To outsource to a third party or to keep it in house, that’s the question for growing businesses. And it’s an exciting one. Graduating to a stage in which your business requires third-party logistics warehousing (3PL) is a sign that things are going well for you.
Recently, Celigo asked a group of experts to put their heads together and contribute to a guide on all things 3PL. And while we don’t like to toot our own horn, we were glad to contribute, as do consider ourselves to be experts. Easyship provides warehousing solutions across the globe for vendors of all sizes. Below, we’ll give you eight key takeaways from the guide, including matching a 3PL to your business’s needs, the inflection point at which to invest in a 3PL and how to integrate a 3PL into your business. And if you just so happen to be on the lookout for If you’re looking for a new warehouse fulfillment partner, Easyship is here to help! Get in touch now for more information and to speak with a representative.
1. Working with a 3PL comes with Unique Challenges
Working with a third-party organization can challenge the status quo of your business operations. Before jumping into a new relationship with a 3PL, do your research — and do it thoroughly. So before you go all in one one provider, make sure they fit your needs, questioning the following:
- The direct costs of working with a particular 3PL provider. Business owners need to properly budget for this transition to keep their finances sound. In particular, the upfront cost of the freight shipment and notifying the fulfillment center with "advanced shipping notice" (ASN), which is a form that describes the incoming shipment, costs quite a bit.
- How their fulfillment systems and logistics function with yours. Think of it as Asana vs Monday or Android vs iPhone on a very large, tangible scale. Maybe the two orgs take inventory differently or have different communication styles. Some kinks can be ironed out, others not so much.
- Level of experience with your product type and other unique business needs. A warehouse that specializes in lobster is no help when you sell canvas backpacks. Make sure your 3PL has experience with and the facilities for your product type and, if not, has proven that they can do the research and make the space.
2. Understand the Costs of Working with a 3PL
As we mentioned, the first challenge is the initial cost. But once you get past that hurdle, there’s more to come. Although that doesn’t mean there aren’t other additional costs down the line.
Here are some costs businesses can anticipate while working with a 3PL.
- Pick and Pack: Fees associated with picking an item and packing it for shipping. This fee can be charged per unit, carton or pallet.
- Gift wrapping: Have items gift wrapped for special occasions.
- Kitting: Process in which individually separate but related items are grouped, packaged and supplied together as one unit.
- Refurbishment: Checking returned items and bringing them back to sellable condition.
- Retail compliance: Process of generating UCC-128 labels, transacting activity in a retailer’s portals, and all other activities needed to conform with a retailer’s requirements to avoid
- Chargebacks: Chargebacks are different from returns. They are payment disputes settled and issued by a bank when a consumer reports a charge that just doesn’t look right to a consumer.
- Integration: There’s also the cost of integrating a 3PL with their marketplace software, such as Shopify or BigCommerce. This process is made easy thanks to shipping software like Easyship.
As an added investment and long term cost, your company ought to avoid outdated transportation management systems (TMS) and processes managing the information flow that makes up the lifecycle of an order. Not all 3PLs have the capability to provide automation, so working with a provider that uses modern tech, while maybe a costly partnership when compared to a budget warehouse, will have high pay off for you and you customers in terms of service and ease of shipment in the long run.
Today, most 3PLs use commercial TMS software platforms that can be easily researched. But if you go with a provider that uses a bespoke, in-house system, ask about their R&D spend and frequency of upgrades. You can ask other customers what their experience with the warehouse has been and research online, too.
3. Use a 3PL to Perform Due Diligence
When it comes to a 3PL, it needs to do more than ship to fit. Businesses must do their research before selecting a partner in shipping and fulfillment, in freight and warehousing. Here are three things to deeply understand about prospective 3PLS.
Technology and integrations are key
What does your 3PL do? More importantly, does your 3PL do for you without asking? It’s not enough to simply pick, pack and ship. You’re looking for more than a basic integration with your eCommerce store that functions as a dashboard. Instead, your brand needs a seamless management system that allows you to offer bundles, keep track of subscriptions and merge duplicate SKUs. Don’t settle for a provider that can’t support the business you’ve built.
Fulfillment centers in key locations
Working with a 3PL that has multiple fulfillment centers allows you to split your inventory across several locations. This will help your eCommerce business to save money on shipping costs, please customers with swift delivery times due to decreased travel and, if international centers are available, avoid taxes and duties at customs.
SLAs and accountability
Partner with someone you can trust and be sure that you all understand the service-level agreements (SLAs) before you enter in a partnership with a 3PL. Don’t let the legal mumbo-jumbo get to you: This is all about being on the same page on the basics, like how your goods are kept in the warehouse and the speed at which they’ll be delivered.
4. Matching a 3PL with Business Needs
Another challenge is perhaps the most intuitive: Finding a 3PL that meets your unique business requirements. It’s more than just whether or not they can ship your goods.
Some 3PLs specialize in low-touch or high-touch services, while others focus on food items and have temperature-controlled spaces or only ship large items like furniture certain electronics. Know who you’re doing business with. Most importantly, when you’re first using a 3PL you’re likely rapidly scaling your company or have been scaling recently, as is the business function of a warehouse. Make sure your provider can accommodate for rapid growth.
5. Use a 3PL as a Time Management Tool
In some ways, a 3PL is just a very elaborate time management too. Which manual 3PL processes tend to be the most time consuming? Those are the best candidates for automation.
The following manual tasks make the case for automation as a time-saving measure:
- Manually syncing new orders with the shipping software and 3PL is extremely time-consuming and tedious.
- Picking and packing and inventory counts are two long processes that require not only lots of time but also physical efforts.
- Sending orders via email or spreadsheet upload and staying lookout for new orders is exhausting when done manually, but simple when automated.
- 3PLs eat up hours when scheduling carriers by hand.
These tasks can be simply managed and completed easily through automated systems. While most businesses aren’t automated to start, there’s typically an inflection point at which it’s time to make the switch, or else waste time and money.
6. The Best Time to Automate your Processes
There’s no rule about 3PLs — like you can only look for one after you’ve been operating for a certain amount of time or at a certain valuation.
You may be wondering when to automate your 3PL processes or if there are any particular criteria worth paying attention to. The short answer is: whenever and not really.
Businesses of all sizes work with 3PLs — from pre-launch companies to publicly traded brands. But the single greatest way to know when it’s time for automation is when you’re growing fast and can’t keep up.A general rule is that if shipping starts to feel like a burden, leaving you unable to focus on other aspects of your business while logistics takes the front seat, backseat and trunk, then you need to consider working with a partner.
What’s the opportunity cost of waiting too long to invest in 3PL automation?
By delegating the low-dollar tasks, like picking and packing to a 3PL, you can focus on the higher-dollar tasks, like marketing and sales. This will leave you able to generate a positive ROI and scale your business quicker. The opportunity cost by not investing in 3PL automation is that merchants cannot focus their time on growing their business, leaving them distracted by the day-to-day, day in and day out.
7. How much risk does a business incur by going without automation?
Typically it’s not a question of whether or not to automate, but when. Still, if a business decides to stay manual, they run several risks. The first is the loss of time and additional labor required to manually provide the information needed by the 3PL to process the orders. Without automation, a business will have to manually check to see if orders are placed, guess which packaging materials work best to keep the shipment safe and be the least expensive and risk human error when entering data manually. It’s a large margin for error.
Additionally, your business runs the risk of falling behind on order fulfillment, which limits your ability to scale. Shipping will be more expensive because you can't dynamically find the most cost-effective method. Not to mention, you could also mistakenly send duplicate orders to the 3PL, and there can be times where different systems may not sync causing missing logs and other errors. This could lead to duplicate orders being sent out and discrepancies in stock, leading to budgetary issues.
8. Planning and Implementing 3PL Automation
Once you know what your business needs to get the job done, it’s time to realize the vision. To make your automation dreams a reality you’ll need to make a plan and then implement it — which is simple enough in theory.
In logistics, planning is everything. Once you’ve decided it’s time to outsource your fulfillment needs, you need to budget and plan for the transition — as we’ve already identified it can be a costly transition. Going automated isn’t an overnight change. It’s recommended that you take at least one business quarter to devise and implement this plan.
Additionally, in the research stage, it’s recommended that you look into working with 3PLs who consider using a modern TMS platform as the critical foundation of their business. Find out which system they use and if its functionalities are the most modern and compatible with your needs. Of course, make sure the 3PL is within budget.
Once you’ve set a budget, the next step, and the first tactical step is always to unify and synchronize your data. That will leave a small margin for error and keep everyone aligned on the same page.
Once you have a plan, it’s time to put it in action.
In order to successfully automate your 3PL processes, you’re going to need to integrate these disparate systems — the original manual set and the new, automated one. It probably won’t surprise you to learn that the root of inefficient manual processes lies in the fact that data is siloed across multiple disparate systems.
In order to combat any mix-ups, you should use an iPaaS (integration Platform as a service) to integrate your 3PL system and manage all of your integrations in one place.
Celigo’s iPaaS, integrator.io, makes it easy to build and maintain custom integrations between your storefronts, 3PL providers, ERP, CRMs, and anything else involved in your 3PL processes in a centralized place.
If you’re at the all-elusive inflection point where you feel ready to take advantage of all the benefits that come with outsourcing and automating your order fulfillment, Easyship can help. With access to network of warehouses, the ability to sync your orders, 250+ shipping solutions and a real-time global tracking system — we’ve got your back.