What is 3PL and does your eCommerce Business need it?

Wondering if you need a 3PL for your eCommerce business? Do you have over 1,000 orders per month and have outgrown your space?

We’ve done the hard work investigating what is a 3PL and what you need to know about 3PL providers so you don’t have to. According to PR Newswire, the global 3PL market is forecast to be worth more than $1.7 trillion by 2024 so it’s worth understanding if it’s the right move for you.

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, such as SKUtopia.

What is the difference between 2PL, 3PL and 4PL?

2PL logistics is when you control your own picking and packing and then rely on shipping couriers to deliver your goods. 3PLs are responsible for inventory, fulfilment and shipping while 4PLs manage the fulfilment partners you are working with too.

When do you need a 3PL?

It is likely you’ll need a 3PL if any of the following 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
When do I know my business is big enough to bother with a 3PL?

If you are spending a substantial amount of time picking, packing and sending your orders in a market or location where operational staff are expensive or you are trying to ship to customers in remote geographies (aka overseas), a 3PL might be for you.

What are the Benefits of using a 3PL?

Bill Baramilis, Head of Operations at Livani Hair Care, noted two key benefits of working with a 3PL; teaming up with logistics experts and freeing up valuable time as a business owner.

“It is important to have someone with the logistics know-how in place that work well. Not having to implement logistics ourselves, gives us time to focus on the areas of our business that we specialise in.”

Why is a 3PL Important for my Business?

eCommerce businesses are looking to outsource their logistics now more than ever, with over 90% of Fortune 500 companies using 3PL services according to Armstrong & Associates.

For some, outsourcing logistics means certainty when operating during the Covid-19 pandemic and a better work-life balance.

Katy Beeson, founder of natural skincare brand, Theseeke explained “I’m trying to run everything across the board at the moment, so I’ve realized with things like Covid and unexpected injuries to staff, it’s not sustainable for our staff to keep working in that way, so knowing that all our orders will be going out regardless of whether there’s restrictions in place or someone is not working for a certain amount of time, that’s a massive plus for us and it also means we can work from a laptop and have a lot more flexibility in terms of lifestyle which is also important for us too.”

What to look for in a 3PL

For Katy at Theseeke, it is important to partner with sustainable businesses.

“That’s a massive thing for me, to team up with a company that has good values over just going for the cheapest option. Having worked with Workit, I know they are honourable and ethical in everything they do. I have a lot of confidence in that as well”.

How does a 3PL work out pricing?

A 3PL can have complex pricing and typically 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 too (where you can login and update your inventory and get reports)
Cons of using a 3PL 

A big drawback of 3PL providers is the complexity in pricing. Human error in picking and packing orders can also cause incorrect orders, delays and costly returns. You know a 3PL is worth replacing when you are constantly chasing them and fixing errors.

In their 2020 eCommerce insights report, AusPost found the apparel category has the highest rate of returns (30%) which erodes margin through extra shipping and handling.

Disconnected Systems

Many 3PL providers have proprietary systems that don’t talk to storefront software like Shopify or Magento or WooCommerce, forcing you to use an air-gapped system for inventory management, meaning you manually update the order status of orders shipped by 3PLs. Groan.

Customer Experience Interrupted!

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.

Wasteful Packaging

Know the feeling when you open an online order to find box within box within box? Consumers are more environmentally savvy than ever and don’t want wasteful packaging. And as a business owner, you don’t want to have to pay for that extra boxing either. Modern order fulfilment and 3PLs offer automatic cartonisation, saving money and trees.

 

Choosing a 3PL

Before selecting a 3PL, conduct in-depth research and find one that suits your needs. The right 3PL can change your business for the better, allowing you to scale your operations and get more hours in the day with less to worry about.

Riarne Gale
Riarne Gale

Riarne Gale is the Head of Content & PR at SKUtopia. She’s passionate about sharing great tips, resources and strategies for all things eCommerce, shipping and logistics.