance of 1000 items at $3.00 each. You purchased an additional 500 items at $3.50 later in the accounting period. Your ending inventory would include 1500 items valued at $3.17 each, totaling $4,750. 

This method is the simplest way to evaluate ending inventory; it is best suited for companies that sell similar products. As businesses expand their product offering, calculating ending inventory becomes more complex.

Gross profit method

The gross profit method estimates ending inventory where an actual physical count is not desired or necessary. This method uses the company’s expected gross profit margin for the current period as a starting point for estimating COGS and ending inventory. Companies will use their historical gross profit margin as a guideline for their current expected gross margin. Keep in mind that this method is not acceptable for audited financial statements.  

Here are the steps to calculate gross profit:

  1. Multiply the net sales during the current period by (1 - expected gross profit margin) to obtain an estimate of COGS.
  2. Apply the standard inventory valuation formula: Add up the period’s beginning inventory and the cost of all further inventory purchases to date. Then, subtract the estimated COGS to obtain the ending inventory.

Retail method

This method is best for retail stores looking to estimate inventory counts for a specific timeframe without doing a physical count. It uses the cost-to-retail ratio.

Once you have the cost-to-retail ratio, you multiply this number by the net sales for the period to estimate COGS. Then you plug this amount into the standing ending inventory formula listed above. This is an imprecise count but is helpful to assess ending inventory until a more accurate method can be performed for accounting and tax purposes.

How Partnering with a 3PL can help with inventory management.

A 3PL provider can help with inventory management in several ways. First, they can provide warehousing and fulfillment services, which involve storing inventory, packaging, and shipping orders. They can perform physical stock counts when needed. They can also help track inventory, which is essential for keeping accurate records and preventing out-of-stock or overstocked situations.

In addition, a 3PL can help with inventory forecasting, which involves predicting future demand for products. Overall, a 3PL can be an excellent asset for any business that needs help with inventory management. By outsourcing complex inventory tracking and management task, companies can save time and money while improving customer service and satisfaction.

Because inventory directly affects your business's balance sheet and income, it is necessary to choose a method that aligns with business needs and operations workflows. Whether you manage inventory in-house or outsource it to a 3PL partner, calculating accurate ending inventory is an essential metric for your business. If you want to learn more about how Falcon Fulfillment can become your inventory management partner, get in touch with one of our agents today.

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Inbound and Outbound Logistics

Inbound and Outbound Logistics - What you need to know.

Inbound and Outbound Logistics

Logistics is the process of coordinating and moving resources – people, materials, inventory, and equipment – from one location to storage at the desired destination. Regarding eCommerce, logistics management involves a significant aspect of business operations. Furthermore, logistics is a considerable expense, with logistics-related spending coming in at more than $1.64 trillion last year alone. What are the main differences between inbound and outbound logistics? What are the main challenges, and how can streamlining logistics benefit your business? All this and more will be covered in today's post.

Inbound vs Outbound Logistics 

Inbound logistics is where goods and materials enter the supply chain to be sold to the customer. Outbound logistics is the process whereby the finished products are sold and delivered to the customer. Streamlining both aspects of logistics is crucial to the profitability and success of the company.

What is outbound logistics?

Outbound logistics involves storing and moving goods to the customer or end user. Outbound logistics includes the systems required to prepare, pack, and deliver packages. The steps include order fulfillment, packing, shipping, and customer service related to delivery.

Warehousing

In order to meet customer demands, a warehouse or storage facility is necessary to store surplus inventory. US Business Inventory/Sales Ratio is 1.33, up from 1.26 last year. You can store your inventory in your own warehouse or partner with a third-party provider. This is significant expense for eCommerce businesses. Whether you outsource your warehouse needs or handle them in-house, it is a crucial part of outbound logistics.

Inventory Management

Most eCommerce companies utilize inventory management software to maintain a consistent flow of orders and sales. Inventory management involves carrying adequate levels of stock to fulfill customer orders. It is a vital part of business management because it allows companies to boost profits and reduce overhead. There are many benefits to using an automated inventory management system, including improved accuracy and better transparency. Inventory management also includes: 

  • Product locations
  • Quantities of each product type
  • Profit margin by style, model, product line, or item
  • Setting the ideal amount of inventory to have in back stock and storage
  • How many products to reorder and how often
  • When to discontinue a product

Streamlined inventory management can boost profitability and improve customer experience. It allows you to capture and fulfill every sale while simultaneously avoiding overstock.

Order Processing

When a customer orders through the sales channel, a notification is sent to the warehouse for fulfillment. The staff in the warehouse receives the order and verifies its validity. They ensure the product(s) are in stock and can be made ready to send out to the customer.

Picking, Packing, and Kitting

All items are packaged, sealed, and labeled for shipment at this stage. Once an order is received and verified, the order has to be carefully picked, packed, and prepped for transport. Some items or orders, like subscription boxes, also require kitting services, where more than one product is carefully assembled into one shipment or package.

Transportation

Transportation involves any method or mode to move goods from your storage warehouse to a carrier distribution center or direct-to-customer. When moving goods to a distribution center or fulfillment facility, larger vehicles like freight carriers, semi-trucks, and rail lines are used. Then products are separated into smaller vans or vehicles to be delivered to the end consumer.

Last Mile Delivery

The final aspect of outbound logistics is the last-mile delivery to the end customer. Whether the package is delivered to a home or office, this is the culmination of the logistics journey. If the final delivery is unsuccessful or the product arrives damaged, the product may be returned, triggering an inbound logistics process (returns). 

What is inbound logistics?

Inbound logistics is when a company secures raw materials, goods, and supplies to produce products it will sell to an end consumer. It is the receiving or incoming part of the supply chain cycle. A few of the critical components of inbound logistics include:

Sourcing and Purchasing

The first step in inbound logistics is determining what materials, goods, or supplies are required to make your product. The next step is investigating manufacturers or suppliers of said goods or materials. Finally, a company will engage with the manufacturer to purchase and receive materials. Ensure that accurate records are kept from purchase orders so they can be reconciled with shipments.

Transportation

A manufacturer/vendor will provide a notification when goods are being shipped. A tracking number is supplied, which helps ensure warehouse and distribution teams are ready to receive the items efficiently.

Receiving

This part of inbound logistics involves receiving shipments at the warehouse or distribution center. Loading dock staff will evaluate the shipment for damages and accuracy. Once the shipment is approved, the goods are stored in a designated storage facility or moved to a secondary manufacturing or assembly area. All goods ready for customer sales are input into the inventory management system and carefully stored.

Reverse Logistics

The final aspect of inbound logistics occurs after a sale. Reverse logistics includes adding products back into the supply chain due to a product return. Check out 4 Ways to Streamline Returns Management.

Challenges of Inbound and Outbound Logistics

Inbound logistics challenges

The main challenges of inbound logistics include the following:

  • Finding reliable and trustworthy suppliers
  • Sourcing affordable suppliers and manufacturers 
  • Balancing inflow and outflow of goods to maintain adequate materials without overstocking
  • Managing transportation delays and boosting supply chain resilience
  • Maintaining receiving and quality control processes

Outbound logistics challenges

The main challenges of outbound logistics include the following: 

  • Hiring quality staff to manage order processing 
  • Maintain order accuracy and efficiency
  • Negotiating transportation and shipping contracts to keep costs low
  • Meeting delivery timeline expectations 
  • Reverse logistics management and process

Benefits of optimizing logistics

Inbound and outbound logistics are necessary for business operations to run smoothly. Without products, there are no sales, and vice versa without sales. Therefore, inbound and outbound logistics must work together for optimum success. Here are some ideas to optimize your logistics process.

Maintain optimal inventory levels

Having too much or too little isn’t ideal. If you order too much inventory, then you run the risk of paying high storage fees. If you order too little, you miss out on sales opportunities and run the risk of disappointing customers. To maintain optimal inventory levels, it is necessary to commit to regular inventory audits, offload slow-moving stock or deadstock, invest in items with higher turnover rates, and those products with higher margins. Successful companies regularly review demand forecasts and take physical stock counts. Striking the correct inventory levels will reduce overhead costs from storage, improve product performance and profitability, and improve procurement workflows.

Improve warehouse management

Implementing a streamlined warehouse management process that reduces human error will improve order accuracy, shipping efficiency and maximize storage utilization. Most companies will use software programs that help to automate inventory levels, trigger reordering events, picklist automation, and track shipment deliveries.

Partner with a 3PL to optimize logistics

If you spend more than 15% of your time managing your logistics, it might be time to investigate working with the 3PL. 3PLs are experts who partner with eCommerce businesses to handle inbound and outbound logistics. They manage receiving, warehousing, negotiating with shipping carriers, and returns. Some 3PLs, like Falcon Fulfillment, can provide flexible inventory storage in their fulfillment centers. Find out more about how Falcon Fulfillment can take the stress of managing logistics off your plate. Get in touch with one of our friendly agents today.

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holiday shipping deadlines

Holiday Shipping Deadlines - Main Carriers

Holiday Shipping Deadlines

If you are an eCommerce business, you are probably well aware of the holiday shipping deadlines that are fast approaching. Merchants and consumers alike should be mindful of these shipping cutoffs. These are the last day(s) a package or letter can be shipped and still arrive in time for Christmas. You still have the opportunity to squeeze in a few more sales and meet these tight deadlines. Keep in mind these are not guarantees but merely estimates. The final delivery date can change based on where you are shipping from, weather, delays, and other unforeseen circumstances. However, these guidelines ensure you have the best chance of getting your packages delivered on time. Here are the main carrier holiday shipping deadlines for 2022.

USPS

Your local United States Postal Service is estimating the following deadlines for shipments within the 48 contiguous states:

 

 

  • Dec 17 – Deadline for USPS Retail Ground
  • Dec 17 – Deadline for First Class Mail
  • Dec 19 – Deadline for Priority Mail
  • Dec 23 – Deadline for Priority Mail Express

 

 

 

Here are the additional deadlines if you are shipping from/to Alaska or Hawaii.

  • Dec 2  for Retail Ground for Alaska, N/A for Hawaii
  • Dec 17 for First Class & Priority for Alaska and Hawaii
  • Dec 21 for Priority Mail Express for Alaska and Hawaii

FedEx

FedEx has the following holiday shipping deadlines for 2022. These are subject to change without notice. Check the FedEx holiday schedule for the most current announcements. These are for the 48 contiguous states only.

 

  • Dec 9 – FedEx SmartPost shipments (exclusions apply)
  • Dec 14 – FedEx Ground (scheduled pickup) and FedEx Home Delivery shipments
  • Dec 20 – FedEx Express Saver and 3Day Freight shipments
  • Dec 21 – FedEx 2Day Freight shipments
  • Dec 22 – FedEx Standard Overnight, FedEx Priority Overnight, FedEx First Overnight, and 1Day Freight shipments
  • Dec 23 – FedEx SameDay shipments (additional fee may apply)

UPS

For UPS, you will want to use their online time and cost calculator to ensure you have the most up-to-date details, especially for their UPS® Ground services. Their expedited services are easier to add to your calendar and share with your customers. Here are the expedited deadlines for UPS services within the 48 contiguous states.

 

  • Dec 20 – Deadline for UPS 3-Day Select shipments
  • Dec 21 – Deadline for UPS 2nd Day Air shipments
  • Dec 22 – Deadline for UPS Next Day Air shipments
  • Dec 25 – No pickup or delivery service. UPS Express Critical services are available.

 

Holiday Shipping Deadline Calendar

If you are a visual person, this is a combined main carrier calendar noting the 2022 holiday shipping deadlines. Available for download below.

Holiday Shipping Deadline Calendar

No matter who you use for your holiday shipping needs, it is critical to know your final cutoff days/times to ensure packages arrive before Christmas. Every carrier has a slightly different policy and pricing structure. If you are an eCommerce business that has grown weary of trying to track deadlines and save money during peak season year over year, consider partnering with Falcon Fulfillment. Our relationships with a network of carriers and volume discounts could make your next holiday season a breeze. Contact one of our agents today if you want to find out more.

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Making Returns Easy - 4 Ways to Streamline Returns Management

Making Returns Easy

A seamless return process helps increase customer satisfaction and retention and minimize the negative impact they have on your business. Returns happen for various reasons, including; unmet expectations, damaged or defective products, and incorrect fit. Last year, an average of 8.1% of all purchased products were returned. The returns management process, or reverse logistics, involves customer service, inventory management, and shipping logistics. It requires intentional planning, clear communication, and staying customer focused. Here are some of the key aspects of making returns easy.

Communication

Simplifying and making returns trouble-free boils down to communication. Communication is at the center of straightforward returns, whether it is communicating with customers or updating internal staff and protocols.

Communicating with customers

The main focus of your returns management process should be to make your customer’s life easy. When a customer is dissatisfied with a purchase, making the process to return the item can save the relationship and even win a brand advocate. Start by outlining the process for shipping a product back and requesting a repair, refund, or exchange. Set expected timelines for each aspect of the returns process. Customers want regular updates on the status of their return and how long it will take to resolve it. Over-communicate with customers throughout the returns process. This builds trust and confidence in your brand. Clear and consistent communication can lead to the purchaser returning to your company despite a poor buying experience.

Streamline Internal Communication

Not only do your customers need regular updates regarding their return, but so do the staff that will receive the product, evaluate it, and adds them back into the inventory system when possible. Invest in developing a system of internal communications so that when returns arrive at your warehouse, they don’t overwhelm staff or clutter your storage area. A centralized method to receive, evaluate, and update inventory systems will ensure a seamless returns process. A few crucial parts of the internal returns process include:

  • The customer requests a return, and internal teams either approve or disapprove the request.
  • Approved requests will receive logistics instructions to return the item to the company.
  • The product is received in the warehouse. 
  • Staff determines if the product can be resold or need to be discarded, liquidated, or destroyed.
  • Depending on protocols for the product, staff approves a refund, packages a replacement product, and ships it. 
  • Products that can be resold are added back into the inventory management system and restocked

Returns Automation

One of the best ways to make returns effortless is to automate the returns management process. This includes implementing customer portals to begin the returns process without speaking with a customer service team. Furthermore, most aspects of communication with customers can be automated. There are several robust returns management software systems available. Here are a few of the highly reviewed options.

In addition to utilizing an automation software program, you can partner with your fulfillment teams to streamline the returns process. At Falcon Fulfillment, we specialize in eCommerce returns management. Working with a 3PL you trust can ease concerns about the returns process and help boost customer satisfaction. Plus, most 3PL companies already have a streamlined, efficient returns system refined over time with hundreds of returns. In other words, they have the expertise to do it right.

Integrated Technology

Integrating your POS systems with inventory management and returns management creates a streamlined process. Getting all the systems and software platforms to communicate with one another can be tricky. As you evaluate and set up your technology, ensure that integrations are “straightforward.”

While avoiding returns altogether isn’t always possible, it is possible to make returns easy. Ensure you have intentionally created a seamless process for your customers. Remember that making their life easy is the most crucial aspect of returns. If a customer has a good experience with getting a refund, replacement, or credit, they will be more likely to shop with your business again. If they have a poor product experience and a difficult return process, you have lost them for good and will likely also have to deal with poor customer reviews. Partnering with a 3PL specializing in returns management is another option when implementing a new returns process. Get in touch today if you want to learn more about how Falcon Fulfillment can help with your returns. 

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choosing a 3PL partner - factors to consider

Choosing a 3PL Partner - 11 Factors to Consider

Choosing a 3PL Partner - Factors to Consider

For eCommerce business owners, fulfilling orders in-house might be feasible for a short time. As sales increase and warehouse space become sparse, it might be time to outsource fulfillment. Choosing the right 3PL partner for your fulfillment needs can help your business become more strategic, increase customer satisfaction, and scale. Here’s what you need to understand about choosing a 3PL partner and factors to consider. 

Questions to Ask and Answer Before Selecting a 3PL Partner

  1. What are your company's shipping and packaging priorities?
  2. What are your company’s marketing priorities?
  3. How will these priorities change over the next 3-5 years? 
  4. What is the projected growth you expect over the next year or two? 
  5. What qualities do you expect your 3PL partner to have? 
  6. What services do you want your fulfillment partner to offer?
  7. Is sustainability important? 
  8. How communicative do you want your 3PL partner to be in the relationship? 
  9. Do you want your fulfillment team to handle returns and restocking? 
  10. Where are the majority of your customers? Countries, regions, towns, etc. 
  11. Is offering free shipping to your customers a priority?

11 Factors to Consider When Choosing a 3PL Partner

Capability

Almost every 3PL company will provide an expanded network of transportation carriers, warehousing, and expertise in the logistics industry. These are the foundational requirements. To understand which 3PL partner will work best with your company, you need to understand what other services they provide. Can they help you with kitting, pick and pack, and returns management? Selecting a 3PL provider that can offer various services will help you offload more logistics management as you grow. 

Stability

Don’t go with a newbie. Fulfillment companies popped up like dandelions during the COVID-19 pandemic and have subsequently withered just as fast. Choose a  3PL partner with an established track record for superior service and exceeding industry service standards. The supply chain continues to fluctuate rapidly. Selecting an experienced and stable 3PL partner can help you preempt shifts in the supply to ensure minimal disruptions to your business operations and inventory.

Reputation & Reviews

3PL partners that go above and beyond to care for their customers, carriers, staff, and vendors will have a solid reputation in the industry. Fulfillment companies leverage their relationships in transportation, manufacturing, and marketing to help their clients. Trust reviews from multiple sources to determine what you can expect working with them.

Safety & Security

Amazon lawsuits are multiplying daily from accounts of negligence and safety concerns. While no warehouse is perfect, it's vital to ensure your 3PL partner is demonstrating a high level of safety for staff and products. Look for providers that have PCI certification and a HAZMAT shipping certification. Furthermore, they should safeguard financial information. 

Customer Service

Excellent customer service is a vital part of running a successful business. When customers have a good experience with your company, they share it with others. 3PL companies that exhibit excellent customer service respond quickly to requests, provide clear and helpful communication, are adequately trained, speak with customers directly, and are present in the warehouse. When choosing a 3PL partner, evaluating their customer service offering and quality is crucial.

Scalability

One of the benefits of partnering with a 3PL is the ability to scale your business. The partnership allows you immediate access to flexible storage space, expertly trained fulfillment staff, and a broad network of transportation carriers. Most 3PL companies offer some level of scalability for your business. However, not all 3PLs are created equal. You don’t want to discover after you have onboarded that your plans to 10x are impossible. Ensure your fulfillment partner can provide storage, shipping, and fulfillment solutions for your business today and in the future. 

Accuracy

Inaccurate data, inventory, or tracking details can affect your bottom line and customer satisfaction. A solid 3PL partner will have a 99% or higher accuracy rate. This is the industry standard, so anything below that is a red flag. Most 3PL companies utilize high-tech inventory management systems and real-time tracking and delivery programs. This reduces human error and increases insight.

Responsiveness

One of the main complaints of customers about 3PL partners is the need for more responsiveness. Many fulfillment companies don’t have the human resources to provide a dedicated account manager. They correspond with customers “when they can.” With Falcon Fulfillment, you always have a dedicated account manager. This has enabled our customers to get the answers they need to make crucial business decisions and keep their clients happy. Ensure you are satisfied with the level and consistency of communication your 3PL offers.

Omnichannel Expertise

Retailers who desire to meet and exceed customer expectations strategically offer an omnichannel experience. Find a 3PL provider that has expertise in streamlining sales, inventory management, and fulfillment across all platforms. They can make recommendations to expand your sales funnel without jeopardizing brand continuity or diminishing customer service.

Multi-site Distribution

Unless you sell to customers in a single location, having a 3PL partner with multi-site distribution centers is a significant benefit. This allows you to offer your customers lower shipping costs and faster delivery. Multi-site distribution is essential when competing with the “Prime Effect,” of lightning-fast fulfillment.

Compatible Technology

Every 3PL partner will have slightly different integrations that are turnkey. Select a fulfillment company that already has compatibility with your systems or is willing to customize integrations. Disjointed systems are one of the significant causes of frustration and miscommunications in logistics and shipping so discuss this issue early in conversations. Here is a short list of the integrations Falcon currently offers:

  • Shopify
  • ShipStation
  • WooCommerce
  • Infusionsoft
  • ClickBank
  • OrderBot
  • Click Funnels
  • Zapier

In addition, our Shipstation partnership allows us to integrate with more eCommerce shopping carts like:

  • Amazon UK, Canada, Mexico, USA
  • UltraCart
  • eBay
  • Walmart
  • and more

Lastly, Falcon Fulfillment offers our API, allowing seamless custom integrations.

Selecting a 3PL partner doesn’t have to be challenging, but it does require strategy and intentional investigation. When choosing a 3PL partner, consider these factors to ensure a good fit. Remember that your fulfillment team is an extension of your business and should exhibit similar cultures, values, and quality. Cost is a driving factor, but it shouldn’t be the only factor. If you want to learn more about the Falcon Difference, contact one of our specialists today.

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