3PL: Are third party logistics right for my business?

Outsourcing your fulfilment is no menial decision. It requires a lot of thought and a lot of research. Whilst many e-commerce businesses find that 3PL is the way forward, the world of fulfilment is not a one-size fits all approach and for some businesses, they may find that outsourcing their fulfilment at the current stage of their e-commerce journey may not be the correct decision.  

 Whilst outsourcing your fulfilment undeniably helps in terms of scaling up and streamlining services, it’s all about being in the right place at the right time and there’s always the risk of jumping into the deep end too soon which could result in a negative experience as you find yourself having to juggle a series of new factors that you never considered.  

 If you’ve recently been finding yourself humming and hawing about the idea of finding third party fulfilment but remain undecided, this post will shed clarity on just what outsourcing your fulfilment will mean for your business and whether your business is currently ready or not. 

 Why do businesses choose 3PL solutions? 

 E-commerce businesses tend to outsource their fulfilment for multiple reasons. Third party logistics puts the shipping process in hands of those that are specially equipped in the field and have years of experience. By delegating a large task and putting it in the hands of professionals, it ensures a streamlined shipping experience and allows the e-commerce business to scale their operations quickly and easily, allowing them to handle larger order volumes and reach more customers. It also means that more time can be spent on other aspects of business, such as product making, designing, and marketing. 

 
So, when would 3PL not be advised? 

 Whilst it may sound like a no brainer, and quite often, it is the sensible decision to make, this isn’t always the case. Every business is different and grows at different speeds. Here are some situations where outsourcing your fulfilment could be detrimental to your brand.

1. Your e-commerce business is brand new  

Whilst starting as we mean to go on is great, it is important to use the ‘taking off the ground stage’ as an important learning period. In-house fulfilment allows you to learn the ins and outs of the trade before handing the duty over to somebody else, after all, knowledge is power! By starting off in-house, you give your business time to flourish, learn the tips of the trade and make yourself more aware of trends within the sales of your products. By becoming a master of your trade, when you are ready to outsource, you will have a clear idea of your requirements and subsequently will be able to filter out 3PL providers based on what is best suited for your needs.  

 2. You have a low order volume  

Whilst this may sound obvious, if you have a low order volume, 3PL logistics may not be the most cost-effective solution. The whole idea behind outsourcing your fulfilment is to pay a third party to store and ship your products. If you have a low order volume, the fees for storing are going to add up and hazard your chances of creating maximum profit. The process of outsourcing can be time-consuming, so if your brand is currently in a position where outsourcing is viable, the time invested into looking for a 3PL solution could be detrimental. 

 3. You have small margins  

If you have small margins, outsourcing your fulfilment can be a costly process that can quickly eat away at your profits. You may end up spending more in fulfilment fees than you would ever make in profits from the sale. Additionally, 3PL costs are multi-faceted as they cover a wide variety of different procedures such as; storage, pick and pack, and carrier costs, so you must consider all the different cost elements. 

 4. You don’t have SKUs or barcodes  

If you don't have SKUs or barcodes, it is impossible for a 3PL provider to manage your inventory accurately and efficiently. Without SKUs and barcodes, orders cannot be tracked, and stock levels cannot be efficiently managed. Whilst fulfilmentcrowd offer reworking services at a cost, not having a SKU or barcode is a big problem. 

 5. Your products have a micro-shelf life  

If your products have a micro-shelf life, it is important to ensure that they are shipped quickly and efficiently. If you cannot ensure that a large majority of your products will be shipped within this time, this will result in a loss of product and loss of profit. All 3PL partners should and will operate batch control and a FIFO process, however, if your order volumes don’t move product quickly enough, disposing of out-of-date stock comes with a hefty price tag.

Choosing the right fulfilment partner 

 If some of these factors apply to you right now, that’s not to say that outsourcing your fulfilment can never be on the cards! As your business grows, you may find yourself in a situation where outsourcing your 3PL seems much more viable. If you find yourself in that position now, here’s what you need to know: 

 Choosing a 3PL provider is like picking a suitable partner. You want to work with a provider who understands your wants and needs and always goes the extra mile.  

 Understands your needs: Before you start looking for a fulfilment provider, make sure you know exactly what you need from them. Consider the type of goods you’re selling, the size and weight of your products, the amount of stock you need to store, the number of orders you’ll need to process, your average basket value, the type of packaging you’ll require and shipping methods you’ll need and so on. 

 Consider capacity: Make sure the fulfilment provider you choose has the capacity to handle your current and future needs. If you’re expecting a large influx of orders, make sure the provider you choose can handle the increased demand. It’s important to have a partner that has the operational capabilities and the right tech to be able to manage peaks and troughs in volume, whilst still maintaining service level. For instance, the fulfilmentcrowd app supports with inventory and order management, and our warehouses are designed with volume in mind.  

 Check for scalability: Make sure the provider you choose can scale as your business grows. Consider their ability to store and process more orders, adjust their services as needed and provide additional services if needed. At fulfilmentcrowd, we make sure current and projected volumes are constantly being discussed from the get-go, enabling a mutual understanding of a growth path, ensuring warehouse and pack face capacity and operational capabilities to fulfil annual volumes.