For ecommerce business, in-house fulfillment or outsourcing to a 3pl fulfillment, there is no one right way to proceed the fulfillment process, since it depends on sellers’ unique needs and what they are willing to take on.
Generally, there are several questions you
can ask yourself whether you need a 3pl fulfillment services.
What’s 3PL fulfillment services?
Third party logistics (abbreviated as 3PL) fulfillment is part of supply chain management that involves storing inventory in a warehouse, packing and delivering orders.
7 questions to ask about using a 3PL fulfillment services
- How many SKUs do you have?
The quantity of SKUs or unique products you hold will
influence your bottom line. Say you are using a long tail strategy and have
many products, in this case, if you choose to outsource to a 3pl, you will be
charged a relative huge storage space fee for warehousing your products,
especially if your products are turning over slowly. On the other hand, if you
hold a small number of SKUs, then using a 3pl fulfillment service will save you
on fulfillment infrastructures and facilities if you do in-house fulfillment
and future less expense on shipping fee by leveraging 3pl fulfillment company
order volume advantage.
- How would you like to
optimize your shipments according to customers’ destinations
Facilities for storing inventory and shipping orders are important,
not just in terms of space, but also in terms of their location and proximity
to your shipping destination. For a company looking for growth, the value of
third-party logistics is not only in being able to expand across the country,
but also in being able to send more packages than it does internally.
The nationwide 3pl fulfillment service allows you to
deliver packages at amazon-like speeds to your customers, reducing shipping
time and the areas you will ship to. The less the zones, the lower the freight.
While these costs appear to be incremental at the order level, they increase
- What does your brand
growth plan look like?
Is your order volume consistent monthly, seasonal, or
increasing over time? The requirements you experience and anticipate will
affect your shipping and processing strategies because you want to ensure that
the warehouse space you choose is not too large or too small. Will you expand
so fast that you will soon transcend the new space? Or will you never fully
expand to the full warehouse and risk overpaying by square footage?
Third-party logistics provides a safety net for any peak season
demand, no matter planned or unplanned, so you don’t have to worry about fulfilling
orders on time or having to lay off workers at the end of the peak season. Considering
any short-term sales and fulfilling products on a long-term basis can help you
make the right decision.
- Have in-house fulfillment
A good 3pl should always be your good partner to help you
stay in the know without having you pay more attention to your order
fulfillment implementation. Generally, a dedicated account manager will be
assigned to answer your questions responsively at your deck and is always be
one step ahead of you. For a business with incremental order volume, this kind
of support will really avoid you be distracted from the core business——to
attract more customers.
- What do you need for your
When it comes to return process, some 3pl providers will
offer different options such as processing returns and exchanges themselves or
getting the packages back to senders. Since the complexity of your return
process also affect your fulfillment strategies, if your return review
procedure is very involved, you may want to partner with a 3pl fulfillment company
handling your return management.
While there are many variables in calculating shipping
fees, the handling can be more complex based on the ways 3pl fulfillment
company charges. No to mention that the value-added services (like kitting and
assembly) they charge and other customizations. So it can be tough to make an
apples-to-apples comparison between internal fulfillment and 3pl fulfillment.
For internal fulfillment costs, you need to add up the
monthly operating costs (including warehouse labor, rent, and packaging
supplies) (for example, $20,000), and then divide this number by the average
monthly shipping volume (10,000), with a handling cost of $2 per order. While
this is a very simple calculation, you’ll see how it affects your margin: if
the customer spends $60 before taxes, the shipping cost is $10, and your order handling
cost is $2 per order, then the order’s total internal fulfillment cost is $12,
or 20% of the average order value. How does this compare with different
- Do you want to manage fulfillment yourself?
As consumers, we like the speed with which amazon delivers orders, but
as a business, it’s hard to meet those expectations. If you can’t complete orders
at that speed and deliver packages so diligently, your customer experience will
suffer. Many brands are finding that the transition over fulfillment helps them
refocus on internal work and allows their teams to devote themselves to other
fast-growing parts of the business, thus making better use of their time.