Gone are the days when shipping delays were considered to be normal, and customers rarely made a fuss about it. The modern consumer wants their shipment to be delivered on time and does not think twice before deserting an e-commerce company that fails to ensure on-time delivery. The reputation of your e-commerce business depends on your delivery team’s ability to meet delivery deadlines consistently. One of the many things that you can do to streamline your shipping process is to outsource your logistics to a 3PL provider.
Third-party logistics: An introduction
Managing logistics processes is a time-consuming and effort-intensive exercise. When planning their e-commerce business’ logistics strategy, the management has to keep in mind different factors, such as government regulations and unique customer needs. E-commerce businesses realize that planning and executing their logistics strategy is not their core competency. To help their teams better focus on their KRAs, these businesses outsource their logistics to a 3PL provider.
While many service providers handle entire processes, including transportation, distribution, and procurement, others focus on specific segments such as freight shipping and product sourcing.
See as we expand further on Third-Party Logistics 101: Your Complete Guide.
Types of 3PL logistics providers
Standard 3PL providers
Standard 3PL providers offer services related to basic functions of logistics such as picking, distribution, and warehousing. For most standard 3PL providers, the 3PL function is not their main activity.
Very few businesses prefer outsourcing their logistics to a customer adapter. These service providers handle the entire logistics process of their customers. Their team comprises expert professionals who come up with strategies to improve their customers’ logistics dramatically.
Customer developers are the most specialized 3PL providers. A customer developer integrates itself with their clients and manages their entire logistics function. These providers perform some of the most involved and extensive logistics tasks.
Service developers offer their customers value-added services such as cross-docking, custom/specific packaging, and tracking and tracing. Service developers invest extensively in setting up a solid IT foundation.
Factors to consider when deciding whether to outsource your logistics
The number of orders you process every day
If you have a small team that processes more than ten orders a day, consider hiring a 3PL provider that can help you improve your profit margins. Calculate the costs of hiring a 3PL provider and compare it with the cost of doing everything yourself. When calculating the cost of partnering with a 3PL provider, remember to factor in the potential growth opportunities you’re currently unable to pursue.
Compare your storage costs with the quote offered by your provider. Consider bundling storage costs with outsourced fulfillment.
If you need too many expert professionals to manage your logistics function, consider outsourcing it to a 3PL provider. Third-party logistics providers have extensive industry connections and can reduce or increase the size of their teams to meet fluctuations in demand.
3PL and e-commerce
There are several benefits of using 3PL in e-commerce. 3PL providers come up with custom strategies that focus on addressing customer pain points. Some challenges that 3PL can help e-commerce businesses tackle are:
Time and money wastage
Outsourcing logistics processes to a third-party can help save a substantial amount of resources. When a 3PL provider takes over the logistics processes of an e-commerce business, the company’s team can devote more time to performing their core tasks. Most 3PL providers have a global network that they use to get the best offers. Their customers do not have to invest time and resources to negotiate with suppliers and warehouses.
3PL providers spend a substantial percentage of their revenue towards upgrading their systems and processes. Many producing and selling companies do not have the expertise or resources required to adapt their systems as swiftly.
Your 3PL provider can play an important role in helping improve your customer experience. An experienced 3PL provider can come up with a custom plan to ensure on-time delivery and help you avoid expensive retail vendor chargebacks and frequent disruptions.
3PL providers come up with a strategy to communicate with on-field teams (comprising drivers, who are the first point of contact with customers). They devise a plan to provide real-time updates to drivers on the road.
Inefficient issue management
Some factors impacting your on-time delivery rate are beyond your control. Traffic jams or vehicle breakdowns, for instance, can prevent your drivers from delivering shipments on-time. 3PL providers can help address these issues by coming up with ways to communicate updates to receivers and keep downtime to a minimum (by re-booking another truck). Your 3PL expert can also design strategies to improve the efficiency of your returns handling process.
Some issues related to managing a workforce include hiring and firing employees, educating them on the insurance benefits, and resolving union issues. Many expert 3PL providers assume these responsibilities and associated paperwork and reporting burdens.
Many e-commerce businesses struggle to keep pace with growing customer demand. They are unable to scale up when demand for their products rises. Hiring a 3PL provider can help address this problem. Experienced 3PL providers come up with a strategy to respond to an increase in demand and know when they need to invest in upgrading infrastructure and acquiring more space. An experienced 3PL provider stays on top of market developments and can accurately predict a rise/fall in demand. 3PL providers plan well in advance and ramp up recruitment to keep pace with demand growth.
Experienced 3PL providers do not leave any room for speculation. To get data-driven insights, expert 3PL providers use several tools and apps that generate data related to order trends, sales, and inventory levels.