DEFINITION -SCOPE OF 3PLS
A third-party logistics provider or 3pl is an external provider of eCommerce fulfilment services. The service provided can vary depending on the type of 3pl you’re working with. In most cases they handle warehousing, picking and packing, and connect with a courier for shipping. Couriers are also technically 3pl’s but tend to specialize in the physical movement of parcels from one location to another.
WHERE DID THIS TYPE OF SERVICE ORIGINATE?
3pl services arose in the 1970s and ’80s but were spin-offs from military logistics networks used in the mail order catalogue business, niche to say the least. It wasn’t until the rise of the internet and subsequently online shopping in the mid to late ’90s that brought about the data-driven intelligent systems we see today.
Brick & Mortar offers an opportunity for customer experience not possible online. Smart business owners understand customer satisfaction leads to repeat business and strive for innovative ways to achieve positive reactions from customers. With the current state of affairs and the e-commerce boom underway here is an outline of one way you can improve your customer satisfaction – Using the right 3pl.
HOW THIRD-PARTY LOGISTICS WORK
Now, as a business owner, you understand the terminology and what they entail at the highest level. Let’s dive a bit deeper and build a clear picture of the logistical operations a 3pl provides.
Some work from paper and others work from QR codes but essentially the components any fulfilment operation will need to handle are:
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- Receiving
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- Storing
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- Picking
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- Packing
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- Shipping
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- Returns
Receiving
Receiving is just that, the receipt of inventory into the warehouse. Your orders can’t be fulfilled without the product to do so. Most 3pl services will have some process or form to do this. Each form is unique, but they will all need certain types of information to handle your inventory correctly. Product SKU’s, box dimensions and weights, the total number of items, expected arrival date, fulfilment shipping begins to date. How this is handled is down to each company and they’re warehouse.
Remember, during receiving large volumes of products are in motion. Moving items once could take hours, moving them multiple times could take days!
It is extremely important to understand your warehouse intake process as mistakes here can incur series fees. Especially in a time when the tracking and tracing of items are of critical importance to world health, you need to be on top of your game.
We all want fast service, your customers and you included, getting the right labels on the right boxes can save you hundreds, potentially thousands of pounds. Don’t let your inventory be quarantined and your supply chain distributed over avoidable errors. For more info on avoiding hidden intake fee’s check out our article here.
Remember your service provider is your partner – speak to them when tricky situations present themselves, create an action plan to resolve the issue – ACTION THE PLAN!
Storing
Storing your products safely and in an easy to process way comes next. There are many different systems and practice’s used, but the aim of the game here is to make the most popular items easily found and easily replenished. Hiding your #1 seller in an attic for safekeeping might sound like a good idea but the practicality of climbing your loft ladder every time it sells is a lot worse.
How your products are stored depends entirely on the products themselves. From a legal perspective, we have the Manual Handling Operations Regulations 1992 for guidance in the UK. Common sense dictates that smaller lighter items be placed higher and conversely heavier items closer to the floor.
Some warehouses are fully insured or bonded, some have refrigeration or heat rooms. The diversity of warehouse setups matches the variety of products sold online. More specialised solutions will have higher costs. If you’re starting a new product line, consider how it will be stored and handled and the associated costs before launching it. A good 3pl partner will be able to give you some insight during your planning phase.
The most important thing to understand is: Will this 3pl have the capacity for me now and into the future? Don’t partner with people who will hold you back later. Gear up for growth.
Picking
Picking is the act of collecting products from storage locations and delivering them to a packing station. Lots of 3pl services use barcode scanners to digitally track inventory as it moves through the warehouse, however, we’ve found this to be limiting and slow. QR codes are the next evolution of this technology, holding a significant amount more information combined with a faster read time makes for an overall more efficient pick process.
Some warehouses break up their space by a vendor, or by zones or by frequency of items picked. PaakPOD, being the innovators we are, has digitally mapped our entire warehouse. This allows our system to generate pick routes for staff, creating an extremely accurate and fast-passed warehouse. Not only that but we know exactly where every item is as they move through the multiple scan points in our operation.
Packing
Once delivered by the pick team to the pack station, customers’ orders are ready to be packaged up and prepared for shipping. Here is where additional inserts for customers can be included. As a savvy eCommerce operator, you’ve been wrestling with creating an amazing unboxing experience for your customers, this is where you need to drill down with your provider and see if they can handle your perfect package. Not only can the handle it but can they handle it at scale and full speed.
There are many ways to pack orders depending on the materials available, the price point of your product, how fragile it is and its final destination. Some vendors see the value in ECO-packaging, others need their products delivered in exquisitely made branded boxes. Whatever your requirements are make sure they can be achieved. More importantly than that, find out what it takes to modify them at a later date! Ecomm is all about iteration and optimisation, don’t be hamstrung by outdated operations.
There is a practice of optimizing your shipments based on dimensional weight. Dimensional Weight (DIM) is the calculations carriers use to figure out the cost of each parcel shipped. Our partner Yodel has built this calculator which you can use to get an estimate of your shipping weights.
At PaakPOD , we work with clients to reduce their DIM and cut costs all along the supply chain. We’ve reduced shipping costs by a further 12% for clients by optimising their packaging size. We are happy to share our big picture expertise with our clients. For more information about packaging and the true value of inserts, click here.
Shipping
The last leg of order fulfilment is the shipping process. Third-party logistics providers typically purchase and print shipping labels for you. Some compare prices from all available carriers while others have pre-established partnerships and negotiated discounted rates on your behalf.
Shipping comes down to delivery speed offered by your store in combination with the selection of the consumer. As eCommerce has developed and grown over the year’s customers are expecting high-speed accurate delivery. Some carriers are offering, in limited circumstances, next hour delivery alongside same day, 24hour and 48-hour services. The major drawback form online shopping is the delay from purchase to the receipt and the desire for instant gratification has driven the rise of these high-speed services. 52% of UK shoppers say that Next-Day delivery is the fast service they prefer.
Returns
While most wouldn’t consider returns to be part of the order fulfilment process, we know this just isn’t true anymore. 30% of all eCommerce purchases are returned in comparison to less than 10% of brick and mortar purchases. As a result, returns can pose a major headache for online retailers. Not all 3pl’s can handle returns and even fewer can handle the complete process of prepping and reinjecting your inventory ready for re-sale. Make sure you understand exactly how your 3pl will handle returns, what are their limitations? This is especially important for fashion retailers as even higher than 30% of returns are common.
THE PRO’S AND CON’S OF FULFILMENT SERVICES
Reliable and hassle-free. Once set up your logistics headaches are no more. Let trained professionals deal with it. The right provider can save you money and give you the ability to enter new markets easily. Monitor your sales data in interesting ways and leverage industry-wide information to provide actionable insights. Other benefits include accurate inventory control and high-quality unboxing experience for your customers.
If you’re not at a scale sufficient enough to use a 3pl and you are, then wasted capital is a major concern. Having a bad 3pl provider can lead to headaches beyond control. Delivery windows are an important part of the online shopping experience and if you’re 3pl can’t handle your orders your customers and your business suffers. There also needs to be a high level of trust between you, the business owner and the 3pl service provider. Inventory is expensive and you have to trust in your third-party logistics provider to securely store that investment for you.
CRITICAL DECISION – FINDING THE RIGHT PARTNER
With so many options and setups available choosing the right partner is the hardest part of any 3pl journey. You need to make sure the provider can handle your needs in the manner you wish. This takes communication and time. For a deeper dive into how to find the right partner for you check out – Finding the Right Fulfilment Partner
CRITICAL DECISION – WHEN TO USE 3PL SERVICES
WHEN CONSIDERING IF A 3PL IS THE RIGHT MOVE FOR YOUR BUSINESS THERE ARE SOME IMPORTANT QUESTIONS YOU SHOULD ASK YOURSELF.
Are you fulfilling 20+ orders per day?
Volume is a blessing and a curse. Obviously the more you are selling the better it is for your business. On the other hand, the more you sell the more you must fulfil, this can become overbearingly time-consuming and result in a negative effect in other areas of your business. If you don’t have time to run new campaigns, enter new markets and handle customer service requests your business will plateau and potentially decline. Don’t let all your hard work go to waste by not outsourcing at the right time.
Do you have space to continually store your inventory, is it cost-effective?
It’s all about the numbers, here again, volume, that sweet cruel mistress. No one wants to jump over box’s to make a cup of tea in the morning, even less so if those boxes aren’t yours. Home storage, while cheap isn’t great. Liability and accident insurance may not cover the cost of your inventory should the worst happen. On the other hand, if you’re using a warehouse or office space to store product, how much is it costing you? Do you have the benefits of fulfilment to go along with that storage cost? Is it fully insured and secure? After investing hard found capital in inventory, improper storage could be the unravelling of your business. Protect your investment and ensure it’s stored safely and securely.
Does your growth plan incorporate the increased demand put on your current fulfilment solution?
As you grow and sales increase are you going to be;
1. Keeping enough stock on hand in your current storage solution?
2. Process orders quickly enough and at your high standard to keep customer expectations and experience the best they can be? If you are personally picking and packing 20 orders a day, how long does it take? What happens when you’re doing 40, 60 or 100? At PaakPOD after talking with our amazing clients we’ve calculated approximately 5 hours saved each week. 5 hours a week, what would you do with an extra 5 hours? Get some much-needed sleep? Get that new product online? Diversify into a new market? Get your globalization action plan implemented? Have a date night with a significant other?
THINGS YOU NEED TO KNOW BEFORE CHOOSING A 3PL
Intimate product knowledge is essential for effective operations. The specific details of products can have far-reaching implications. From where and how the product is stored through to which carriers can deliver your products all depends on the product specifications themselves. From a price point, the DIM mentioned above is an essential piece of information that will give an accurate picture of the costs associated. For operations, understanding your desired unboxing experience and how your products are shipped from suppliers let’s good partners find cost-effective solutions that work for you.
The number of SKU’s and order volumes is also important figures for consideration. Providing this information upfront will encourage potential partners to act quickly and secure your business, potentially with more favourable conditions than otherwise offered.
No matter which partner you choose, your products are still subject to the laws of the land. In the UK all carriers must adhere to Safety Data Sheet (SDS) formerly MSDS for shipping chemicals. At first, you might not think this applies to you but most cosmetics, alcohol/liquids and electronics (batteries) are covered by these regulations. For more in-depth information check out the HSE chemical classification guide here.
Author note* Have you ever wondered why batteries were not included with your Christmas present? This is why.
What service do you need to meet customer expectations? Good 3pl’s will have multiple service types and speeds available. The pricing for which will depend on the speed of service and shipping destination. If you want accurate pricing quotes, know what you want before engaging a potential partner.
The more prepared you are for onboarding the smoother it will be. Smooth is fast and fast saves money!
THE INNOVATION OF 3PL
The amazing transformation of logistics into next hour delivery systems and we haven’t even got drones working yet (Read Author Observation, below if you want to know how drones are helping save lives through innovative logistics). The possibilities are endless and for the next-level customer experience, you need next-level customer service in addition to your products. Fulfilment is a factor in customer satisfaction. Ensure good results by using the right 3pl.
If you’re interested in more about how PaakPOD is the dynamic partner you’re looking for click here and choose how to contact us – email, phone or chat your choice.