Understanding E-Commerce Fulfillment
Small e-commerce businesses have been on the rise in recent years, especially during the COVID-19 pandemic — e-commerce jumped 6.9% in terms of total retail sales between 2019 and 2020.
With brick-and-mortar businesses rendered inoperable, enterprising entrepreneurs adapted to changes in the market and shifted to models that are more suited to a more digital world.
Those small business operators may not know the most effective way to distribute their goods, leaving precious revenue to be lost in the industrial machine.
This article seeks to solve that problem with an overview of third-party logistics in order to present a viable solution to those businesses that create clothing and other small items.
What is Third-Party Logistics?
As organizations grow, they often develop fulfillment and warehousing needs that expand beyond their ability to maintain themselves. Third-party logistics (3PL) is a solution to that problem because it allows companies to outsource at least some of those operations to a vendor that specializes in those services.
Business models that include some form of drop-shipping rely on 3PL in order to reduce both costs and liability. These services are often scalable and can be used as needed or as long-term solutions.
Who Needs 3PL Services?
A lot more happens on the back end of e-commerce than the consumer might imagine. Supply chain logistics encompasses a number of functions, any one of which could be reason enough for companies to choose to work with a 3PL provider.
To handle the entire burden of logistics internally might require more physical space than a company can afford, or perhaps it’s in the budget but would simply take too much effort to maintain.
In most cases — especially for businesses with customers outside of their immediate geographic locations — it’s easier to simply outsource e-commerce order fulfillment to a company with the infrastructure in place to provide a high-quality experience to their customers.
Benefits of Working With 3PL Provider
Though we’ve alluded to some of them briefly, let’s take a closer look at some of the benefits that 3PL offers to businesses of all sizes.
Having someone on your side that knows how to manage order fulfillment and logistics of e-commerce is no small advantage. Working with experts in these areas can streamline the entire process from order to delivery with minimal cost.
What’s more, shipping across state lines and internationally comes with even more challenges that, if not accounted for, could bring the expansion of an otherwise successful operation to a halt. The guidance of someone who understands the different requirements of diverse governments is invaluable to developing a wider reach.
Whether operators would rather use 3PL providers simply for storage or to outsource e-commerce order fulfillment entirely, they can usually select a level of service most appropriate for their needs. What’s more, there’s no requirement that a certain level be maintained all the time. Some businesses have a cyclical demand for their products, such as those that deal in seasonal clothing or sporting goods.
3PL companies can help them to scale accordingly so that they can continue to serve their customers without a loss in quality of service or a need to hire (and train) a lot of seasonal employees.
Without worrying about the day-to-day logistical demands of running their operations, most organizations have more mental resources available to focus on core processes. This may lead to improved products, customer service, or simply more streamlined processes that increase profitability.
All of the benefits of 3PL for the business translate to a better overall experience for the customer as well. Those who place orders can expect more consistent and reliable delivery than is possible with an in-house logistics solution.
A key thing to note here is that customers don’t much care about the steps in between — they just see that these businesses offer a reliable service, and they appreciate receiving their orders intact and in a timely manner. This leads to brand loyalty, word-of-mouth marketing, and ultimately more happy customers.
How to Choose a 3PL Provider
Decision makers have to remember that when they decide to work with a vendor — especially one that handles a function as critical as logistics — they are essentially expanding their businesses so that they include the service providers as well.
No one would knowingly bring in an unreliable partner, but that’s exactly the risk that many take when they fail to do their due diligence around 3PL providers. There are a few things that anyone can do that can help them make a more informed decision.
Ask for References
There’s hardly a better way to get an idea of what one might expect than by speaking with an existing client. Any red flags should be taken into consideration and weighed against the feedback of others. Hiccups happen in every business and every industry, but a company that has a pattern or reputation of mishandling the relationship should be avoided, no matter how low their prices are.
Check Their Finances
If possible, it’s a good idea to look into prospective 3PL providers’ financial history. The last thing a business needs is to sign up for a vital service only to have the company fall through for financial reasons. There are usually signs of an impending collapse, and the astute observer should catch them before it’s too late.
Check for Compatibility
There are providers that serve companies of every size, so it’s important to choose one that works for a particular business. Companies that work with providers that offer far more capability than they actually need are likely to overpay for their service. Likewise, they should be sure that the vendor is physically able to handle the volume that a given business expects to bring in, even during the busiest times of year.
Third-party logistics offers business owners the opportunity to increase profitability and efficiency in a single step by outsourcing the work of fulfilling customer orders. The best 3PL providers are in the business of understanding e-commerce fulfillment, allowing business owners and operators to focus on their most important work.