How Does A 3PL Optimise Your Order Fulfillment Costs?
Third-party logistics (3PL) companies are increasingly used by those in the eCommerce business to optimize their fulfilment services and reduce costs for both the business and the customer.
A 3PL offers everything from procurement and fulfilment to storage and shipping, including pick, pack, and ship services, custom packaging, and inventory management. A 3PL brings knowledge and expertise to the eCommerce business, helping to optimize the entire fulfilment process, reduce shipping costs, and meet both the business and customer expectations. Outsourcing fulfilment is advantageous for an online store.
In this article, we're going to be covering how a 3PL can help you to optimize your order fulfilment costs, what optimization of the order fulfilment process is, and what the benefits of using a 3PL are. To find out more, keep reading now.
What is the role of 3PL in supply chain management?
Supply chain logistics is a complicated sector and so many in the eCommerce business have begun seeking out a fulfilment provider to help smooth the order fulfilment process. Working with a 3PL can help businesses, particularly those with an online store, to streamline their order fulfilment and manage everything from procurement to shipping of items.
A 3PL works to maximize the benefits for the company and can help to create a more sustainable fulfilment process by using its expertise in supply chain logistics. They will provide up-to-date and effective planning for the company to ensure fulfilment is smooth, costs are kept low, and customers are kept happy.
Why do companies use 3PL for outsourcing fulfilment?
The main role of a 3PL is to manage order fulfilment and create a sustainable fulfilment process for its clients. Using expert knowledge, they will scale space, labour, and transportation to maximize order fulfilment for the current inventory. This means using warehouse geography to reduce transportation and shipping costs, easing the transition between seasonal periods as well as the fluctuations in the industry, and optimizing storage solutions to reduce the costs of storing inventory.
In addition to optimizing the current order fulfilment process, a 3PL will also be able to aid new growth for your company. With distribution centres in a variety of locations, a 3PL is in the perfect position to increase the reach of your online store or eCommerce business.
A 3PL brings knowledge, space, and labour to the process that your company may not already have making a 3PL one of the best options for eCommerce order fulfilment services.
How does a 3PL optimize your order fulfilment and shipping costs?
A 3PL optimizes your order fulfilment process in a number of ways. These include:
- Warehouse space - A 3PL will already have warehouse space in different locations that are available for use. Warehouse space is becoming harder to come by and even if you can find a suitable space, rent is also skyrocketing. Indeed, warehouse space rent was up by 16% in some parts of Australia by the end of 2021 due to a huge surge in demand for rental space. A 3PL will be able to allocate suitable space for your inventory according to your needs as well as maximize storage space to reduce these costs.
- Labour management - Order fulfilment requires people to carry out the fulfilment process, which means that if you are opting for in-house fulfilment services you would need to hire people to do this. A 3PL already employs staff at its fulfilment centres, already has access to extra staff during busier periods, and already knows how to streamline the fulfilment services it offers. Using a 3PL means not having to worry about labour management or labour costs at your own fulfilment centre.
- Shipping costs - A 3PL knows that lowering the costs of the fulfilment process begins with negotiating the cost of shipping. An established 3PL will have good relationships with carriers to get the best prices for bulk shipping and will also use strategic locations for distribution to reduce transport costs. This kind of knowledge comes from being an expert in supply chain logistics which is why a 3PL is great to use if you do not have fulfilment expertise in-house.
- Packaging - From custom packaging to reduced packing materials, a 3PL will calculate fulfilment costs and choose packing boxes and other packing materials that reduce the weight of shipments to in turn reduce the cost of shipping. In addition, a 3PL may be able to offer custom branded packaging and packing boxes to help get your name out there without the additional labour of picking and packing your own inventory.
A 3PL is effectively an eCommerce fulfilment provider that can ensure your eCommerce order fulfilment strategies are working in an optimal way for your business and will take over fulfilment operations, from managing inventory to shipping orders, to make sure the complete process is sustainable.
What is order fulfilment process optimization?
Using a 3PL can help you to optimise your fulfilment service, but what exactly does it mean to optimize your order fulfilment?
Optimization is essentially a fulfilment solution that works in the best interests of eCommerce merchants and their customers. This means creating an eCommerce order fulfilment process that maximizes the productivity, efficiency, and capabilities of the process used to fulfil orders.
Whether your company will fulfil orders in-house or you choose to use a 3PL, an optimized and strategic eCommerce order fulfilment process is in your best interests. If you choose to use a 3PL, the optimization will always be done at their end so you can continue to grow your eCommerce businesses without having to worry about the fulfilment processes.
What are 3PL expenses?
3PL expenses are the expenses paid to the company that runs your eCommerce order fulfilment strategy. When choosing a 3PL, it is important to take into account all of the different services of the company, rather than just choosing the cheapest option.
Things to take into account when looking for a 3PL include:
- The fulfilment technology that the company can offer your eCommerce businesses
- The inventory management software used
- The customer service the company can offer
- Any customization options, e.g., custom packaging
- The geographical fulfilment locations, e.g., the location of the company's warehouses in relation to your customers
- The capacity of international orders - Whether you already ship worldwide, or are intending to in the near future, the shipping speed and capabilities of the 3PL will be important to your decision
Using a 3PL for your eCommerce order fulfilment process could be a costly expense, but the expertise of these kinds of third-party fulfilment companies have can benefit your company and ensure a smooth and sustainable process.
What are the benefits of companies using a 3PL?
A 3PL can be an extremely advantageous e-commerce fulfilment solution and help to keep total fulfilment costs down. Below we have listed all of the advantages that come with using a third-party fulfilment company.
- Expertise and knowledge - As we have discussed, while a 3PL may be slightly more expensive than creating a fulfilment process internally, the knowledge and expertise of a third-party fulfilment company may outweigh the benefits of keeping it in-house. This is because this kind of company will be able to negotiate better shipping costs, alter packing materials to reduce transportation costs, optimize inventory storage, and much more to create a streamlined and sustainable process. Supply chain logistics is a complex industry and outsourcing will help save you time and money.
- Saving time and money - With knowledge and expertise comes the ability to reduce overall costs as well as negate any need to properly understand supply chain logistics and the inner workings of the industry.
- Scaling operations - The e-commerce supply chain process is about scaling everything from labour to transportation to ensure that your order fulfilment process suits your company as best it can. A 3PL, with specific industry knowledge, will optimize your process to create the best possible order fulfilment strategy for your company.
What is fulfillment cost?
Fulfilment costs are essentially the costs incurred at the fulfilment centre you choose to distribute your merchandise. Fulfilling orders involves lots of steps, from receiving merchandise, sorting and segregating it, and storing it to picking and packing it and distributing it. You will incur costs involved with the storage space, inventory management, and labour costs as well as transportation and shipping costs.
A 3PL will be able to help you to optimize these costs in relation to your inventory quantities and types by negotiating bulk shipping costs, reducing packing options to the lowest practical dimensional weight for the merchandise, and utilizing smart storage solutions among many other things.
How do I reduce order fulfilment time?
Shipping speed is incredibly important to customers of eCommerce businesses. Being able to pack and ship orders quickly will build brand loyalty and help people to trust your brand to get their orders out on time. eCommerce works well when customer expectations are met time and time again.
To reduce order fulfilment time, there are a few things that you can try out. These include:
- Reducing travel time of goods - Having warehouse space and fulfilment centres located close to places where orders are coming in can help you to reduce the travel time once the order is shipped, meeting customer expectations of timely delivery.
- Optimizing your warehouse space - Shifting your space so that employees can get to the most-used packing materials or grouping best-selling products together can help speed up the process of picking and packing your merchandise.
- Implement technology - By implementing technology that can monitor inventory and orders, you run less risk of running out of stock without realizing or losing orders.
If you feel overwhelmed by the idea of expanding and streamlining your order fulfilment chain, you could opt to outsource your fulfilment and utilize the expert knowledge of a 3PL for your distribution.
A 3PL can help you to optimize your order fulfilment process by using its expert industry knowledge to streamline the process and make it more sustainable for your company. Many eCommerce companies now use a 3PL due to its ability to reduce fulfilment times and shipping costs. Why not see how a 3PL could help you today?