Your business is suddenly growing. Your orders are through the roof. It’s great but there are still parts of your business you want to give attention to, grow and establish. Trouble is, this growth and your new shipping and fulfillment duties are taking up all your time, money, manpower, storage, and attention. Now might be the time to think about engaging a 3PL.
What is a 3PL
At its most basic, a 3PL offers your company help with logistics, shipping, and fulfillment. So you take orders, your third-party logistics provider (3PL) fulfills them. A 3PL is a link in the supply chain that brands use to outsource part or all of their business’s distribution and fulfillment services.
With the birth and subsequent growth of ecommerce, the market for 3PLs has exploded. Most Fortune 500 companies, 86% of them to be precise, and 96% of the Forbes 100 use 3PL services.
Don’t fumble your logistics, shipping, and fulfillment
How important are good logistics, shipping, and order fulfillment? Very. If you’re still not convinced, here’s a little story about Mike Brown and his wildly successful Death Wish Coffee brand.
In 2013, Mike Brown, founder of Death Wish Coffee, appeared on the show Good Morning America. It was a great break for him and his already successful brand. However, 30 days later Amazon had shut down their account and eBay had dropped a big ol’ lifetime ban on them. What could this very successful, popular coffee brand have done that suddenly made them a pariah?
They failed miserably with their logistics, shipping, and order fulfillment.
After the Good Morning America appearance, the demand for their coffee increased exponentially. That’s great right? Sure, if you’re ready for it. But Brown and his company were not and because they weren’t ready, they dropped the ball on logistics, shipping and fulfillment for 10,000 orders.
All is well now and Mike and his company are hugely popular and continue to be successful. But, it was a close call. Logistics, shipping, and fulfillment are mission-critical areas for your business. If you make mistakes there, it could cripple your growth potential or even shut you down.
Why engage a 3PL
If the story of Mike Brown and Death Wish Coffee isn’t clear enough, here are some more benefits of engaging a third-party logistics company for your business.
3PLs have more leverage with freight companies than individual shippers do. Working with carriers on behalf of multiple customers, 3PLs can negotiate price based on volume and frequency.
Scale up or down as needed
Most businesses will experience some fluctuations in demand throughout a given year. Using a third-party logistics company allows you to manage peaks and troughs more effectively without having to commit capital when you don’t need to.
Provide a better customer experience
In this day in age, customers are expecting next-day or even same-day shipping. Using a third-party fulfillment company allows you to offer fast shipping no matter where the order is being sent. This is due to the fact that you’ll have access to the 3PL’s wide distribution network.
Test new markets
With an international 3PL, you may have the flexibility to finally dip your toes into new waters, in new markets, in other countries without having to commit to any major investments like having your own warehousing space and staff.
Shipping delays are almost inevitable in the business. When unforeseen circumstances arise, a 3PL is responsible for making alternate arrangements to fulfill your orders as quickly as possible. You’ll also be protected in the event of damaged or lost goods.
Get smarter, faster
If you’re just starting out, who better to take care of your logistics than a company that specializes in logistics? Order fulfillment, warehousing, and shipping come with some serious challenges all on their own. Do you need extra challenges on top of the ones that come with starting a new business? Not really. Handing it off to an expert can really make a difference in the way your business functions. This is going to leave you more time to focus on increasing your overall value to your customers and your place in the market.
Make sense of international logistics
If you’re selling internationally, a 3PL can take care of documentation, customs, duties and other issues that may arise at borders. These issues can delay your shipments or result in high costs if not done thoroughly and correctly. You’ll save time when you’re not trying to work out compliance rules pertaining to different countries. Your 3PL handles all that with ease.
In the area of warehousing, not having to maintain your own space and staff can be a big cost-saving measure. Companies that provide good inventory forecasting can help to optimize your inventory levels and save you money in inventory holding costs.
So, is it time?
It’s a question you should not take lightly but one that needs to be asked. Is it time for me to engage a 3PL? If you’re asking, don’t wait to answer until you’re overwhelmed with order growth. Breaking the fulfillment promise you make with a customer can do long term damage to your brand.
Ask yourself these three key questions. They will help you determine if now is the time.
- Are you fulfilling more than 10-20 orders per day?
If the answer is yes, calculate the costs of partnering with a 3PL to keep your profit margins strong. Also, estimate growth potential- those opportunities you’re not currently able to pursue- by outsourcing fulfillment.
- Are you running out of costly inventory storage space?
Brands often forget to include storage costs in their order fulfillment expense calculations. Compare your current expenses with estimates from 3PLs. Determine if bundling storage costs with outsourced fulfillment is a better value.
- Is your brand a coiled spring?
If you’re expecting a sustained spike in volume - not just one-off-flash sales or marketing promotions- estimate the costs and headcount necessary to meet demand on your own. Then, compare that with the costs of outsourcing fulfillment.
Now is the time to choose the right 3PL
You’ve done the math, taken a look at budgets and time consumption and you’ve determined that yes, now is the time to engage a 3PL. Now what? Well, here are a few things you should consider when seeking the right third-party fulfillment company for your business.
Current and forecasted volumes
You want a 3PL that can handle your current volume, but one that’s also ready to handle your volume if you suddenly decide to add a bunch of new stock, increase your stock volume, or if you have a great spike in sales. You want a 3PL that handles your business now and when you’re hitting your optimum pace.
References and business performance
Check out references and reviews from other customers that have used the 3PL. Get reports on the company’s performance over the last few years. Get information about one-time deliveries versus delays, and how they compensate businesses when there are problems.
If you’re using a cloud-based Inventory Management System (IMS), you should choose a company that is similarly cutting edge and ready to integrate with your stock control software. Ensure that the 3PL provider’s technology works with how you work.
It’s about saving time, saving money and allowing you to focus on other parts of your business while you let a competent, trustworthy 3PL handle your logistics, shipping, and fulfillment. It’s an important decision, make it wisely.
When you decide it is time for you to take your business higher, Agile is there to make the climb as easy and efficient as possible. You can be sure the mission-critical elements of logistics, shipping and fulfillment are handled with experience and unmatched skill when you partner with Agile.