Everything you ever wanted to know about third-party logistics (3PL) and fulfillment
You might find yourself overwhelmed with your fulfilment and distribution plan lately. After all, you got into the e-commerce business to sell things — fulfilling and shipping those orders just seemed like a detail. But as your e-commerce marketplace started taking off, you might have started realizing just how much work goes into this part of your business.
At first, it was something you could handle on your own. But now, you’re probably starting to realize that fulfillment and shipping is getting much bigger than you and your team. We’re glad you’re here. Because all too often, e-commerce entrepreneurs wait until things have gotten out of control before considering contracting a 3PL. Here, we’re going to walk you through how a 3PL works, when it’s time to use one, and what the advantages and disadvantages are. Even if you don’t plan on using a 3PL right away, understanding these things will help you make that decision when it’s right for your business. Let’s get started.
What is 3PL?
Third Party Logistics (3PL) is a supply chain management service that businesses use to outsource part, or all, of their distribution or fulfilment. As such, a 3PL does not own any of the inventory themselves. They simply help businesses distribute their products to customers and retailers.
Today, with the e-commerce boom and democratization of retail thanks to the internet, 3PL’s are incredibly popular. In fact, it is estimated that a staggering 86 percent of Fortune 500 companies and 96 percent of Fortune 100 companies use 3PL’s.
Is a 3PL right for my business?
A third party logistics company isn’t right for everyone, particularly those who haven’t reached a certain threshold yet. But, if you find that your fulfilment and shipping process is getting too big or stressful to handle, that’s a big sign that you may need more professional help.
It could be time to turn to a 3PL if…
- Fulfilling orders is taking up all of your time.
- Order fulfilment actually is stunting your ability to grow because you can’t get the orders out fast enough.
- You’re out of storage.
- Your business is growing, or you’re expecting a large spike.
With that being said, there are different types of third party logistics companies to help you fulfil your orders.
Transportation 3PL’s will handle shipping between your factory or warehouse, for example. Or between you and your buyer.
- Warehousing and distribution
The most common, a warehouse 3PL will handle storing, shipping, and returns.
This is usually the kind of 3PL that you turn to once you’ve hit close to the 9-figure mark. This 3PL will help you optimize your entire logistics network.
What are the advantages of 3PL?
A third party logistics provider has built their business on making your job easier. By no longer having to deal with, or worry about, your fulfilment and distribution you can focus on the parts of your business that you’re good at.
- Limits your overhead
It takes a significant investment in both time and money to set up your own warehouse. When working with a 3PL, you will pay for their service, but you won’t have to put all of that time and money into setting up the entire operation yourself.
- Allows you to be more professional
If you’ve been doing everything from home and struggling — not sleeping, missing orders, making mistakes — working with a 3PL is going to ensure that your products and orders are fulfilled and shipped in a professional and timely manner.
- Expansion is easier
If you go viral tomorrow, or just expect extra orders around the holidays, your 3PL is built to handle that increase for you and your customers seamlessly. Additionally, if you decide you want to expand to international markets, there are 3PL’s that already have contracts and merchant records, which can get you launched faster.
Are there disadvantages to working with a 3PL?
While working with a 3PL is meant to alleviate a lot of the pressure from your business, there are some things you need to keep in mind before you make the decision to switch.
- Set-up fees
While you don’t have the massive up-front costs of building your own warehouse and setting up the logistics for that, you still will have pay a premium to get started with a 3PL. Expect up-front costs, such as integrating their software into your e-commerce website, SKU’s, account access, and more.
- Losing control
A lot of times, you won’t even work with a 3PL that’s near you. In fact, it might be better to outsource your fulfilment and shipping to a 3PL that’s close to where your products are produced, for example. While you should only work with a 3PL you trust, it is still a big decision to hand over this crucial part of your business and customer journey to someone else. With this in mind, don’t make a decision lightly.
- Hidden responsibilities
Unless your 3PL has set up a highly sophisticated and integrated system, if or when your customers have a problem with their delivery, they’re going to turn to you. Because of this, it is extremely important to have access to all of your 3PL shipping data so you can maintain your customers trust and get them the information they need.
3PL’s are a great solution when you look at it from all angles
Working with a 3PL isn’t for everyone. But for many growing e-commerce marketplaces, it is eventually something they need to turn to. Knowing the different kinds of 3PL’s, as well as the advantages and disadvantages, can help you choose the right provider and ask the right questions for your business.
We are Fetchr; a company specialized in e-fulfillment. We help e-commerce entrepreneurs grow their business in the Middle East. Let’s make it happen! One box at a time. Learn more here.
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This blog is intended for informational purposes only, and should not be considered business or legal advice. MENA 360 DWC-LLC (Fetchr) will not be held liable for the use, non-use or misapplication of this information, lost profits, personal or business interruption, or any other loss.