What is a 3PL and Should I Use it?

Posted on Wed, July 11, 2018 in Business Operations, eCommerce, by admin

If you’ve dabbled in the world of product fulfillment then you know what a 3PL is and most likely know the power of these third-party logistic companies.

Having a 3PL — and more importantly — an exceptional 3PL can be the difference between expansion and collapsing under the competition, so it’s vital to know exactly when you should be using a 3PL. Working with a 3PL is a valued partnership, with a foundation built on trust because they help manage all of your distribution so it’s extremely important to be picky.

Outsource the Headache and Reignite the Creativity

The single biggest pain point for most ecommerce businesses is actually handling the physical products that you are making, selling and shipping to your customers. 3PLs move the product for you, so you can focus on building your brand, creating new products and providing excellent service.

When you’ve hit a point where you’re reevaluating business strategy or you’re feeling overwhelmed, you’re most likely at a point where you can onboard a 3PL. At no point in your business should you feel overwhelmed to the point of losing your creative spark.

A great 3PL can take off the stress of packaging, paperwork, training, customer support and so much more. They will allow you to continuously be creative in any direction you want to see your business go. Your brand will have the ability to create new products while expertly shipping and distributing the products that you’re selling.

Have Access to More Efficient Shipping Options

If your business is producing enough to work with a 3PL, you probably have a wide range of products, some of which may even be complex subscription boxes. Subscriptions can be sent out on daily, weekly or even monthly time frame and, with expected growth, the headache of managing that can all be absorbed by your 3PL.

Working with a 3PL gives you access to their multiple warehouses that will allow you to significantly improve transit time, especially in a saturated ecommerce market that offers competitive shipping options. When you ship an item (depending on its size) beyond a certain shipping zone, you are charged an additional amount. By investing in a 3PL, you can eliminate those extra zone costs because they most likely have warehouses strategically placed within certain zones that generate more traffic and where they don’t, they are able to more easily partner with other warehouses otherwise beyond your scope.

By working alongside different shipping carriers, a 3PL allows you to foster partnerships with carriers all around the world that you would likely not been able to partner with at significantly cheaper rates.

The Cost of a 3PL

Depending on your product and size of the company, there are a few different pricing models. Globally, 3PL costs vary on an annual basis reflecting the economic climate of the region from where products are being shipped from and where they are being shipped to. The three greatest variables of where cost fluctuates are:

- Inbound Handling & Processing

This reflects how the products are being received to the warehouses. Most 3PL’s charge a fee for tracking your inventory and verifying that it was delivered to the facility, and that too without any damage to the product.

- Warehousing

Where and how the product is being stored. This typically goes hand-in-hand with shipping rates because the price would be different depending on where the warehouses are or how many there are.

- Outbound Handling & Processing

How are the products are picked, prepared, and packed to be shipped out? Some 3PL’s have picking and packing priced by each order, depending on how much goes into one box, other companies often roll over that price onto shipping.

Seamless Scalability

It’s important to note that although 3PLs do make it easier, the services change from one business to another. Some tend to cater to businesses that produce over a few hundred to a thousand or more orders a day and, depending on the 3PL, they may not be able to accommodate packaging that is super complex. That being said, if you’re producing a few hundred orders a day and expect more growth, using a 3PL will allow your business to be able to scale at a higher level than you otherwise would not using a 3PL.

When you think your company is ready to work with a 3PL, be picky about who you work with. Making the sale is crucial, but fostering and maintaining a lifetime client is far more important for a sustainable business. GRAYBOX can help you scale your operations and select your 3PL if you are ready to make the jump.

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