With the introduction and growth of Fulfillment by Amazon (FBA), 3PL fulfillment seems more popular than ever in the eCommerce world. For those who haven’t heard the term, 3PL is the acronym for a 3rd party fulfillment center, or warehouse, staffed by efficient logistics professionals where you can outsource your entire inventory operation. They receive your inventory and orders through a variety of methods, ship to your specifications, and provide you with a tracking numbers for the shipped orders. Many 3PL companies offer additional services such as returns processing, building kits, and light assembly.
If you’re considering outsourcing your fulfillment to a 3PL operation, here are some points to consider as you make your decision:
Identify Your Metrics
Know what problem you are trying to solve by moving to a 3PL. Is it fulfillment time, cost of inventory storage, or staffing costs? When looking at 3PL vendors, share your KPIs with them so they know what is important to you and they can tailor their offering to you. It will be particularly helpful to have the data on the last 12 months of your operations: number of shipments, average items per shipment, average number of items in inventory, etc.
Space and the Ability to Scale
This is the most commonly discussed reason for outsourcing both inventory and fulfillment. When dealing with a massive offsite warehouse, you not only have space to scale your growth, but the warehouse optimization, staffing, and shipping coordination are now off your plate. Furthermore, the 3PL may be able to accomplish tasks cheaper since they are operating at a larger scale.
We recently connected with a customer who, though based on the west coast, has a product line which is incredibly popular in Florida. They plan to work with an east coast 3PL warehouse to fulfill a portion of their inventory. Allocation of key products to just the right amount of space in a targeted location could save you significant shipping costs over the course of the year. Another way clients are targeting 3PLs is based on location for tax purposes, which is why you’ll certainly want to engage your accountant during the consideration process.
A Personal Relationship
3PL solution providers want your business. A key part of bringing it in and holding onto it is through the establishment of a personal relationship and often a dedicated account manager. Most facilities will welcome you for an onsite evaluation of storage, process, and face-to-face introductions with their staff.
Nobody can argue with the sheer power of Amazon’s FBA program. FBA inventory leverages immensely popular Amazon programs such as Prime and One Click Buy on tablets/phones. Coupled with a massive distribution operation, it a true behemoth in the eCommerce fulfillment game. There are a number of strategies to consider if using FBA, but the key points to know are your margins, competition, product velocity, and the rules of the marketplace if you plan to succeed with Amazon FBA.
3PLs tend to charge for the storage space, a pick-and-pack fee per package, and other assorted fees. Make sure to model their costs through your average and your best sales months to see if it makes sense financially to go with a particular vendor.
Going with a 3PL fulfillment or FBA can be smart business decision to solve the operational challenges, save costs and improve customer experience. If you would like to find out how to better work with FBA and 3PLs, please contact us to learn more.