Do you have over 1,000 orders per month and have outgrown your space? Wondering if you need a 3PL for your eCommerce business?
For many eCommerce businesses, scaling your operations is an exciting yet challenging phase of growing your brand. With only 24% of new businesses having the chance to grow from small retailers to large-scale enterprises, it’s critical now more than ever to find the right processes to keep up with your growth demands.
To succeed in making this happen, most businesses turn to 3PL or third-party logistics providers. Think you might also need one?
As a logistics expert, we’ve done the hard work of compiling everything you need to know about what 3PL means and how to choose a 3PL provider so it’s easier for you to find out all you need to scale your business.
What is a 3PL?
3PL or third party logistics providers organise the logistics of online selling, including order fulfilment, warehousing and inventory management. A 3PL can be a single service provider, such as warehouse storage, or an integrated service that manages orders, shipping and fulfilment in one place, like what SKUTOPIA does.
The global 3PL market is forecast to be worth more than $2.8 trillion by 2031. This means that more and more businesses are looking into outsourcing their logistics services to keep up with the increasing demands of eCommerce customers today.
When do you need a 3PL?
If you’re starting to wonder whether you need a 3PL provider, any of the following might describe your current situation:
- Fulfilling your orders is taking too much of your time and effort
- You want to scale your business (and you don’t want to waste time chasing shipping providers)
- You’ve run out of space to store your products
- You want to automate your inventory management
Recognising the need for a 3PL provider often comes from facing the limitations of handling logistics internally. If fulfilling orders consumes too much time and effort, if you aim to scale your business without getting bogged down by logistics, if you’ve run out of storage space, or if you want to automate inventory management, partnering with a 3PL can be a game-changer.
3PL vs 4PL: What is the Difference?
As you hunt for providers to outsource your logistics to, you will encounter having to make the decision between 3PL and 4PL (fourth-party logistics) providers.
While the final call will all come down to your business requirements and priorities as you scale your brand, having the right knowledge of what each offers and when to use them will be valuable as you try to find out which would work best for your operations.
To understand better what does 3pl mean in comparison with a 4PL, here’s a quick rundown of the difference between 3PL and 4PL:
3PL providers deliver crucial services like warehousing, pick and pack solutions, and shipping, enabling businesses to concentrate on their primary activities.
Conversely, 4PL providers oversee the entire supply chain, integrating multiple logistics functions and utilising advanced technology and analytics to optimise operations.
Key 3PL Operations and Benefits
In essence, outsourcing your key logistics functions to a 3PL provider allows your brand to focus on your core competencies and growth strategies.
By delegating your complex and resource-intensive logistics tasks to specialists, you can spend more time on your other important business operations such as product innovation, marketing, and customer engagement.
But what exactly happens when you outsource your logistics to a 3PL provider and how is it better than doing it yourself?
3PL operations bring a wealth of expertise and advanced technology to the table, ensuring that these logistics processes are handled with precision and efficiency:
1. Receiving
Receiving is the initial stage where a 3PL provider accepts inventory from suppliers or manufacturers. This process involves checking the accuracy of the shipment, inspecting for damage, and updating inventory records.
Outsourcing your receiving processes to a 3PL ensures that your orders are accurate and efficiently handled. SKUTOPIA, for example, utilises advanced technology to handle large volumes of received products swiftly, reducing the risk of errors and delays and streamlining the first process of order fulfillment.
2. Warehousing
Warehousing involves storing goods in a secure and organised manner until they are needed. This includes managing inventory levels, ensuring products are stored in optimal conditions, and maintaining accurate records.
By leveraging a 3PL’s warehousing facilities, brands can save on the costs of building and maintaining their own storage spaces. Additionally, 3PLs often have advanced warehouse management systems (WMS) that provide real-time visibility and efficient inventory management, leading to better stock control and reduced holding costs.
3. Picking
Picking is the process of selecting items from inventory to fulfill customer orders. This step requires precision and speed to ensure orders are completed accurately and efficiently.
With 3PLs’ optimised systems, order picking can be handled with high accuracy and speed. Outsourcing this function minimises errors, reduces labour costs, and ensures that orders are processed quickly.
4. Packing
Packing involves preparing the picked items for shipment, which includes selecting appropriate packaging materials, ensuring items are securely packed, and labelling packages correctly.
Professional 3PLs use industry best practices for packing, which can reduce the risk of damage during transit and ensure orders are accurately packed even with high order volumes. They also have bulk purchasing power for packing materials which helps to reduce costs.
5. Shipping
Shipping is the final step in order fulfillment, involving the dispatch of packed orders to customers through various carriers.
3PLs typically have established relationships with multiple carriers, allowing them to negotiate better shipping rates and offer faster delivery options. They can also handle the complexities of international shipping, including customs clearance. This can help your brand scale operations without having to invest in logistics infrastructure.
6. Returns
Returns management encompasses the process of handling returned items, from receiving the returned goods to inspecting them, restocking, or disposing of them as necessary.
Managing returns can be resource-intensive and complex. A 3PL can streamline the returns process by ensuring quick processing and providing insights into return reasons to help improve product quality and customer satisfaction. This can then enhance customer loyalty and reduce costs associated with returns.
All in all, partnering with a 3PL enables your business to be more agile and responsive to market demands so you can scale your operations more effectively without the need for significant capital investment in logistics infrastructure.
Choosing Your 3PL Provider
A 2022 study on third-party logistics revealed that 73% of shippers (3PL users) experienced a more positive customer experience due to 3PL usage, which also introduced innovative methods to enhance logistics effectiveness. Additionally, 86% of shippers reported that using a 3PL led to greater cost-efficiency in their logistics operations.
The right 3PL can change your business for the better, but before selecting your provider, conducting in-depth research will help you find one that best suits your needs. Consider these factors:
Costs
Third-party logistic providers often have complex pricing, and each differs with what services they offer. Typically, pricing includes all of the below:
- Pick and Pack (product handling)
- Bin storage size (warehouse storage costs)
- Label printing (for couriers)
- Errors and Returns processing
- A monthly software subscription (where you can login and update your inventory and get reports)
Depending on whether the 3PL provider offers more services in addition to the ones listed above, 3PL pricing can cost more than the others. The key is to ensure that you get the worth of what you’re paying for and that there are no hidden fees once you sign up with your provider.
Systems
Many 3PL providers have proprietary systems that don’t connect well to storefront software like Shopify, Magento, or WooCommerce. This forces you to use an air-gapped system for inventory management and means you manually have to update the order status for orders shipped by 3PLs.
Having systems that integrate well with your eCommerce platforms is a vital factor to look out for 3PL providers. If you have to manually handle this critical piece of your operations, you can’t expect efficiency in your order fulfillment operations.
Speed and Quality of Fulfillment
High-quality fulfillment services can significantly impact your brand reputation and customer satisfaction.
A 3PL with high fulfillment quality ensures that orders are picked, packed, and shipped correctly and promptly. This reliability helps build trust with customers, leading to higher satisfaction rates and increased customer loyalty. Happy customers are then more likely to become repeat buyers and brand advocates.
To streamline fulfillment operations, 3PL providers usually use advanced technologies and best practices to reduce errors while allowing brands to scale operations smoothly as demand grows.
SKUTOPIA’s robotic order fulfillment, for example, values fulfillment accuracy and speed by leveraging the efficiency of robots in picking, packing, and dispatching orders. This ensures that brands can scale their operations up or down and still maintain the quality of fulfillment for every single delivery.
Reliable and Fast Shipping
In many industries, shipping speed and reliability can be a significant differentiator. With modern consumers expecting speedy and reliable delivery services, brands that can promise and deliver fast shipping often stand out from competitors who cannot match their delivery times.
Partnering with a good 3PL that prioritises fast and reliable shipping allows businesses to offer attractive shipping options, such as next-day or same-day delivery, which can be decisive factors for customers when choosing where to shop.
A scalable 3PL provider can handle fluctuations in demand, such as seasonal peaks or promotional surges, without compromising delivery speed or reliability. This flexibility ensures that brands can maintain high service levels even as they expand, supporting your sustainable growth.
Care for your brand
The unboxing experience is very much part of a modern brand’s repertoire for creating emotional connections with their customers. 3PL and order fulfilment companies that care more about their branding will deliberately take over that feeling – slapping their brand and logo on the box.
Ensure you choose an order fulfilment provider that values the importance of your brand experience and allows you to personalise inserts with orders and brand the delivery packaging.
Sustainability
Consumers are more environmentally savvy than ever and are driven by a brand’s value and sustainable practices. In fact, 25% of Australian shoppers are more likely to shop with a brand again because of sustainable packaging.
It won’t be long before sustainability becomes a key factor consumers consider when shopping online. As an eCommerce business, preparing for new trends in the industry will be crucial to staying competitive.
If your 3PL provider can support sustainable practices like custom packaging, you’ll have a significant edge over your competitors.
3PL Robotic Fulfillment with SKUTOPIA
In the world of eCommerce order fulfillment, efficiency, accuracy, and scalability are paramount to staying competitive. SKUTOPIA's robotic order fulfillment offers a cutting-edge solution that addresses these critical needs, providing ecommerce businesses with a range of benefits that far exceeds what traditional fulfillment methods can offer:
Unmatched Speed and Efficiency:
SKUTOPIA’s robotic systems are designed to handle high volumes of orders with exceptional speed and precision. By automating the picking, packing, and shipping processes, SKUTOPIA significantly reduces the time it takes to fulfill orders, which means faster delivery times for customers.
Enhanced Accuracy
Human error can be a costly aspect of manual fulfillment processes. SKUTOPIA’s robots are programmed for meticulous accuracy, ensuring that orders are picked and packed correctly every time. This precision minimises the risk of mistakes, such as shipping the wrong item or incorrect quantities.
Scalability
As your eCommerce business grows, your fulfillment needs become more complex and demanding. SKUTOPIA’s robotic order fulfillment systems are inherently scalable, allowing businesses to seamlessly handle increasing order volumes without compromising on speed or accuracy. Whether it’s a seasonal surge or long-term growth, SKUTOPIA can adapt to meet evolving demands, providing a flexible solution that grows with your business.
Cost Efficiency
Automating fulfillment processes with SKUTOPIA can lead to significant cost savings. By reducing the reliance on manual labour, businesses can lower labour costs and minimise errors that result in additional expenses. Additionally, SKUTOPIA’s optimised processes reduce waste with sustainable custom packaging by our robots.
Sustainability
In addition to operational benefits, SKUTOPIA is committed to sustainability. Our robotic systems are designed to be energy-efficient and reduce waste, contributing to a smaller environmental footprint. By choosing SKUTOPIA, ecommerce businesses can align with environmentally responsible practices, which is increasingly important to consumers.
