Five Signs it’s time to outsource fulfillment to a third-party logistics provider (3PL)
Your online shop will grow faster than you can imagine. More sales mean more inventory management. You have to pack more boxes and get them on the trucks in the right order. You’re also responsible for marketing, updating your website and growing your staff.
If it feels overwhelming, or if you feel that your space is becoming too small, it may be time to consider outsourcing to a third-party logistics provider (3PL).
What’s a 3PL?
Third-party logistic providers (also known as 3PLs) are companies that can get your products to customers quickly and with accurate orders.
When you outsource properly, shipping products and labeling boxes don’t have to be a hindrance to the fun stuff. A company can’t know when they will be able to outsource.
Instead of searching for the perfect solution, focus on your problems. These things can get in the way of your business running efficiently. It’s time for you to look for a fulfillment partner.
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Why should companies outsource fulfillment
You may be considering outsourcing certain parts of your business for a variety of reasons. It can help you turn a problem in your business into a competitive advantage by allowing you to provide high-quality customer services while reducing errors that could cost you money.
Fulfillment professionals spend time and money to find the best software, tools and workflows that will ensure that orders are packaged correctly and safely. 3PLs train every day to ensure orders are accurate and reduce costs. This is how they stay competitive.
They also keep an eye on your systems and know how they integrate. This allows your eCommerce website to generate shipping rules and print labels. This time, however, it goes directly to 3PL. This information will be used by the 3PL so you don’t have to worry.
Their job is to help you save money and time. If fulfillment is too costly or burdensome, it’s time for you to let someone else handle the hard work.
Here are 5 signs it’s time for a 3PL.
01. Running your business can be affected by filling out orders
What are the different tasks you have to complete each day with your eCommerce business?
There are nearly too many stores, if you’re anything like most people. When you think about what you love most, managing the warehouse and tapering up boxes are probably not the top 20. If you spend most of your time making sure picking and packing operations run smoothly, or pinch-hitting in order to meet spikes in demand, maybe it’s time to outsource those operations to a company that is skilled in scaling quickly and getting things done right. You can’t let your warehouse operations get in the way tomorrow’s customers.
When you don’t have the time to fill orders or set up new ones, start looking at your 3PL options. This allows you and your leaders to concentrate on the bigger picture and the overall market. It might allow you to launch a major sale, try a new product or discover the weaknesses of a competitor. This will reduce the amount of time that you have to spend on fulfillment.
You will see when fulfillment becomes a stressor and prevents you tackling your core activities. You can nip this in the bud by working with someone who is skilled in selling your products. It’s worth the extra sleep each night.
02. You have too many or too few items in your inventory.
An eCommerce store cannot take money from someone and not be able fill the order. This is one of the worst mistakes. This can cause trust issues and lead to cancellations or refund requests.
Stock-outs can not only stop a sale from happening, but they can also reduce the likelihood that someone will return to your store next time. To avoid them, you must have a detailed understanding of your inventory.
Overordering inventory can also reduce the revenue you need to hire a larger team, launch a new product, or advertise for a major sale. Additionally, you are paying more for storage than what you actually need. You can also increase costs if your products require specific climate control.
It takes time to be aware of inventory. It is important to keep track of everything and count it all. Every order that is sent out incorrectly or returned will affect your inventory count. This is where the real work begins. It can be difficult to keep track of stock levels and order enough products to fill the shelves.
If either of these seems to be more frequent than usual, it is likely that you should consider a 3PL partner.
Working with a 3PL is a great way to save time and money. They also use similar tools to accurately track your inventory so that you don’t have too much or too few. There are no stock-outs, but there is no need for high volumes of inventory that you have to store month after month.
A 3PL can integrate with Wix-based tools to ensure you have the right data to serve your customers. This means that you and your 3PL will be working together to understand how summer is different from winter, and how your business should adapt.
03. Orders are incorrect and returns are becoming a problem
The lifeblood of any shop is repeat business. One of the greatest threats to this revenue stream comes from unhappy customers who return products.
Start to analyze why there are increasing returns. If customers are unhappy with a product, or feel they aren’t getting what they ordered, it could be that your website or ads promise too much. If orders are not received on time, are late, or the products are damaged, this could be a problem in the warehouse.
These issues can be solved by outsourcing. You might also get a guarantee that it won’t happen again. 3PLs will pay you for shipments that are not correct. This is an incentive for you and your company to do business with them.
The accuracy of your order reduces the chance of returns, especially if it is two-day shipping or you can deliver it. Your customer experience will improve if you keep your promises. If your 3PL partner provides you with custom packaging, infill in brand colors or support stickers of the logo, or if boxes look nicer than traditional cardboard, it might double your customer experience.
To improve your cash flow, one of the best ways to increase cash flow is to reduce the amount of returns you have. If you notice a trend in this area, it is time to reevaluate your fulfillment operations. Even if your 3PL commitment is not yet in place, high returns can be a sign that something has to change. Don’t let risks persist.
04. It’s clear that you need more people for the job, but don’t know who.
It can be stressful to grow your business. It might involve updating a website, or trying to select from over 40 top payment providers to highlight at checkout. You might have reached a point where your business is so large that you need a customized logo and branding.
All of this is happening but you also have internal processes that need to be changed and expanded. While many store owners are familiar with eCommerce and products, they lack knowledge of warehouse operations and other aspects like manufacturing and production. There is a lot to know and plenty of support.
Is it possible to find the right people to manage such a critical business operation? How can you identify the right people to protect you as your business grows?
Your warehouse staff will be under more pressure due to increasing customer demands. Customers expect fast shipping and quick access to tracking numbers. They also need plenty of support via email if they have any questions or are not satisfied with their order. You will need someone who is familiar with the area and can help you get your software, workflows and other operational elements running quickly.
Many small businesses find that once they have more orders than their core team can handle, the knowledge leap becomes too overwhelming. This is why it’s not uncommon for companies to outsource after they have outgrown their original location.
A 3PL can hire the right people and install the right software. They also have the right relationships that will keep the business moving smoothly and quickly. You get expertise from multiple customers, especially when you consider advanced warehouse and inventory tools and forklifts.
Do not let managing warehouses become a burden. Partner with someone who is a specialist in this area if the demands of inventory and HR are too overwhelming.
You can also outsource to make any changes quickly without needing to hire someone from sales or IT. Instead, they will package your products. Outsourcing keeps your employees focused on what they do best and generally costs less than hiring warehouse leaders and staff.
05. You can get better deals than you might be able to.
Have you ever noticed how competitors can offer similar products and shipping times at lower prices?
Sometimes they compete solely on margins to gain more business and train their staff. They hope volume will make up for the lower profit per item. They might be able ship more cheaply because they receive better rates from carriers such as UPS and FedEx.
There are many factors that affect the shipping cost of a product. Shipping costs are affected by factors such as distance, weight, and box size. To see how much you are paying and to determine if there is a way to save time, use DIM Weight Calculators.
There’s also another factor: discounts. Leading carriers can negotiate discounts for packages and push prices down a bit below the standard rate. However, this only applies if there is enough volume.
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Unfortunately, most eCommerce businesses that are small and growing won’t be able to offer discounts on the same scale as larger companies. A 3PL usually comes with built-in savings and immediate discounts. Because they ship to multiple eCommerce stores, they are likely to meet all carrier requirements. They can enjoy a greater discount if they have a larger operation.
Many 3PLs will pass some of these savings on to you. This keeps them big and healthy, which makes it easier for them to reduce churn as well as grow their businesses. A 3PL that is specialized in your product type — such as hazardous, heavy, large or heavy — will optimize their carrier deals for these product characteristics.
To better prepare, use a DIM weight calculator to determine if your order value is becoming too high in shipping costs. A 3PL can help you get deeper discounts and reduce warehouse costs.
Sign number 6: Things are going well
A 3PL can be a great option if your eCommerce store is performing better than you expected. You’re worried about cash flow, orders, and ensuring that you have enough product supply to satisfy demand.
This is the ideal position for online shops.
In this instance, the reason to use a 3PL is to maximize these benefits and take advantage of that potential. Instead of waiting for your business to experience the above-mentioned pain points, it is better to find partners that will help you grow and thrive.
Do not wait for products to be returned. Or, you may find that your warehouse is too small or that your team is outgrowing the resources necessary to scale up management. You might be surprised to learn that 3PL partnerships are the best way to prosper and profit.