Outsourcing fulfillment marks a significant milestone for an e-commerce brand. It’s a clear sign that it is growing and ready to take its operation to the next level.
Yet it’s also a major decision that has long-term consequences for a business’s success. Whether your brand is able to thrive—or simply survive—can hinge on the support and expertise provided by your 3PL.
Why outsource fulfillment?
The vast majority of brands start by fulfilling orders independently, as their order volumes are too small to make outsourcing cost-effective. But as your business grows, in-house fulfillment becomes increasingly inefficient—both in terms of time and cost.
It’s one thing to handle order fulfillment and shipping for a couple hundred orders per month. But once sales begin to increase, it becomes harder to keep pace with the high expectations of e-commerce shoppers. Regular order notifications, rapid shipping, and on-time delivery are no longer optional; they are the bare minimum fulfillment requirements that brands must offer if they don’t want customers to leave a negative review.
So, how can brands continue meeting customer expectations as their operation grows? By partnering with an e-commerce fulfillment provider.
10 Questions for a Potential 3PL Provider
Searching for a 3PL, no matter whether it’s your first partnership or your third, can be an overwhelming process for businesses. With so many considerations that need to be taken into account to find the perfect provider, your business must know the questions that reveal a 3PL’s strengths and weaknesses.
Without further ado, there are 10 questions that you should ask any prospective 3Pl partner to find the perfect fit:
- What is your monthly minimum order volume?
Most 3PLs are dedicated to working with certain types of brands, from startups to multinational retailers. This is because logistics providers are required to plan carefully to allocate the necessary amount of warehouse space, labor levels, storage configurations, and more to their clients.
Because their facilities are set up to handle a certain scale of fulfillment, providers need to make sure that any prospective account is worth the space and time they require. As a result, many fulfillment partners set an MOQ (Minimum Order Quantity) for the number of orders a client must receive each month to qualify for using their services.
This means that some larger 3PLs might not have the appropriate facilities to work with up-and-coming brands with smaller order volumes. Therefore, it’s important to estimate metrics such as your sales volumes and inventory turnover as accurately as possible, including peak season projections, to see if a prospective 3PL provider can accommodate your needs.
- How many fulfillment centers do you have/where are they located?
Some 3PLs will operate a single fulfillment center, while other providers have a network of multiple locations. For brands with a nationwide customer base, using multiple warehouses to store inventory and fulfill orders is an effective way to reduce shipping costs and delivery timeframes to your customers. This gives you the ability to allocate orders to the fulfillment center closest to the customer, which avoids lengthy and expensive cross-country shipping.
In sum, the location of a prospective partner’s warehouse(s) is a really important consideration. While there are advantages to being within a short drive of your 3PL partner, the priority should be finding a facility that gives you the easiest access to key customer hubs. Whether you require a centralized or decentralized fulfillment strategy will depend on your order volumes, where your customers are based, and whether you have enough data on consumer demand to know where different SKUs should be stored.
- Can you handle a sudden increase in order volume?
Retail is a cyclical industry, which means that sales activity typically spikes around major holiday events, such as Thanksgiving and New Year. However, changing market trends or a successful marketing campaign can also cause unexpected surges in demand for your products. This means that any potential partner should have the ability to manage a spike in orders without creating bottlenecks in order fulfillment or shipping.
In practice, a reliable 3PL provider should be regularly reviewing your sales and inventory data from previous sales cycles to accurately meet customer demand. Ask a prospective 3PL to create a surge fulfillment plan to see how they would scale up order processing for key sales days, such as Black Friday and Cyber Monday.
- How many software integrations can your system handle?
In 2022, a 3PL is no longer just a warehouse or logistics service that moves goods from A to B. Every e-commerce brand is a multilayered ecosystem of selling channels, e-commerce platforms, business intelligence systems, return portals, and more—and your provider needs to sit right at the center of this network to coordinate seamless order fulfillment.
A logistics partner who can offer a full suite of software integrations with common platforms such as Shopify (or even better, facilitate building their own integrations in-house) is a highly valuable asset in a marketplace where connectivity is the key to better customer experiences. Moreover, this means a much smoother onboarding process and less likelihood of technical problems kicking in when your operation goes live.
- What strategies do you use to keep shipping costs down?
Shipping represents one of the biggest ongoing costs for e-commerce brands, especially as expectations continue to increase for free and rapid shipping. So, as your business grows and customers become dispersed across the country or internationally, you want a 3PL partner that gives you the best possible cost savings in your shipping strategy.
For example, the more carrier partnerships a potential 3PL has, the more flexibility your business has to get the cheapest rate. It’s important to note that some fulfillment companies will only work with carriers that meet their required service levels or operate in certain regions. If you can’t shop around easily for competitive rates, this will result in higher shipping costs for your brand.
In addition to carrier partnerships, you should also be enquiring about a 3PL’s cartonization strategies and how they can streamline package sizes to achieve lower DIM weight for shipping.
Peak season surcharges are another pain point for online sellers, which kick in during the holiday season to help carriers manage higher operational costs. While no 3PL will be able to shield you from peak season surcharges completely, you should look for a partner who can lessen their impact.
- Can I view any testimonials from your current customers?
There’s one easy way that brands can get an inside look at a prospective 3PL’s success—ask for recent client testimonials.
Hearing from a 3PL’s current customers will help you to understand what kind of partner they are to do business with and whether they are a good cultural fit. It’s a good idea to look specifically for clients that are in the same industry as you, so you can gauge which types of businesses are having the most positive experiences—and which are not.
Look at external review sites that might be able to offer you a more balanced perspective on the pros and cons of different fulfillment companies, and if any recurring themes are present in account management or reliability. Reviewing any case studies a 3PL has produced and then approaching those businesses directly is a good way to verify that they are still happy with the service they’re receiving.
- What fulfillment services do you offer?
While just about every 3PL provider will offer standard services like inventory receiving, storage, and pick and pack, there’s much more to fulfillment than just the basics. Value-added services, such as kitting and custom packaging, add a huge amount of value to the brand experience. But because they are more expensive and complex to implement, they aren’t offered by every 3PL.
While you may not see a need for value-added services now, this could easily change in the future. Product offerings such as gift sets, subscription boxes, and bundles are great ways to differentiate your brand—but only if you have a 3PL partner who is capable of fulfilling these differentiators. By choosing a provider at the very beginning who invests in value-added services, you won’t find yourself needing to switch 3PLs later.
- Do you have real-time inventory visibility?
Understanding your inventory levels is essential to make strategic business decisions and track how different SKUs or sales events are performing. If you don’t have real-time visibility into important inventory metrics such as inventory turnover, days on hand, or shrinkage, it’s impossible for a brand to get a grasp of how healthy its inventory base is—and whether they have enough units on hand to fulfill outstanding orders.
Inventory on hand can fluctuate from hour to hour, especially during peak season. To get the real-time insights needed for up-to-date decision-making, you’ll need to partner with a 3PL that has invested in these abilities as part of their tech stack.
- How does your company handle reverse logistics?
Although it’s a critical part of e-commerce logistics, returns management is often neglected by brands and 3PLs alike. Why? Because with so much focus on outbound orders, it’s easy to forget about the orders that are coming back into the warehouse.
But given the importance of the returns experience in e-commerce, consumers aren’t going to be happy with anything less than a seamless, hassle-free returns process. This means that the way your 3PL partner handles returns on your behalf will reflect on your customer service capabilities as a brand.
It’s important to vet any prospective 3PL according to their reverse logistics capabilities. Check what their lead time is to process returns and how quickly they can recondition returned merchandise and have it ready for resale. Any delay in completing the return process can result in brands accumulating excess inventory or dead stock, which is extremely costly to your business.
- Are you able to scale with my business?
When partnering with a 3PL provider, you need to take a long-term view of your fulfillment needs. By partnering with the right 3PL from the very beginning, they can scale and support your operation for years to come.
When a partnership between a 3PL and a brand comes to an end, it’s not always because a business is unhappy with the service. Sometimes, a logistics provider just isn’t able to keep supporting their growth.
Small 3PLs might struggle to cater to a big increase in customer demand, while multiclient 3PLs might be restricted in how much extra storage space they’re able to give you during peak season.
But if a third-party logistics partner cannot scale their operations efficiently in both directions, your brand is going to miss out on valuable cost savings and opportunities to grow your business. Get a good understanding of a prospective 3PL’s labor levels, warehouse space, and order capacity to understand whether they can grow and adapt to your needs.
Seamless e-commerce fulfillment: Powered by Ryder E-commerce by Whiplash
Partnering with a nationwide, technology-led 3PL like Ryder E-commerce By Whiplash enables you to coordinate a streamlined order fulfillment process that maximizes cost savings and offers customers a memorable brand experience. With over 10 million square feet of warehouse space in strategic locations, we cater to both emerging and established brands by providing a supportive fulfillment strategy catered to your precise needs.
FAQ
A third-party logistics warehouse, or 3PL for short, is an outsourced business that takes care of a company’s supply chain and logistics operations.
