Research shows 49.3% of customers shop online mainly because of free delivery, while 27.4% shop online because of next-day delivery. Even more consequential, 22% of U.S. shoppers abandoned their carts in 2022 during checkout because delivery was too slow.
All these stats emphasize and qualify the overriding importance of fast and efficient delivery in eCommerce for both small and large retailers. Chances are you know this already. However, as a small business owner, your biting dilemma is setting up a big enough logistic and delivery infrastructure to facilitate fast and convenient delivery.
Here’s the good news. You don’t need to build an extensive in-house logistics and delivery network to thrive in eCommerce. Instead, you can leverage the services of a logistics provider and do good business with less hassle and resource investment.
But as we’ll see below, logistics service providers offer many more advantages to small businesses beyond enhancing order delivery. Let’s jump in and discuss the different types of logistics service providers, the solutions they offer, and how they can benefit your small business.
What Is a Logistics Service Provider?
In the broadest sense, a logistic provider is a company offering warehousing, transportation, and distribution services. But that’s the bare minimum service level. Broadly, we can group logistics service providers from 1PL to 5PL according to their level of logistics services.
First-Party Logistics (1PL)
1PL is when you manufacture and transport goods in-house without outsourcing any supply chain elements. It’s essentially in-house fulfillment, where you manufacture and ship goods directly to your customers.
Second-Party Logistics (2PL)
2PL providers offer transportation services from point A to B. 2PL providers include shipping and trucking companies and air freight forwarders. When you hire a 2PL company, you’re only outsourcing the transportation aspect of your fulfillment process (downstream fulfillment).
2PL companies are asset-based carriers, meaning they rely on trucks, ships, and cargo planes to offer services. They may own or lease the assets and equipment.
Third-Party Logistics (3PL)
A 3PL logistic provider offers end-to-end order fulfillment from receiving the shipment, warehousing, kitting, and packing to delivery and reverse logistics. When you hire a third-party logistics provider, you’re outsourcing your order fulfillment logistics operations and some elements of your supply chain.
Partnering with a third-party logistics company is by far the most effective fulfillment solution for small, medium, and large enterprises in the U.S. In fact, research says 90% of Fortune 500 companies leverage 3PL services. ShipNetwork is among the top third-party shipping companies in the United States, offering 3PL fulfillment services.
Fourth-Party Logistics (4PL)
4PL providers offer more inclusive logistics solutions. A 4PL provider will do all that a 3PL provider does and include extra services such as:
- Big data analysis and IT support.
- Modeling and reviewing logistics strategies.
- Overseeing all aspects of outsourced supply chains.
- Implementing solutions to navigate supply chain issues and tech disruptions.
4PL providers operate more like fulfillment consultants. Large companies with sophisticated supply chains and a global client base often contract 4PLs to outsource and manage 3PLs on their behalf.
Fifth-Party Logistics (5PL)
5PL providers offer end-to-end supply chain management. 5PLs provide the same services and solutions as 4PLs but on a larger scale for multiple clients. 5PLs are 4PLs with advanced supply chain networks and a more robust tech capacity. Thus, 5PLs charge higher rates than 4PLs and 3PLs.
Most small and medium businesses will find working with a 3PL more beneficial in terms of services and charges. Unless you run a giant eCommerce store with hundreds or thousands of suppliers worldwide and an international clientele, you may not need 4PL or 5PL providers. A reputable international 3PL company like ShipNetwork will handle your entire order fulfillment process with no hitches.
That said, these are some of the advantages you’ll enjoy from partnering with a logistics solutions provider.
Benefits of Hiring a Logistic Service Provider Company
Partnering with logistics providers comes with the following perks:
Empowers you to Focus on Enhancing Your eCommerce Customer Service & Experience
In the current customer-first era, shoppers automatically anticipate excellent customer experience (CX) from your online store. 47% of customers disclosed that they stopped buying from websites and brands with poor customer satisfaction and after-sales services.
Imagine losing half your customers because of bad customer service when you could have converted them to repeat customers. Contemplate this fact further, and you can quickly develop a migraine, especially if you remember your customer acquisition cost.
But here’s the good thing — hiring a logistics provider enhances your CX in two affiliated ways.
For starters, logistics providers expedite your delivery process. This is a direct gain, given that complaints about slow order delivery are commonplace in eCommerce and almost every e-shopper loathes delayed orders. If you partner with a resourceful 3PL, they can send order delivery updates to your customers, enhancing your post-purchase experience.
Secondly, outsourcing your order fulfillment frees up time and talent you can channel towards boosting other factors that influence CX quality, including:
- Optimizing your eCommerce website for mobile.
- Improving your e-storefront design and product listing.
- Developing customer loyalty programs.
- Creating eCommerce product discovery content like blogs and product reviews.
- Solving customer complaints and digesting reviews and opinions.
Ultimately, these two aspects help you build and sustain top-notch customer service and CX quality for your eCommerce business.
Keeps Your Order Fulfillment Costs in Check
Order fulfillment cost is a recurrent expenditure that handicaps small eCommerce businesses without the resources and time to establish extensive delivery networks. Even if you establish an in-house fulfillment system right away, you still miss out on the benefits of economies of scale before you grow your order volume.
Outsourcing your order fulfillment to a 3PL helps you calculate and budget your delivery costs in advance because you know the standard rates for fulfillment services. For instance, the average market fulfillment rate is:
- $5–$15 per pallet for inventory receiving.
- $8–$40 per pallet per month for storage.
- $3–$5 per order for pick and pack.
Other third-party logistics providers may charge you a flat fee per month for all your fulfillment services. Working with the rates agreed with your logistics provider, you can calculate the actual figure you’ll pay for fulfillment in a given timeframe. This makes overall budgeting more manageable.
Consequently, you can allocate your funds more gainfully without running out of operating capital. And in case your fulfillment costs exceed your budget figure because of order influxes or other unforeseen market conditions, you can negotiate payment terms with your 3PL to navigate such situations.
Should you run into similar scenarios with your in-house fulfillment, you have to use your capital to pay for unexpected delivery costs or borrow money. These aren’t favorable conditions for small eCommerce businesses. That’s why working with a logistics provider is much more advantageous.
You Benefit From Order Fulfillment & Inventory Software Without Steep Upfront Costs
Web-based order fulfillment software makes managing and overseeing delivery operations more feasible. Besides streamlining the supply chain and inventory operations, fulfillment software also helps you collect and analyze everyday data. Additionally, these software solutions also automate some fulfillment functions and help you reduce stockouts.
The upfront cost of acquiring order fulfillment software is the only limiting factor, particularly for small businesses. For instance, Fishbowl Software costs $4,395. This may be a steep price tag when you’re a fledgling business.
Conversely, logistic service provider companies have the financial muscle and tech capacity to buy the best-rated fulfillment software or design and build in-house software. Thus, when you outsource your order delivery to a logistics provider, you enjoy the convenience and output of this software without the need to buy or subscribe.
Logistics Providers can Help you Navigate Supply Chain Crunches
Supply chain crises, like the latest COVID-19 supply chain issue, can cripple your eCommerce store if you don’t get agile and find quick solutions. Many events can trigger supply chain crunches: a global pandemic like we experienced in 2019 through 2021, political instability, labor strikes, natural disasters, or panic buying.
Having excess on-hand inventory is the safest way to wade a supply chain crunch. And this calls for extra warehouse space. Partnering with international 3PL companies makes it possible. Here’s a case in point:
Say you’re a U.S.-based florist importing flowers from Columbia. You get wind of a possible labor strike in your suppliers’ companies just before Valentine’s Day. But because your 3PL has a cold warehouse in Columbia, you can increase your order margin to cover the likely shortage in case a strike happens.
If you had an in-house fulfillment system with warehouses only in your U.S. distribution centers, such a strike would trigger a massive supply shortage and cause you untold losses. This is one way logistics providers help you avoid supply chain crises.
In addition, logistics service providers can assist you in sourcing and negotiating with new suppliers during a crisis. Most likely, your 3PL may also be serving your industry peers in the same or different country. This gives them a more comprehensive network of suppliers. If your main supply came short without notice or on short notice, your 3PL could help you get a new supplier sooner.
You Enjoy Faster Shipping With Fair Carrier Rates & Terms
The very nature of shipping favors bulk cargo. As a result, large eCommerce stores with bulk orders can leverage full truckload (FTL) shipping, which is faster and more cost-effective. Shipping companies are more willing to discount FTL shipping than less-than-truckload (LTL) shipping. LTL shipping is more suitable for small businesses.
Logistics service providers consolidate multiple orders and use FTL shipping. This means your orders arrive early without you paying FTL rates. When using in-house fulfillment, you would most often be forced to use LTL shipping and share truck space with other customers. You would save money but be forced to contend with slower order deliveries.
Additionally, 3PL providers shield you from costly holiday and peak season rate hikes that shipping companies impose on customers. Because 3PLs are among the most prominent clients of shipping companies, they may be exempt from seasonal rate hikes or pay much lower rates. 3PLs will then pass these cost advantages to you.
If you’re using in-house delivery, you may not have the privilege to negotiate rate hikes because shipping companies may not prioritize you among their cash cow customers. Typically, carriers offer discounts based on order volume. As a small business, chances are you won’t get close to the discount threshold, but a logistic provider will.
You Gain Extensive Logistics Expertise From 3PLs
While you may be a subject-matter expert in your line of products, you’ll encounter a steep learning curve in logistics. To succeed in eCommerce, you need more than product knowledge. That’s why it pays to partner with a 3PL provider from the onset.
Because 3PLs are experts in logistics matters, they’ll help you avoid costly mistakes that can crush your small business. Maybe you design and manufacture the most exquisite wine glasses in America. But you may not know how best to package and cushion them for shipping to far-off destinations like Australia.
3PLs come to fill such logistical gaps. This way, you can focus on enhancing your product’s quality and leave the mundane logistics tasks to your 3PL. Even better, you’ll tap from their established IT systems and technical knowledge. For instance, you may request your 3PL to recommend the most appropriate software for your in-house operations.
Why Choose ShipNetwork as Your End-to-End 3PL Partner?
At ShipNetwork, we believe every small eCommerce store needs a bigger 3PL brother. To duly fill our big brother shoes and propel your eCommerce store to next-level success, we have invested in our delivery infrastructure to enable one-to-two-day ground delivery, one-day fulfillment, and 100% order accuracy.
When you partner with ShipNetwork, you enjoy unlimited access to our fulfillment centers in the west coast, midwest, south-central, mountain, northeast, and southeast regions. Better yet, our platform supports partner integrations with other eCommerce marketplaces such as eBay, Amazon, and Shopify.
Schedule a call today, and start your journey to great eCommerce fulfillment.