Is your business ready to outsource fulfilment? Outsourcing your fulfilment and returns to a 3PL can solve many issues for eCommerce businesses, but that doesn’t mean it’s always the right solution for every business.
While there is no absolute right or wrong time to use a third-party logistics provider, jumping too soon could have negative consequences for your business, such as high costs, time or a poor experience. These consequences might push you to use a substandard provider, raise your product prices, reduce delivery speeds, or bring your logistics back in-house – vowing never to outsource again. None of these outcomes are ideal for your customers, your business or your growth.
To ensure you take your eCommerce business in the right direction at the right time, we’re sharing the unthinkable: 10 signs to not use a 3PL.This blog isn’t intended to paint a negative image of third-party logistics. A 3PL brings significant benefits to retailers, including access to expertise, technology, and resources when used at the right time.
Together, these benefits power you to ship orders quicker, cheaper and more reliably than when fulfilling in-house. In turn, creating an improved customer experience and more positive customer reviews leads to more sales, deliveries, and so on.But to fully realise these benefits, you must be ready.
When Shouldn’t You Use A 3PL?
In our experience as a multi-channel fulfilment and return service, there are 10 signs that a business isn’t yet ready for 3PL:
You’ve just started your eCommerce journey
We all want to start as we mean to go on, but at the very beginning of your eCommerce journey, fulfilling orders in-house is hugely beneficial. Use this golden opportunity to learn the ins and outs of your business before outsourcing, establishing your exact requirements so you can later partner with a 3PL provider best suited to your needs.
You have a low order volume
When you outsource your eCommerce fulfilment, you’re paying someone else to store your products. This storage fee is minimal with fast-moving stock because items don’t require holding for long. However, if you have slow-moving inventory, this storage fee adds up and dents your profits. Keep slow-moving stock in-house or find a 3PL with low long-term storage fees.
You have small margins
Outsourced fulfilment has many cost benefits. However, if your products have a small or micro profit margin, it’s likely to be more cost-effective to fulfil orders in-house by yourself. That’s not to say you can’t outsource fulfilment if you want to, but the return on investment will be significantly smaller than using outsourced fulfilment for products with larger margins.
Your packaging is tailored
Something we see in the luxury market is tailored packaging – picking different coloured ribbons, boxes and inserts to complement the ordered products. This is great for high-end brands delivering a personalised customer experience but can result in costly 3PL fees and skills, making it cheaper to conduct in-house.
You don’t have SKUs or barcodes
A 3PL requires your products to have identifiers to quickly recognise and locate items when an order comes in. These are usually in the form of a barcode. If you don’t currently have barcodes or your manufacturer cannot provide them, you will need to implement them before using a 3PL.
Early cut-off times are usually a result of inadequate technology and capacity or facilities located further away from the delivery hub. But they can significantly impact your ability to attract and retain customers who value fast shipping.
You operate a fragmented supply chain
Shipping products to a fulfilment centre and having them processed costs money, and this cost significantly increases if you’re making multiple shipments of low quantities. Therefore, using a 3PL when operating a fragmented supply chain or working with suppliers who can’t send products in bulk can be cost-prohibitive.
You sell hazardous materials
Not all 3PLs handle hazardous materials, affecting more businesses than you might think. If you want to use outsourced fulfilment for such products, look for a 3PL specialised in handling hazardous products, with the necessary licences and training.
Your products have a micro shelf life
While established 3PLs are experienced in storing, handling, and shipping expiry-dated products, if your products have a micro shelf life, this could prohibit outsourced fulfilment. For example, if you sell freshly baked bread, the time it takes to ship loaves in and out of a fulfilment centre will take up too much valuable time.
You want to keep your store small
Not everyone has ambitions to make it big in the field of eCommerce. Hobby sellers and passion projects often use online sales as an added bonus, with no big plans to expand or take over the world. That’s ok. If you’re comfortable managing in-house fulfilment and want to continue as a small or part-time seller, don’t feel pressured to use a 3PL provider.
You haven’t found the right 3PL
Your fulfilment costs are spiralling out of control, you’ve maxed out your internal capacity, you’re struggling to deliver orders quickly, and you’re confident that you need a fulfilment partner to help. But if you haven’t found the right one yet, don’t panic and go with someone who doesn’t feel like the right fit.
Never rush into a 3PL relationship, especially when they don’t meet all of your requirements. Take the time to understand what you need, and find a partner who can help your business now and into the future. In particular, you should look for:
- Resources – the space, packaging and staff to suit your fulfilment needs.
- Experience – expertise in delivering eCommerce orders quickly and professionally.
- Technology – the latest technology to increase efficiency and reduce costs.
- Pricing – using economies of scale to offer affordable and competitive pricing.
- Speed – the ability to deliver orders quickly.
- Scalability – the capacity to scale with your business.
- Ethical auditing – ethical auditing by reputable industry bodies.
Outsourcing your eCommerce fulfilment to a third-party logistics provider is an exciting step for any business. However, it’s not a step you should rush into. By ensuring that your business is ready for outsourced fulfilment, you ensure that a 3PL will benefit your brand, customers and bottom line.
If you’re not ready for outsourced fulfilment, that doesn’t mean you will never be ready. Use the above signs to make your business suitable for a 3PL, whether that’s increasing your order volume, establishing your requirements, preparing your stock or connecting with established 3PLs to find the best partner for your business.
If you are ready, why not give us a call to discuss the next steps and if we can help.