As eCommerce grows, so does the need for third-party logistics (3PL) services to help with fulfillment.

A 3PL can provide a wide range of solutions to help businesses handle the complexities of eCommerce order fulfillment.

In this guide, we will explore the different types of 3PLs, the services they offer, and how to choose the right 3PL for your business.

We will also look at case studies of businesses that successfully used 3PLs for their eCommerce fulfillment needs.

Finally, we will cover some of the emerging trends in 3PLs and what they mean for businesses.

By the end of this guide, you should have a better understanding of 3PLs and how they can benefit your business.

 

What Is 3PL?

Third-party logistics (3PL) is a type of outsourced service that provides businesses with comprehensive supply chain management services.

These services include storage and distribution, eCommerce order fulfillment, inventory management, warehousing, transportation, and more.

3PLs can offer additional value-added services such as kitting and assembly, cross-docking, packaging, custom labeling, returns processing, and product customization.

By leveraging the expertise of a 3PL provider, businesses can streamline their processes and optimize their supply chain operations to achieve greater efficiency and cost savings.

Furthermore, 3PLs give companies better control over their supply chain as they continuously monitor performance metrics such as on-time delivery and customer satisfaction to ensure that all objectives are met.

With 3PLs providing an integrated solution for handling each step in the process from procurement to final delivery - businesses have access to the latest technology, best practices for order fulfillment, and customer service management that helps them stay ahead of their competition.

What Are The Different Types Of E-Commerce Fulfillment Solutions In 2022?

Drop Shipping

Drop shipping is a fulfillment model in which eCommerce retailers send customer orders to third-party suppliers, who then ship the products directly to the customers.

This eliminates the need for the eCommerce retailer to carry any inventory since the supplier manages and ships all of the products.

Drop shipping is often used as a cost-effective way for small businesses to start selling online without investing in expensive inventory or storage facilities.

Some well-known drop shipping brands include Amazon, Walmart, and Nike. To learn more about starting a drop shipping business, read our guide on getting sales with drop shipping.

Pros and Cons of Drop Shipping

Pros

• Low capital investment required.

• No need to carry inventory.

• Can outsource order fulfillment.

• Access to supplier's inventory and products.

Cons

• Low margins.

• Lack of control over shipping and quality.

• Potential for longer delivery times.
  
  

When is this perfect to use?

Drop shipping is an excellent option for businesses that are just starting and have a limited budget.

It allows them to start selling products without investing in inventory and storage space.

It also gives them access to various products without managing their stock.

Direct-To-Consumer (D2C) Fulfillment

D2C fulfillment is an eCommerce model in which the products are shipped directly to the customer from the supplier or manufacturer.

This eliminates any middleman or intermediary and allows businesses to save on storage and shipping costs.

This method is often used by brands that have warehouses or employ an external 3PL provider for order fulfillment services.

Some well-known brands that use D2C fulfillment are Apple, Ikea, and Zara.

Pros and Cons of Direct-To-Consumer Fulfillment

Pros

• Lower operating costs.

• Faster delivery times.

• More control over shipping and quality.

Cons

• Higher capital investment required.

• Potential for delayed orders.

• Difficult to scale quickly.
  
  

When is the perfect time to use this?

D2C fulfillment is an excellent option for businesses with the capital to invest in inventory and storage space.

It allows them to handle their order fulfillment and optimize their operations for faster delivery times while maintaining quality control over shipping.

This method is also well-suited for businesses that are looking to scale quickly, as they can manage their inventory and shipping operations.

Cross-Docking Services

Cross-docking is a type of eCommerce fulfillment service in which goods are transferred from one truck or train to another without being stored or processed.

This method allows businesses to move products more quickly between different points in the supply chain, allowing for faster delivery times and lower transportation costs.

Cross-docking is often used by businesses that require quick turnaround times for their merchandise or products that need to be shipped quickly.

Examples of businesses that use cross-docking include Walmart, Target, and Amazon.

Pros and Cons of Cross-Docking Services

Pros

• Reduced inventory storage space.

• Faster product transfers between different points in the supply chain.

• Reduced shipping and transportation costs.

Cons

• Higher labor costs for loading and unloading.

• Potential for product damage or loss.

• Difficult to scale quickly.
  
  

When is this perfect to use?

Cross-docking services are great for businesses that need to move products quickly between different points in the supply chain.

It can help reduce inventory storage costs and shipping times while also providing a more efficient way of transferring goods between warehouses or distribution centers.

This method is well-suited for businesses that require quick turnaround times or have products that must be shipped quickly.

Inventory Management Systems

Inventory management systems are software solutions that help businesses manage their inventory levels, track sales and shipments, and maximize efficiency.

This can include features such as product reordering, order tracking, barcode scanning, and automated reports.

Businesses often use these systems to ensure they have the right amount of stock on hand at all times.

Examples of companies that use inventory management systems include Best Buy, Walmart, and Amazon.

Pros and Cons of Inventory Management Systems

Pros

• Helps reduce overstock and out-of-stock situations.

• Better visibility into product movement.

• Efficiently manage stock levels.

Cons

• Requires upfront investment in hardware or software.

• Potential for inaccurate data if not implemented properly.

• Extra cost for training.
  
  

When is this perfect to use?

Inventory management systems are great for businesses that need to track their productivity levels and ensure they have the right amount of stock on hand at all times.

These systems provide better visibility into product movement, helping businesses identify areas of improvement in their operations and reduce overstock or out-of-stock situations.

This method is well-suited for businesses with many products and a need to stay organized.

To learn more, read about the key features one should consider while picking inventory management software for their company.

Order Management System (OMS) Platforms

Order management system (OMS) platforms are software solutions that enable businesses to manage orders from multiple sales channels, track inventory levels, and optimize operations.

This can include features such as order tracking, automated reports, and analytical insights.

Businesses often use these systems to ensure efficient order fulfillment and reduce the potential for delayed orders.

Examples of companies that use OMS platforms include Shopify, Walmart, and Amazon.

Pros and Cons of Order Management System Platforms

Pros

• Enables cross-channel process automation.

• Better visibility into product movement.

• Reduces potential for delayed orders.

Cons

• Requires upfront investment in hardware or software.

• Potential for inaccurate data if not implemented properly.

• Extra cost for training.

When is this perfect to use?

Order management system (OMS) platforms are great for businesses that need to manage orders from multiple sales channels, track inventory levels, and optimize their operations.

These systems enable process automation across different channels and provide better visibility into product movement, helping businesses identify areas of improvement in their operations.

This method is well-suited for businesses with many sales channels or products that must be fulfilled quickly.

Value-Added Services (VAS)

Value-added services (VAS) are services that a company can offer to its customers in order to improve their experience and drive additional sales.

These can include features such as product customization, installation or assembly, packaging or labeling, and customer support.

Businesses often use these services to differentiate themselves from competitors and add value for their customers.

Examples of companies that use VAS include Apple, Ikea, and Amazon.

Pros and Cons of Value-Added Services

Pros

• It helps create a competitive advantage.

• Improves customer satisfaction.

• It can be used to increase sales.

Cons

• Requires upfront investment in hardware or software.

• Potential for inaccurate data if not implemented properly.

• Extra cost for training.
  
  

When is this perfect to use?

Value-added services (VAS) are great for businesses that must differentiate themselves from competitors and improve their customer experience.

These services can help create a competitive advantage by providing customers with added value.

This method is well-suited for businesses that have unique or specialized products and need to provide additional support in order to increase sales.

How To Choose The Right 3PL Service For Your Ecommerce Business

Choosing the right 3PL (third-party logistics provider) can be difficult, especially for eCommerce businesses.

So we’ve made a list of the best 3PL companies for you to pick.

But how exactly do you know what to look out for?

Here are some tips to consider:

Analyzing Your Ecommerce Business Needs

Here's a step-by-step guide to help you evaluate your eCommerce business needs:

Step 1: Assess Your Current Fulfillment Setup

Take a moment to think about your current fulfillment strategy, including the processes that are already in place. Consider how you want your products to reach customers and what kind of customer service support you're providing.

Step 2: Determine Your Ecommerce Fulfillment Goals & Objectives

Your 3PL should be able to handle all of your fulfillment needs. Ensure you clearly understand your goals and objectives regarding ordering fulfillment, including any specific requirements for the 3PL, such as meeting service-level agreements (SLAs) or providing tracking information.

Step 3: Understand Your Business's Product Mix & Total Volume Of Orders

It's important to understand how your product mix and total order volume will affect the cost of fulfillment services. Be sure to factor in any seasonal fluctuations or special promotions that may require additional resources or capabilities from your 3PL.

Step 4: Examine Your Budget & Cost Structure

A 3PL should be able to provide you with a detailed breakdown of its pricing structure, including any additional fees or charges. Be sure to factor in any additional costs that may arise from your fulfillment needs, such as shipping and packaging materials.

Step 5: Consider Customer Service Expectations

Your customers' experience is key to a successful eCommerce business. Make sure your 3PL can meet your customer service expectations, including any special requirements such as same-day or next-day delivery.

Evaluating Third-Party Logistics Providers (3PL)

Once you've determined your fulfillment needs and goals, it's time to evaluate 3PL providers.

Here are some key factors to consider when evaluating 3PLs:

• Research potential 3PL providers and their services.

• Request a quote from a shortlist of suitable providers.

• Review 3PL provider's references & customer feedback.

• Check for certifications and industry compliance.

• Make sure the 3PL provider offers technology integration options.

• Assess the level of service, support, and scalability.

• Verify that the 3PL provider can meet your cargo shipping needs.

• Review their pricing structure & negotiate terms.

• Get a clear understanding of contractual obligations & sales.

• Make sure the 3PL is capable of handling returns efficiently.

• Consider their environmental policies & practices.
  
  

Making Your Final Decision

The last step in choosing a 3PL is to make your final decision. While doing so, you will need to consider the following:

Selecting a 3PL that meets all your requirements

Once you have a shortlist of 3PL providers, it's time to make a final selection. Ensure the provider meets all your requirements and is a good fit for your business.

Consider any additional costs, customer service expectations, and contractual terms before making your decision.

Carefully consider all potential pros and cons

Make sure to weigh up all the pros and cons of working with a 3PL provider. Consider how their services will benefit your business, their pricing structure, customer service levels, and scalability.

Drafting a legal agreement and signing the contract

Once you've decided, it's time to draft a contract with the 3PL provider. This should cover all aspects of the agreement, including pricing, terms, and conditions.

Make sure you're both on the same page and there is no ambiguity in your legal agreement.

Conducting a trial run with the 3PL provider

Before signing the contract and working with the 3PL provider, it's a good idea to conduct a trial run.

This will give you an opportunity to assess their services and make sure they can meet your needs.

Monitoring & assessing the performance of the 3PL provider

Once you've begun working with the 3PL provider, monitoring their performance is important.

Make sure they're meeting your expectations and that they are providing quality services.

Refine your strategy to ensure continued success with 3PL services

As you work with the 3PL provider, consider ways to refine your fulfillment strategy.

Look for opportunities to improve efficiency and reduce costs and ways to enhance customer experience.

Re-evaluate your 3PL provider regularly

It's important to re-evaluate your 3PL provider regularly. Consider whether their services still meet your needs and how they could be improved.

This will allow you to make sure you're getting the best value for money.

Finally, launching your store doesn't have to be a stressful process. Choosing the right 3PL provider can ensure that your store is successful and that customer orders are fulfilled on time.

Conclusion

Choosing the right 3PL provider is essential for your business's success. Here are some of the key takeaways to consider:

• Make sure you take the time to research potential providers

• Review their references and customer feedback

• Check for certifications and compliance

• Assess their level of service, support, scalability, and pricing structure

• Make sure you understand contractual obligations and sales

• Consider their environmental policies and practices
  
  

We hope you've found this article helpful. If you have, please share it with your friends and colleagues.

Good luck with the process of finding a 3PL provider!