Beginners Guide to 3PL Fulfillment
To help you evaluate whether or not a 3PL partnership is right for you, we have developed this beginners guide to 3PL fulfillment. We will discuss what a 3PL is, the pros and cons of using a 3PL, and questions you should ask before selecting a partner.
What is a 3PL
Third-party logistics, or 3PL for short, is a company that offers outsourced logistics services. 3PL services encompass everything from procurement to last-mile delivery. A 3PL provides the staff, space, and transportation network required for order fulfillment. They can manage receiving, inventory warehousing, packaging, and shipping services, letting businesses focus on other essential 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. Furthermore, some 3PL companies specialize in specific product types such as:
- B2B
- Ecommerce
- Retail
- Apparel
- Health & Beauty
- Frozen Foods
- Nutraceuticals
- Beer & Wine
Pros of Working with a 3PL
In this beginners guide to 3PL fulfillment, we will focus on the most relevant benefits, although there are many more.
Industry Expertise
Streamlining and managing supply chains, transportation, and new market compliance can be overwhelming. When partnering with a 3PL, you gain the advantage of industry experts with insider knowledge. They can help facilitate imports, exports, international shipping compliance, and economic regulations. This is incredibly valuable as you consider launching new markets or expanding overseas.
Cost Savings
Businesses often partner with 3PLs to save money and boost profitability. 3PLs consistently improve efficiency in the order fulfillment process. They reduce shipping costs by leveraging their collective order volumes to negotiate better rates. Furthermore, they typically provide faster delivery times.
Scalability
Another benefit is the ability to scale your business with a 3PL. It is easier to navigate sales peaks and valleys when warehousing, staffing, and transportation needs rise and fall in step with demand. 3PL fulfillment companies give their clients the ability to scale quickly without significant capital investment in fulfillment infrastructure.
Customer Satisfaction
Working with a 3PL can significantly improve your overall customer satisfaction. They help provide quicker delivery options with more consistent results. The inventory management technology used by most 3PLs allows for fewer stock-out situations. Lastly, many 3PL companies handle reverse logistics, or returns and refunds. All of these create happy customers.
Cons of Working with a 3PL
There are clear advantages of working with a 3PL. However, you should also know the common drawbacks you might encounter. Here are a few complications you should consider especially if you are trying to determine whether to continue dropshipping or transition to 3PL fulfillment.
Loss of Inventory Control
Many business owners want to maintain a high level of control over their inventory. Rightfully so, your business can suffer if products are not packaged and shipped correctly. Releasing inventory management and fulfillment to a 3PL can be unsettling and detrimental if the right partner isn’t chosen. Finding a logistics partner you can trust is a process.
Higher Up-Front Costs
Saving money with a 3PL is a long game. Setting up your 3PL warehousing and distribution requires an initial investment. Your storage needs and order volumes will determine the necessary upfront cost. Companies with high order volumes and flexible storage space will benefit most from a 3PL partnership. An excellent 3PL will tailor costs around actual needs.
Loss of Control over Customer Experience
When you entrust a 3PL to fulfill your orders, you have to give up some control about how and when those products will be delivered. When a 3PL performs or handles a customer poorly, that reflects on your business directly. This is why choosing a trustworthy and competent 3PL is crucial.
Questions to Ask Before Choosing a 3PL
- Will your technology integrate with your sales channels and inventory management platforms? (Omnichannel technology)
- How does your pricing model work? I.e., do you charge separate fees for receiving, picking/packing, and warehousing, or do you provide an all-inclusive option?
- What types of products are your specialty? If your product is outside of their wheelhouse, how will they accommodate it?
- What is their experience with peak seasons? Can they handle fluctuations in order demand easily?
- Do they provide same-day order fulfillment, and can they offer competitive 2-day shipping for most of your customers?
We have scratched the surface in this beginners guide to 3PL fulfillment, but we hope it has shed a little light on the topic. No matter where your business is in its life cycle, there will come a day when partnering with a 3PL will become a viable option. If you have more orders than you know what to do with and your inventory is spilling out of your current space, it might be time to consider a 3PL option. Chat with one of our specialists today to find out how Falcon Fulfillment can help.
