Why do companies outsource their logistics?
efore jumping into when is the right time to use a 3PL, let’s quickly look at why to use a 3PL.
There are three main reasons why SMEs choose to outsource their logistics:
- Scale – employ support as and when it’s needed, without the need to recruit or train new staff.
- Expertise – utilise industry knowledge and experience to provide an efficient 3PL solution.
- Technology – benefiting from the software, systems and tools to optimise supply chains.
- Resources – leveraging existing resources and partnerships to access reduced rates and established relationships.
When is the right time to use a 3PL?
The fact that you’re reading this blog shows that you’re already considering outsourcing your eCommerce fulfilment to a 3PL. However, if you’re not quite sure whether the time is right, these eight telltale signs can help:
Fulfilment is your largest cost centre
eCommerce fulfilment is costly, especially if you’re trying to keep up with Amazon. Warehousing, wages, packaging, equipment and shipping carriers all cost money and eat away at your bottom line.
If fulfilment has become your largest cost centre, it’s time to start calculating the different options.
3PL providers have the benefit of breadth. They can spread overhead costs across multiple clients and leverage substantial buying power to give you lower rates on packaging, storage and shipping.
You’re reaching capacity
One of the best things about eCommerce is that you can significantly grow your customer numbers without the cost of additional retail space. However, the same can’t be said for your logistics.
More customers generate more orders, increasing your storage space requirement, packaging materials, and warehouse staff. Before investing in doubling or tripling your fulfilment function, determine whether a 3PL can increase your capacity at a lower rate.
An outsourced logistics provider has immediate access to space, staff, and materials to help you manage business growth without the pains.
Your orders fluctuate
Closely related to capacity is the fluctuation of orders. Busy retail periods such as Christmas or summer result in more orders and demand faster shipping. Those last-minute swimming trunks or that forgotten Christmas present all require delivery yesterday, and your customers don’t care what date it is or how busy you are.
Outsourcing your fulfilment powers you to provide consistent, reliable and fast delivery, regardless of the time of year. You don’t have to lease additional warehouse space that you only use two months out of 12, and you don’t have to enter the realms of seasonal staffing either.
You want to try out the new tech
The emerging technology in eCommerce logistics is exciting. Drones, robots, blockchain and digital twinning – it’s the stuff of dreams (and nightmares). But when your business is ploughing eCommerce profits into growth, hiring a Chuck won’t be at the top of the budget.
By partnering with a forward-thinking 3PL, you benefit from the technology that matters. This means that you won’t waste money on a robot that only saves a few minutes a day, but you can still benefit from technology that enhances your customers’ experience.
Your customers want orders quicker
Amazon is still raising customer expectations when it comes to delivery speeds. And, while most customers don’t need same-day delivery, they do expect delivery within a few days at least. However, fast deliveries are still challenging for many, especially during busy periods.
A third-party logistics provider takes the worry of fast shipping out of your hands and provides you with reliable and feasible fast shipping options that you can pass on to customers.
You’re spinning multiple plates
Working in a growing eCommerce business can sometimes feel like working in a circus. You could be in charge of fulfilment, supply chains, product sourcing, eCommerce platforms, finances, procurement and more. And fulfilment takes up a lot of time.
Outsourcing fulfilment doesn’t mean that you’re failing in your position; it simply allows you more time to spend on strategic tasks that will make a significant business impact and less time managing a warehouse.
You’re operating a disjointed fulfilment process
While running a hybrid logistics model isn’t a bad strategy, if you’re using FBA, it may be a costly one.
Amazon FBA can be expensive when handling certain product types or fulfilling multi-channel orders. If this is the direction your business is going, an established multi-channel fulfilment partner can often work out cheaper and more straightforward.
Enterprise logistics isn’t your expertise
Running the fulfilment operation of a start-up store is vastly different from managing an enterprise brand’s logistics. If your business is aiming big, it’s best to consider outsourcing early.
Using a third party enables you to benefit from established experience in implementing and running a first-class enterprise logistics operation – delivering products of all shapes and sizes quickly and affordably.
If you don’t think your business is quite ready for a 3PL, don’t worry. By knowing the top fulfilment growing pains now, you can recognise the need for a 3PL before you become overwhelmed with orders and unable to meet customer demand.
If you do you think your business is ready for a 3PL, then take a read of our comprehensive guide on how to outsource your fulfilment and what to look for in a 3PL.
Are you ready to outsource your eCommerce fulfilment?
If you’re actively considering partnering with a 3PL fulfilment partner, it’s important to ensure they’re right fit for you.
Download our comprehensive guide on outsourcing your fulfilment to learn more or contact us today for free, no-obligation advice.