Introduction
Third-party logistics (3PL) fulfillment delegates the handling of order fulfillment and logistics tasks to a dedicated partner. A 3PL handles warehousing, fulfillment, shipping, and inventory management. They often manage returns too. This helps businesses save time and focus on growth.
Deciding to outsource order fulfillment is not an easy task. It involves research, time, and vetting numerous vendors. Knowing when to outsource fulfillment is a huge undertaking for many small companies.
Knowing when to switch 3PLs is not any easier for larger companies.
3PLs Improve Customer Satisfaction
As consumer preferences and market standards continue to change, fulfillment is becoming increasingly important in e-commerce and logistics. With companies like Amazon regularly providing reliable 2-dayshipping, consumers expect faster shipping times. Statista reports that 60% of people in the United States expect to receive their package in two days or less.
As the e-commerce market continues to grow and evolve, partnering with efficient and reliable fulfillment centers is essential. Outsourcing warehousing, order fulfillment, and shipping to a third-party center makes the supply chain easier. It also helps you deliver your products accurately and on time.
Faster and more accurate shipping saves your company money and reduces stress. It also boosts customer loyalty.
This blog highlights five key benefits the right 3rd party fulfillment partner can provide to your business.
1. Cost Efficiency
- Avoiding capital expenditures: 3PLs invest in technology. Warehouse management systems (WMS) require a significant investment. A robust WMS manages and controls the daily warehouse operations – it covers everything from receiving, inventory management, picking and packing, and shipping. The WMS is the backbone of the 3PL. When you outsource to a 3PL or switch 3PLs, the WMS capabilities and scalability should always be top of mind. With a 3PL, companies get the benefits of a comprehensive WMS without all the capital expenditures.
- Labor: Labor costs have soared in recent years. According to the Bureau of Labor Statistics, “compensation costs for civilian workers increased 3.9% for the 12-month period ending in September 2024.” That increase is in addition to the 4.6% increase from September 2022 to September 2023. Hiring and maintaining a labor force is expensive. The 3PL hires and maintains the labor. They will bill for labor at an activity level vs. a fixed cost. This means companies only pay for the labor used to fulfill their products, eliminating the high costs associated with labor. 3PL’s typically bill transactionally. You pay for the activity vs. variable costs of labor.
- Shipping Rates: The theory of “volume discounts” is seen everywhere, from consumers shopping at warehouse stores like Costco and Sam’s to price reductions and clearance sales. Volume discounts are especially important for shipping rates. The more a 3PL ships, the lower the negotiated shipping rate. 3PL’s have significant buying power with carriers. With this buying power, 3PLs have lower shipping rates, which they pass on to their clients. With the cost of shipping increasing significantly since 2019, the 3PLs shipping rates can save companies a significant amount.
- Reducing Operational Costs: When ecommerce businesses take advantage of a 3PL’s pre-established infrastructure and expertise they can avoid the large capital investments required for setting up and maintaining their fulfillment operations. This not only saves businesses money but also time that they would spend on the initial infrastructure setup and continued maintenance. 3PL’s can also help companies with their shipping rates. Because of 3PLs’ long-standing relationships with shipping companies, they can negotiate lower rates saving your company money.
- In-House Fulfillment Costs vs. Third-Party Services: When comparing in-house fulfillment and third-party fulfillment the difference in the costs can be staggering. However, this does not mean that one is better than the other and is often very dependent on a company’s stage of development and long-term goals. In-house fulfillment is often the right choice for businesses in the early stages of development as there is no need for large warehouse space and fulfillment is simple. As a business grows the services of a 3PL become increasingly valuable. A 3PL helps companies save money and time. They do not need to own or maintain their own infrastructure. This allows companies to grow without completely changing their supply chain. The resources of a 3PL eliminate the need for businesses to invest in additional warehousing space, equipment, and labor during peak times. However, in-house fulfillment's warehousing and fulfillment capabilities are not as flexible. They cannot easily grow with your business and often prevent it from reaching higher levels of success.
2. Focus on Core Business Activities
- Delegating Logistics and Operations: Managing in-house fulfillment can be extremely time-consuming and resource intensive. Businesses that use in-house fulfillment need to invest a lot in warehouse management. They must also hire and train staff. Additionally, they have to manage order processing effectively. This leads to fewer resources available for critical business functions such as marketing, product development, and customer service. By using a third-party logistics provider (3PL), businesses can save time. This allows them to focus on things that help them grow and develop. For example, a company could focus less on inventory control and shipping details. Instead, it could use its resources to improve marketing campaigns, create new products, and enhance customer experience. This shift could result in significantly greater innovation, an improved brand image, and greater customer satisfaction.
- Increased Productivity: Outsourcing fulfillment allows for resources to be concentrated on strategic growth initiatives instead of daily operational tasks. Experts handling logistics and operations help businesses perform these functions efficiently and reliably.
3. Enhanced Customer Experience
- Fast and Reliable Shipping: In today’s fast-paced e-Commerce landscape fast and reliable shipping is becoming increasingly important. Forbes found in a survey of over 3000 people that 77% of people have "abandoned a purchase due to unsatisfactory shipping options." In 2024 it is now more important than ever to have fast and reliable shipping to enhance your customer’s experience and create long-term customer loyalty. Leveraging a 3PL’s geographic footprint is one of the best ways to optimize shipping times, cost, and consistency. A multi-site 3PL can effectively and efficiently fulfill orders closer to the end consumer. a2bFulfillment, for example, has optimized its operations to the point that it can reach 95% of households in the United States in 1–2-days with ground shipping.
- Improved Order Accuracy: A major cause of the loss of a customer to a competitor is poor order accuracy. 84% of shoppers will not purchase from the same retailer again after a poor experience. Receiving the wrong product is highly disappointing for a customer and will likely prevent them from buying again. A3PL improves order accuracy by using technology for better inventory tracking. This includes automated picking, packing, and real-time order updates. These tools help reduce human error. As a result, customer loyalty can grow, leading to more returning customers.
4. Access to Advanced Technology
- Utilizing Cutting-Edge Software and Tools: Advanced technology is the backbone of order fulfillment operations. This technology streamlines a company’s supply chain, enhancing efficiency and accuracy while minimizing cost. Some of the powerful technology employed by top 3PL’s, including a2b Fulfillment include:
- Warehouse Management Systems (WMS): The core system that orchestrates all activities within a distribution center, including inventory management, picking and packing. This may sound straightforward, but the sophistication of a WMS has a direct correlation to efficiency, accuracy and throughput.
- Automation and Robotics: Advanced 3PL’s like a2b leverage the latest in automation and robotics to improve efficiency. Robotics, for example, can reduce travel time within the warehouse by 90%. Accuracy is also improved by reducing human error. Conveyors move packages through packing, shipping, and even sorting into trucks further streamlines the process.
- Transportation Management Systems (TMS): The TMS allows for each order to always be shipped optimally. The system weighs both the cost and time in transit and then matches each order with the most efficient and cost-effective carrier while factoring in surcharges.
- Business Intelligence Platform (BI): a2b Fulfillment’s business intelligence platform Engage, provides unique, detailed and real-time views into inventory levels, order status, shipment details, receipts, and returns. The platform also allows businesses to analyze historical data to identify trends, areas of improvement, and potential growth opportunities. This allows companies to stay one step ahead and use data-driven analytics to make future decisions.
5. Geographic Reach and Expansion
- Expanding into New Markets: Partnering with a 3PL can significantly extend your business's reach to new and emerging markets. Third-party logistics providers often have a network of strategically located warehouses, allowing businesses to efficiently distribute products to customers across the country. This infrastructure ensures streamlined shipping logistics and timely delivery, facilitating smoother market entry and expansion.
- Local Fulfillment Centers: Having fulfillment centers strategically located near key markets can reduce shipping times and costs, enhancing customer satisfaction and loyalty. A 3PL with multiple warehouse locations provides the flexibility to quickly reach a new or emerging market. Partnering with a 3PL that has a strategically placed network of warehouses allows businesses to scale efficiently, meet diverse customer demands, and maintain a competitive advantage in local markets. This ensures businesses can adapt to market changes and expand their geographic reach effectively to best meet customer demands.
Conclusion
Order Fulfillment is a pivotal element in the triumph of a product-based company. In the current rapid, digital era, where customers demand consistently precise fulfillment and swift delivery, collaborating with the appropriate 3PL can create a distinctive competitive edge that can distinguish your company from rivals.
By harnessing robust technology, a comprehensive infrastructure network, and scalability, a 3PL can drastically cut down operational expenses, liberate resources, and boost customer allegiance. This results in substantial time and cost savings, allowing your company to flourish and direct resources toward growing and innovating.
However, it is crucial to assess whether a 3PL is the right fit for your business. Consider your company’s stage of development and future plans. Think not only what your company needs today, but also 3 years out, as moving 3PL’s is not easy to do. Thoroughly research to ensure that the 3PLprovider aligns with your company’s specific needs and goals.
If you are ready to explore how a 3PL can transform your business, contact a2b Fulfillment. With over 20 years of experience in order fulfillment and warehousing services, we offer tailored solutions to meet your unique needs and goals. Contact us today to discover how we can help your company achieve new heights.
