Across the board, businesses and consumers are feeling the pinch of rising costs. For consumers, this means we are becoming more selective in our purchases. Meanwhile, eCommerce brands are treading the fine line between protecting their profits and remaining competitive within their market.
There is no one answer to how to achieve this balance. However, one area where eCommerce brands can take advantage of profit staving is within their operations. When we think of outsourcing any aspect of a business, we assume this will mean a higher cost in return for some benefit. But that doesn’t have to be the case when it comes to your fulfilment and returns. In fact, outsourcing your 3PL can help protect your margins and save costs.
The cost of storage
As your brand grows, you will need more storage, which comes with a cost. For those brands who are at a comfortable capacity in their warehouse, you may be considering the option of relocation to bigger premises to gain additional space for peak season. This relocation comes with more than just the cost of bigger premises; you will also be liable for relocation costs such as transportation, legal fees, and time costs to notify all suppliers and employees.
Alternatively, some brands may be underutilising their current storage space. With the sq ft cost of UK warehousing ranging between £7- 20/sqm, this wasted cost could be eating into your profits.
One of the main benefits of outsourcing to a 3PL provider is that you no longer have to pay for storage space you are not utilising. Instead, you only pay for storage for the space your stock occupies. Whatsmore, your 3PL partner will be perfectly placed to scale your storage with the fluctuations of your sales and support your brands’ growth, so you’ll never pay for unused storage again.
Cost of materials and shipping
Due to the large number of clients that outsourced 3PL providers work with, they have a significant buying power with suppliers, allowing them to pass their economies of scale savings onto eCommerce brands. From the cost of materials and packing to accessing the best shipping and transportation rates, your 3PL partner can ensure you’re receiving the best rates. Whatsmore, they are often located closer to major distribution hubs across the country, which means you can offer your customers later cut-off times for next-day delivery.
Cost of labour
When we hire staff, there is more than just the cost of salaries. Recruitment costs, pensions and benefit costs soon pile on top. Recruitment challenges have compounded these costs recently due to leaving the EU and COVID-19.
Those who rely on agency or temporary workers to support them during peak season or are faced with high staff turnover are likely to experience significant impacts on your margins. And let’s not forget the need to hire more than needed staff to cover sickness and holidays, but what do your team do during the quieter times?
With a 3PL partner, you no longer need to worry about staffing or the associated cost. Whatsmore your outsourced partner are specifically designed to efficiently flex their teams according to the rise and fall of order volumes.
Cost of experience and expertise
But it’s not just about hiring though. ECommerce brands also need to ensure they have the right supply chain experience and expertise within the business. Hiring senior leaders with a wealth of knowledge is costly and often challenging, with many already employed within the top companies in the sector. Additionally, continuous development through training is another cost to include in your profit lines.
However, without this expertise, your operations are unlikely to be efficient or run smoothly, resulting in higher operational costs and unhappy customers. This, in turn, results in an increase in customer enquiries, which requires more customer service staff and thus continues to impact your profitability.
Within 3PL providers, this expertise is built throughout the organisation, allowing you to reap the benefits of their years of experience without the price tag.
Cost of maintaining existing and new equipment
New equipment does not come cheap, but it’s not just the initial investment costs of purchasing the latest technology that will help your operations be more efficient. You also need to maintain and replace your existing equipment, and the costs can soon add up from packing tables to tape guns to replacing parts for your existing equipment or machinery.
With this cost already accounted for by a 3PL, you can be assured that you’ll never be faced with an unexpected technology or equipment bill again.
When shouldn't you outsource your 3PL?
Outsourcing your storage, fulfilment and returns to a 3PL expert provider can provide various operational and customer experience benefits. However, most importantly, you can save money and predict your cash flow more effectively while removing the challenges and headaches associated with managing your fulfilment in-house. Allowing you to focus on what you do best, building your brand.
That said, outsourcing your 3PL services is not suitable for all eCommerce brands. In particular, brands with low orders or bootstrapped start-ups with limited cash flow means that you’re unlikely to benefit from a 3PL yet, but once your order volume is consistently above 1,000 orders a month, you will be ready.
Are you thinking about outsourcing your 3PL?
We’d love to hear from you and see how the team here at Synergy could support you. We have over 30 years of experience working with the biggest brands, including Zara, Find Me a Gift and Tesco.
Call us on 020 4538 8557 , or complete our call back form at the bottom of this page, and our CEO, Gary Rees, will be happy to chat with you.
Additionally, check out our other helpful advice on the key things to look out for when choosing a 3PL: https://synergyretailsupport.co.uk/when-to-change-3pl/