eCommerce has continued to grow throughout the pandemic. If we thought it was booming before, it is booming now. There are more and more eCommerce shops opening every day, and the ones that have been around for a few years are growing rapidly.
With social media, people are learning about new stores and can quickly and easily place orders from their phones! But what does that mean for eCommerce shop owners?
Sometimes, that means that an eCommerce store is growing faster than its employees can keep up! With orders coming in each day, it can be hard to get goods made, orders packed and shipped, and keep customer satisfaction all at the same time. That challenge increases when your business is trying to create new or improved products.
But you do not have to do it all alone! That’s where outsourcing certain aspects of your business can come in. If you want to continue to grow, at some point you will probably have to outsource something.
For eCommerce businesses, outsourcing logistics and order fulfillment often makes the most sense. This process can take up a lot of time and energy, that once outsourced, can be spent on continuing to scale your business.
Let’s take a look at what eCommerce business owners need to know to pick the right 3PL service provider for eCommerce.
What is eCommerce Third Party Logistics?
eCommerce 3PL is when a company outsources its order fulfillment, warehousing, and other logistics tasks to a third-party logistics provider (3PL).
The tasks that 3PLs can help with include inventory management, order fulfillment and shipping, warehousing, and even negotiating better shipping costs with different partners involved in the process. Third-party logistics have more expertise and quality tools and processes in place to make the logistics process more efficient.
This partnership will also free up your employees for product development, customer service, and other business tasks that are often pushed aside for in-house fulfillment.
Advantages & Disadvantages of Using 3PL Services
Free up Time
- You and your staff will have much more time to focus on other tasks. You will not have to employ a fulfillment staff, and your workers in other departments can focus on their jobs, instead of packing and shipping orders.
- For many online businesses, as they grow, it can be too complicated and time-consuming to keep up with order fulfillment. So freeing up time to focus on scaling your business can be a huge benefit for eCommerce shops.
- When you get a lot of orders in, especially around the holidays, it can take your in-house team a long time to fill them all. However, 3PL companies can offer quicker responsiveness for these busy times.
- Their teams are dedicated to order fulfillment and begin the process shortly after an order is placed. This is beneficial for your business and your customers because orders are shipped much more quickly than you could do in-house.
- As you scale and grow your eCommerce business, you are getting more customers who are placing more orders every single day. At some point, it will get far too complicated and time-consuming to fill orders on your own.
- You would need to hire staff, get more warehouse space, and invest in different technologies for warehouse management. All of that adds up! But when you outsource it, you can get the workers, space, and tech at a much more affordable rate.
- When you use a 3PL’s services, you often have access to their network of warehouses and fulfillment centers. This means you might be able to expand your business further and reach new customers in new areas.
- You can provide quicker shipping to people across the country because there is a warehouse just a few towns over that holds some of your inventory.
Typically, 3PLs work with primarily medium and large-sized businesses. If you are running a startup or small business, you may not be at the scale needed to take advantage of outsourcing to an established third-party logistics company. Once your business ramps up and you can no longer keep up with orders, that's a good sign you may be at the right time to look into a 3PL.
Some eCommerce companies want to maintain complete control over their business in every aspect. When you outsource any component of your business, you must be okay with losing a little of that control.
However, if you find the right 3PL company and develop a strong relationship, you will find that they become an extension of your business. You will soon be able to see and understand the ins and outs of their processes and be rest assured your business is in good hands.
Why Should you Hire a 3PL?
The first question you should ask yourself is, “can my team handle the growth we are experiencing?” If you think you would be able to grow quicker and easier by finding a partner to handle some of the work, then it is probably time to outsource.
If you and your team feel like you are drowning in the order fulfillment process or you have simply run out of space to store enough inventory to keep up with orders, it is time to hire a 3PL.
Many times, eCommerce shops work with 3PLs to reduce costs and improve the customer experience. You will free up time and costs that were previously going toward logistics, coordination, and fulfillment.
3PLs bring a lot to the table, but the three biggest benefits you will see are:
- Speed and Accuracy
- Regulatory Navigation
- Industry Expertise
The 3 Biggest Things 3PLs Bring to eCommerce
Speed and Accuracy
- Consumers have gotten used to free two-day delivery. If they want increasingly faster service from your business, a 3PL can provide quick fulfillment and delivery. 3PLs have the technology to manage inventory, automate tasks, and fill orders quickly and accurately.
- If you are dealing with a lot of international shipping or handle certain goods or materials, you may have to navigate some regulatory challenges. With a 3PL, they can help you ensure goods are stored and transported correctly, as well as make sure any customs documentation is good to go.
- You are the expert in your industry, and 3PLs are the experts in logistics. They can bring you skills and support for negotiating shipping rates with a variety of carriers, speedy and accurate order fulfillment, and the latest in inventory and warehouse management.
What Roles Can 3PL Play in eCommerce?
Third-party logistics providers can play as big or small a role in your eCommerce business as you want them to. You can hire them to do everything logistics (from freight to returns) for you – or you can have them just do a few things, like order fulfillment (which often takes businesses a long time once they grow).
Here are some of the most common services that 3PLs can provide to eCommerce businesses just like yours:
Inventory Management and Distributed Inventory
No matter how many unique SKUs and individual items you carry in your eCommerce shop, you need to manage your inventory. Without good inventory management, you would not know if something was running low right as its popular season was approaching, or you may not notice that items still on your warehouse shelves are going to expire soon.
Not only can a 3PL help you manage your inventory more efficiently, but it can also help to distribute inventory across a network of warehouses. This means that your inventory can be housed in multiple warehouse locations. This can help in reducing shipping time for customers in certain parts of the country that would have otherwise been thousands of miles from the inventory.
This can also help when there are extreme weather events that impact one warehouse – instead of delaying order fulfillment indefinitely, another warehouse can step in to ship those orders.
Pick and Pack
This process is used at 3PL warehouses to prepare and ship orders as they come in. When the warehouse receives and processes your inventory, they store it in a specified area of the warehouse.
When an order comes in for your business, they take the packing slip and head over to pick inventory, pack it safely and effectively, and label it for shipping.
When products need to be moved from one point to another, including across international borders, it can lead to headaches and challenges for business owners. However, by outsourcing this to a 3PL, you can find someone to coordinate freight forwarding and everything that goes along with it.
Documentation, consolidation, cargo insurance, and customs compliance can be more accurate when trusting it to a 3PL who has the systems and processes in place to efficiently move your goods.
When a customer returns an item they ordered, your 3PL can manage the process for you with reverse logistics. Once the customer sends the item back to the warehouse, the 3PL will deal with it properly, whether that is restocking it or disposing of it.
You will also have access to data through your dashboard so you can see trends on returned inventory so you can spot potential problems to be solved.
When you work with a 3PL, you will probably have more shipping options than you had before. 3PLs have relationships with carriers and have often negotiated rates for their customers.
This means that you can offer your customer affordable, quick shipping so you can keep up with your competitors.
Your 3PL will not only pack and ship the order, but they will provide you and the customer with insight into where items are. You will know if an order is processed and when it has shipped.
You will receive the tracking number, so your team can track it along with the customer, in case of any customer service inquiries.
Customized orders are becoming more popular, and if you currently offer order customizations or are interested in adding this service in the future, many 3PLs will be able to help with this. Some of the common customizations include subscriptions, kits, and personalization.
3PLs will be able to bundle items, handle recurring orders, include custom gift notes, and other custom order tasks.
Like it or not, data is an important part of any business. Without data, the logistics part of your business could come to a standstill. Your 3PL dashboard will include all the data you could need so you are aware of stocking levels, supply chain management challenges, and shipping times.
This also includes any trends that can help you make decisions about inventory, new products, and promotions.
Steps in the eCommerce 3PL Process
If you are considering using a 3PL for logistics, warehousing, and order fulfillment, you should know the steps that go into the 3PL process.
This is an overview of what happens at the 3PL when orders leave your business or manufacturing facility for the warehouse:
- The first step is for the 3PL to receive the goods. This means they take possession of your inventory into their warehouse and input them into their system.
- Next, items are placed on the shelves in your designated area and stored on shelves, bins, or pallets.
- When a customer places an order, it is time for eCommerce fulfillment. There are a few different methodologies for this, but typically workers go through the warehouse after an order slip comes in to gather the items. Software and technology make this process easier and more efficient.
- Once the items have been picked, 3PL workers get them securely and safely packed for shipment. They ensure the box or envelope is the right shape and size, and that there is sufficient padding for delicate items. You may also be able to use branded packaging or packing tape, depending on what logistics services your 3PL’s warehouse offers.
- The warehouse worker will print and attach shipping labels to the package. Depending on the order and the contract you have with your 3PL, there are different carriers and shipping rates you will be able to use.
- When a customer returns an order or part of an order, there are a few options to deal with it: restocking, quarantining or disposing of items. The 3PL can help with the shipping label, inventory management, and return status of every returned item, so you do not have to worry about it.
Choosing the Best 3PL for eCommerce
At this point, you understand what a 3PL is, the benefits of using 3PL services for eCommerce, and what a 3PL does for your business. So how do you select the best 3PL for eCommerce?
Here are five tips for choosing the right 3PL service provider for your business:
1. Know Your Requirements
- How much space do you need? Do you need specialized services? Do you offer kitting (or do you want to)? If so, you have an idea of what you need to look for in a 3PL. Some 3PLs specialize in certain things, and some may have pricing models that add up quickly if you need specialized services.
- Knowing your requirements for a 3PL will make it easier when you begin to research and contact third-party logistics companies that provide these services.
2. What Kind of Technology Does the 3PL Have?
- You will want to find a 3PL that has technology that matches the technology you use. This will make it easy for inventory levels to be updated automatically on your website in real-time.
- If you want real-time access to data, ensure that the 3PL you are working with has a dashboard and technology system that can supply that for you.
3. Know What They Can Provide
- Knowing the services offered as well as the technology and data that you will have access to are critical for a successful working relationship with your 3PL. If you are not sure of the specific services they will do for your business ask.
- The same goes for data – if you do not know what data they will give you, how often they will provide reports, or if all information will be accessible to you, ask so that you can understand upfront what will be given to you.
4. Where are 3PL Fulfillment Warehouses Located?
- If you are interested in having distributed inventory, then knowing where warehouses are located will be important. If their warehouses are nowhere near where your products are made or where the majority of your customers live, it might not be a good fit.
- A network of warehouses will be more beneficial for growing your business than a single warehouse location.
5. Know Your Integration Needs
- Knowing what eCommerce platform you are on will help to ensure that the 3PL can integrate into your software. Some 3PLs can integrate with Magento, Shopify, WooCommerce, or Amazon, while others may have different capabilities.
- Integration is important for order fulfillment so that orders can begin the fulfillment process as soon as they are placed, but it is also important for accurate inventory management.
Rakuten Super Logistics Now ShipNetwork Provides eCommerce 3PL Solutions
When you decide to take the step into 3PL fulfillment services for your eCommerce shop, you need a partner who knows the industry inside and out.
With ShipNetwork, you will get a partner with the knowledge and expertise that decades in the industry brings. Our teams can manage your order fulfillment, inventory management, and other logistics needs.
Request a quote today on how we can help provide 3PL eCommerce solutions for your growing business.