Fulfilment is where the rubber meets the road in online retail. It’s one of the core activities that every eCommerce business must perform, but not every business is an expert in it. In fact, many modern, digital-first retailers are much more focused on growing and curating their brand through experiences and social media than investing in logistics.
But the role of logistics is critical to running a successful retail business. Take Amazon, for example. One of the biggest and most successful retailers in the world, they own their logistics process end-to-end. Over the years, they have developed innovative technology, systems and processes to optimise stock availability, speed up dispatch, and, ultimately, satisfy their two-day shipping promise.
Of course, most retailers don’t have the scale or resources to do what Amazon does, so how can they compete? Enter third-party logistics providers, or 3PLs. Instead of signing a lease for a big warehouse, filling it with costly equipment and fulfilling the orders themselves, retailers can outsource all of this to a 3PL and get the same capabilities without the high cost of investment.
Some of the other key benefits of outsourcing logistics to a 3PL include gaining network efficiencies, increasing your scalability and tapping into the provider’s expertise and best practices. Here’s a closer look at five ways a 3PL can help grow your business.
Improve network efficiencies
The bigger your warehouse is, the more your throughput can be, the cheaper your logistics become per order. That’s great for the Amazons and Catch Groups of the world, but how can smaller retailers tap into these economies of scale without signing a big lease on a massive warehouse that they don’t need (yet)? By working with a 3PL. Because of the volume of orders they handle on behalf of multiple retailers, 3PLs are able to tap into high-frequency shipping relationships to get better rates and pass them on to their customers. They also generally have sophisticated infrastructure systems and can scale up staffing as needed, all of which helps reduce fulfilment times.
Save time and money
While logistics is the backbone of retail, when it comes to the areas that businesses should focus on spending their time and money, it’s not necessarily as important as building and strengthening the customer relationship. Of course, logistics can have an impact on the customer experience, so you can’t afford to ignore it, but rather than wasting time figuring out problems that have already been solved by others, outsourcing logistics to a 3PL can be a smart decision.
Tap into expertise
Related to this is the fact that logistics is a complicated industry. Building a sophisticated warehouse when you’re already up-and-running is like trying to build a plane while it’s in flight. It really is where the rubber hits the road in online retail. But 3PLs are experts in this space, which means you can tap into their knowledge and experience without having to acquire it yourself.
Moving warehouses is annoying, and yet, many online retailers end up having to move warehouses multiple times as they grow and need more room. One of the biggest benefits of a 3PL is that they generally have enough space for you to expand quickly and easily as your business takes off, or you go through a seasonal sales spike.
Use best practices
Because 3PLs are solely focused on logistics, they are always going to be looking for ways to improve their operation. So, over time, you’ll benefit from improvements in their approach to picking and packing, shipping and warehousing as they pursue best in class practices.
When is a 3PL NOT right for you?
While there are many benefits to using a 3PL, there can also be drawbacks. Because 3PLs are focused on efficiency, they can’t always accommodate a highly personalised fulfilment process. And if your supplier has sent an incorrect order — not uncommon — it can take longer to resolve than if you were in the warehouse yourself.
Whenever you outsource an aspect of your business, there tend to be some bumps in the road around communication and transparency. Some of these issues can be resolved by finding the right 3PL partner. Others can be resolved by outsourcing logistics at the right time — there’s nothing to say it needs to be a permanent solution.
Or you might decide that a 3PL just isn’t right for you. That’s what happened at Zappos. The US-based online shoe retailer famously brought its fulfilment in-house, which former CEO Tony Hsieh wrote about in his book, Delivering Happiness. According to Tony, retailers should never outsource their core component.
But every retail business is different, so if you haven’t at least considered whether a 3PL can help grow your business, it might be time to do so.
If you would like to discuss how a SaaS platform could simplify your logistics requirements, speak to our experts here.