by Nathan Rothfield
Online retail e-commerce sales reached 4.9 trillion dollars globally in 2021 and are forecast to grow 50% by 2025 to 7.4 trillion dollars.
If you’re looking at your supply chain and wondering about third-party logistics companies, freight forwarders or transportation services for your sales, read on for how to get the most bang for your buck from 3PL providers.
3PL is an acronym for Third-Party Logistics. It’s using an external provider instead of you having to do all the logistics for delivering products to your customers. You can outsource it to third-party logistics providers.
Logistics service providers offer a range of services including these common functions:
—shipping and receiving
—warehousing
—inventory management
—picking and packing
—freight shipping
—kitting and customisation
—handling returns.
The best third-party logistics providers for you are the ones that can meet your needs.
For example, if you’re an ice cream producer, you need a logistics service provider who can handle cold chain storage. If you’re dealing in fresh flowers, delivery time is critical.
Highly regulated goods like pharmaceuticals or chemicals may require 3PL providers with special licenses and training programs.
Data is increasingly king, and a supply chain management solution that includes innovations like IoT-based GPS or RFID systems to track goods across the supply chain could be your ticket to e-commerce success.
There are a number of benefits of using third-party logistics companies instead of trying to do it yourself.
3PLs help reduce the cost per order
External supply chain management can provide a lower cost per order when compared to internally managed operations. While this isn’t always the case, it’s often true for small to medium-sized companies that don’t have four-season business models.
Experts in supply chain operations can often find ways to deliver your products more cheaply. They have the scale to drive cost reductions in property, leases, plant and fleets.
Ecommerce businesses might fluctuate wildly across the year, requiring spare capacity for downturns. In contrast, a third-party logistics specialist can utilise their capacity on higher volumes and across diverse clients. The result is often a reduced cost per order.
3PLs lower capital investment
The right 3PL partner can help your company reduce capital expenditure outlays for new or upgraded warehouse facilities, warehouse management systems and automated fulfilment centres.
Logistics operations do not come cheap. Warehousing rents are predicted to rise over the next year. There’s a shortfall of 140 million square footage of warehouse space expected by 2024 which will lift the price of storage facilities.
The scenario is very different for established supply chain management companies. They have supply chain solutions in place, warehouse operations and existing fleets.
As a business, can you think of three things you’d rather invest Capex in than warehouses? Most eCom businesses would rather focus on market share, marketing and growing sales to grow the business.
Leaner workforce
Supply chain and third-party logistics specialists have skilled warehouse staff, not to mention sophisticated warehouse automation technology. This can include robotic machinery that can pick and pack orders.
The great thing about automation like this is that machinery can work around the clock, unlike humans. As a result, you can save money by running a leaner workforce.
3PL providers can invest in training and skills development for the specialised staff they need to operate in more automated warehouses, while as an eCom retailer this is likely to be beyond your scope or ability.
Scale with demand
Online retail is challenging enough without adding the challenge of supply chain disruptions caused by peaks and troughs in demand. These fluctuations could be related to sales seasons, your business niche, competition or any of a number of dynamic factors.
The great thing about outsourcing a supply chain management solution is that you don’t need to worry if your sales go up and down like a balloon. Your logistics operations partner will handle demand fluctuations while you can focus on what you’re best at — running an online retail business.
Perhaps that’s why 90% of Fortune 500 companies rely on third-party logistics (3PL) providers to manage their fulfilment centres, customer orders, inventory management, distribution centres and reverse logistics.
This huge market demand has also seen the 3PL sector grow significantly, and it’s expected to reach $1.75 trillion by 2026.
Improved delivery and distribution services
Technology marches on, and having the luxury of outsourcing your warehouse management system means you can select external party logistics providers with the very latest equipment to maximise your delivery and distribution.
Smart operators can easily manage inventory for multiple customers in the same warehouse, with software that allows for flexible allocation strategies according to demand. 3D visualisations enable staff to see and reduce workflows, bottlenecks and risks.
Warehouse automation in the form of robotised guided vehicles and automated storage and retrieval systems is reducing errors and enhancing productivity.
Artificial intelligence (AI) is being used to improve predictions for supply change management, and the use of IoT devices allows real-time visibility into weather conditions and traffic patterns. The integration of these tech tools is improving supply chain efficiency by up to 20%.
To really succeed as an online retailer, you need a logistics partner who matches your business growth with operational efficiency, value-added services, competitive rates and delivery of a great customer experience.
Check out some of these key things to look for.
Related clients and industry experience
If you’re selling health and beauty products, you’re in a different niche to retailers offering computer hardware and software. You should be looking for a warehouse management solution provider who has experience in your industry sector.
The distribution demands of an online furniture business are quite different from someone selling food, sporting goods or alcohol. Does your partner have distribution centres and supply chains where you need them? Do they have the technology, space and skills to handle the goods that you sell?
Evaluate 3PL providers’ performance against your needs and their prior experience with customers like you.
Extensive list of services for fulfilment
It’s reassuring when you find a 3PL service provider that offers a wide range of services for fulfilment. Because if your online business is growing, you want a logistics partner who can facilitate that growth.
Compare like-for-like services when you’re evaluating 3PL candidates. Some of the vital services include:
—inventory management
—order tracking
—labelling and branded packaging
—custom packaging, repacking, and assembly
—Advance Ship Notice (ASN)
—UCC 128 labelling.
End-to-end solutions
Pause for a moment to consider what would be most useful to you in a logistics partner. Perhaps you just need a limited solution and a specific service like the one-way delivery of flowers within a city.
On the other hand, you might be one of the e-commerce businesses that need a nationwide third-party logistics solution including:
—warehousing
—inventory management
—picking & packing
—shipping
—handling returns.
When you want total order fulfilment, you could require a global solution that includes sea and air experience and customs clearance.
For e-commerce retailers in a growth stage, it can be really useful to have an end-to-end solution that includes supply chain management and financing. With over 30 years of experience supporting some of Australia’s most respected brands, Rothfield’s 3PL solutions are second to none.
Returns (reverse logistics)
Reverse logistics is the term for goods customers return after purchase, which is about 5 to 10% for stores and 30% on average for e-commerce.
Your return rate may be even higher with items such as clothing or shoes — up to 40%. So, it’s vital that you choose a warehouse management solution that can handle your customers’ expectations at the lowest cost.
The seamless integration of your sales and ordering system with your 3PL provider will help you manage this critical stage efficiently and keep your bottom-line trouble-free.
Want to give your business a boost with 3PL solutions that support your sales goals and push to scale your business? Learn more about our 3PL services and the business solutions, including promotional services, we can offer to match your individual industry needs.
Rothfield Connect is our cloud-based platform that puts you in total control of your inventory.
For more information about how we can help with your 3PL needs:
