When we see a low percentage, we often associate being part of an exclusive group – the elite, the select few, the most successful, the ones that persevered.
In this case, it couldn’t be further from the truth. The 10% we are referring to is the percentage of Fortune 500 companies that have not outsourced to a 3PL. This is not a positive percentage by any means.
20 Years of Supply Chain Changes
About 20 years ago, only 45% of Fortune 500 companies outsourced their order fulfillment, warehousing, and distribution services, according to Kevin Smith, president of Sustainable Supply Chain Consulting. But let’s be honest, 20 years is a long time, and a lot has changed since the 2000’s.
We have weathered many “storms” from the 2002 Market Crash, the 2008 Recession, and the 2020 Pandemic. Throughout all of these, “supply chain issues” have been a constant. Consumers had to wait a long time for their purchases. For example, they had to wait a month for toilet paper.
Manufacturers also faced delays in getting their products from China or other countries. Today’s supply chain is robust and resilient but also can be fragile.
Now that the world is back to normal, products are back in stock, shipping costs have leveled-out, and consumers are happy.
Just as the supply chain is coming out of a unique time in history, global inflation set in and just won’t go away. Companies are looking to reduce costs.
Should You Outsource Your Order Fulfillment?
Outsourcing your order fulfillment is a significant undertaking for any company. The process starts with reviewing the current resources and infrastructure. Can it be optimized? Streamlined? Automated? If so, what is the capital and investment needed? What about labor costs? What is the return on investment?
When you outsource to an order fulfillment partner or 3PL, many of these costs have already been absorbed or are amortized within transactional pricing. Clients leverage a robust WMS, automation, technology, and robotics – all without leasing or purchasing. The warehouses have already been primed and configured for clients to scale and grow.
Shipping Volume Matters
Savings aren’t limited to just capital investment. Since order fulfillment providers ship a lot of packages, they negotiate better shipping rates. While you may ship 5,000 orders in a month, a 3PL could be shipping 500,000 packages. With this volume, 3PLs get reduced shipping rates, which they pass on to their clients. Companies can see a significant shipping cost reduction, sometimes more than 15%.
This realized savings can be reinvested into R&D, sales, marketing, and technology. Freeing up money to reinvest and grow the business.
Outsourcing fulfillment services can be a huge advantage from a capital and investment perspective. If outsourcing didn’t make sense, why would 90% of Fortune 500 companies have done it?
But operational and supply chain savings aren’t the only benefits of outsourcing to a 3PL.
Your Brand’s Reputation is at Stake
In today’s world, consumers seem to have all the power. Customer satisfaction is imperative to your success. Social media plays a huge role in customer satisfaction. Consumers do not hesitate to post negative reviews, which often garner the wrong attention for your company.
According to the American Customer Satisfaction Index, 77% of customers are satisfied with shipping. 83% are satisfied with shipment tracking and 81% are satisfied with the timeliness of delivery. These satisfaction rates are high, but keep in mind that one negative review can cost a company $3,000. Steritech, a brand protection and auditing service, released a case study that “estimates that negative online reviews take a collective $200 billion bite out of businesses' results every year.”
The good news is that only one in 10 customers will post a negative review (of which 41% are about poor- shipping). The worse news is that 93% of potential customers read several reviews and consider those before purchasing.
Simply put, companies cannot afford to get negative reviews. Companies can outsource order fulfillment for same-day processing and shipping of orders placed. 3PLs like a2b ship orders quicker, cheaper, and more accurately, because logistics is their specialty and entire purpose for being. This laser-focused attention on quality of service improves customer satisfaction and can lead to customer loyalty.
Building Blocks to Your Success
Order fulfillment companies are built to scale. They can expand and contract based on seasonality. If you ever saw a 3PL facility during peak season, you will understand how much product these facilities can take in and continue operations without an issue. The warehouse is a testament to spatial reasoning capabilities !
A top-notch 3PL will continue to invest in its infrastructure. Over the last few years, a2b has invested significant capital into automation and robotics. These investments ensure the quickest pick, pack, and ship times as well as 99.9% order accuracy. The result is that your clients receive the right item in 1-2 days via ground shipping.
Partners, not Vendors
Outsourcing your order fulfillment is a critical, strategic decision. It can provide you with a team of supply chain experts dedicated to your success. If you decide to outsource your fulfillment, take your time and research. This decision can have a significant impact on your business and the right service provider is crucial. Your 3PL should be a partner, not a vendor.
