Order fulfillment is an integral part of every eCommerce business. Even if you nail buyer acquisition and have an A+ marketing system in place, you won’t retain customers with late deliveries or damaged goods.
There’s a lot that goes on behind the scenes of fulfillment, from receiving, processing, delivering, and more all within a strict timeframe — because no one has time for 5-7 business day delivery anymore.
But not everyone has the time to pick, pack, and ship out orders themselves, especially in a growing business. Likewise, not everyone can afford to buy their own warehouse, hire and train their own fulfillment team, and get their own trucks on the road.
In this article, we’ll take a look at how outsourcing fulfillment to a third party logistics provider (3PL) can help you keep your business running smoothly — while saving you time, money, and customers.
What happens when you have bad fulfillment processes?
1) You lose customers
When you can’t deliver items on time, or in good condition, you lose out on repeat customers. 84% of consumers won’t shop with a brand again following a poor delivery experience. This is important for every eCommerce business, because retaining a customer is five times cheaper than acquiring a new one.
2) You lose money
If you can deliver a great buyer experience from discovery through delivery, it’s better for your bottom line. Not only will you see better retention and referrals from happy customers, you’ll also save money on all the returns, complaints, and penalties that come from poor fulfillment.
3) You lose time
When you do something right the first time, you save all the time you would have spent trying to fix a mistake. If you deliver the wrong item, a damaged item, or a late item, a few things happen:
- Your customer support team has to dedicate their time and resources to handle the blowback.
- You need to spend time figuring out what went wrong and how to placate your customer.
- You’ll have to spend time fixing the mistake, including back-and-forth emails and finding and shipping a replacement.
4) You lose sales channels
Marketplaces can suspend sellers for being late too many times, because it affects the customer experience so negatively. Marketplaces like Amazon, Walmart.com, and eBay all have delivery service level agreements (SLAs) that state merchants must get items shipped and sent within a certain amount of time from when the order is placed.
If you don’t act quickly and get an efficient fulfillment process in place, you risk losing out on multiple sales channels.
5) You lose your reputation
Did you know that a negative review can deter 86% of potential customers? A single negative review can drive away 22% of shoppers, and three negative reviews deters more than half of your would-be buyers.
If you miss your delivery date, send the wrong item, or deliver a damaged or improperly packed item, your reputation could suffer — and your bottom line will follow.
How to ensure on-time delivery and proper item prep
You can avoid negative reviews, getting a seller suspension, and losing out on money and customers by mastering your fulfillment process. This should include everything from:
- Proper packaging so your items don’t get damaged.
- Correct prep work so channels like FBA accept items into their networks.
- Accurate labeling so items don’t get mixed up or confused.
- Efficient handling process so you hit marketplace on-time shipping SLAs and get items out the door as quickly as possible.
- Reliable on-time delivery so you can delight your customers.
If it sounds like a lot, it doesn’t have to stay on your plate. Let’s talk about how you can outsource your entire fulfillment process to a third party fulfillment provider.
4 Benefits of using a third party fulfillment service
A third-party fulfillment service can stock products in a warehouse, pick and pack ordered items, and ship products right to your customer’s doorstep. They have their systems down, and can help you avoid human error and missed delivery deadlines.
Here are some key benefits of outsourcing to a third party logistics provider.
1) Distributed warehouses and item locations
It’s important to have access to multiple warehouses and shipping locations across your market. This way, you can disperse your inventory to ensure there are items close to your buyers, wherever they live. There are two key benefits of this:
- Items closer to buyers means less travel time, which means faster fulfillment, which means happier customers.
- Items closer to their destination means cheaper shipping costs, which means more revenue for your business.
It may not be practical for a single merchant to buy warehouses across the USA, but when you work with a third party fulfillment service, you can tap into their warehouse network and only pay for the storage space you need, in the locations you want.
2) Stay lean and save on logistics operating expenses
Having your own warehouses and fulfillment arms means paying rent or buying property, hiring entire teams to oversee and do the prep and shipping work, buying trucks to get items out, and buying equipment to make sure it all runs quickly and efficiently.
Those are huge expenses that you don’t need to take on. Here are a few ways you can save on operating expenses with a 3PL:
- Eliminate or reduce the cost of leasing a warehouse or storage unit.
- Reduce labor costs and taxes associated with order fulfillment.
- Lower packing material costs, since a fulfillment service may have a better price.
- Pack and ship quickly, allowing for more economical shipping services.
- Cut shipping costs because of volume and warehouse location.
3) Focus on growth, not boxes
Apart from having distributed locations and monetary advantage, employing a third-party fulfillment service may help you focus on other areas of concern in your business. Instead of dedicating your team to prepping, processing, and shipping items, you get to focus on other aspects of your business.
Using a third party fulfillment provider means you can save your time, money, and energy and devote that to expanding your product line, growing sales, and lowering customer acquisition costs.
4) Utilize their strategic partnerships
Many 3PLs have existing partnerships with carriers, suppliers, manufacturers, and other key players in fulfillment. They enjoy things like bulk discounts on boxes and special carrier rates, and can pass these savings down to you.
5 Key factors to look for in a third-party logistics provider
If you’re ready to get going with a third party logistics provider, here are some things you should look for when making your decision.
1. Do they have the capacity you need
Look at where your business is, where you want it to be, and how quickly you’re growing. You need a fulfillment partner who can handle your current and future capacity, with the ability to support your growth as you scale.
Are you adding new SKUs, expanding to new categories, and exploring new sales channels? Or do you plan to stay lean and operate your business at more or less the same capacity as it is now? Knowing your business direction can help you choose a 3PL that’s the right size for you.
2. Can they meet your shipping requirements?
Today’s most successful eCommerce companies aim to offer products that are “direct-to-everywhere.” That means selling everywhere your customers shop, meeting the shipping requirements of multiple sales channels, and being able to deliver nationwide.
Can a 3PL meet the delivery speeds your customers want? Do they deliver nationwide? Can they bundle your items when you have a special sale, or label items according to marketplace standards? Look at what you need in terms of shipping speed and locations, and select a 3PL partner that does it all.
3. What is their pricing structure?
There are many 3PLs that have complex pricing models and hidden fees, so you risk not knowing how much fulfillment actually costs until you get the bill. This is risky and doesn’t allow you to forecast revenue and budget appropriately.
To combat this, look for a 3PL with clear and transparent pricing, and ask about additional fees for things like workorders, inspection, receiving, and other commonly overlooked fees.
4. Where are their warehouses?
Having a distributed warehouse network helps you fulfill quickly, affordably, and on-time. Ask about where their warehouse locations are, so you can gauge how well a 3PL can serve your customer base.
Identify the cities and states that the majority of your orders originate from. Look for a partner who has locations in these areas, with additional locations to ensure nationwide coverage.
5. How do they manage your data and information?
Managing data and information is crucial, because you need real-time insight into your inventory and fulfillment. Your fulfillment partner should provide a dashboard of reports you can monitor. Ideally, they’ll also have a dedicated system that combines data from your 3PL with your sales channels, manufacturers, and warehouses.
Wrapping up your decision on a third party logistics provider
Look for a partner that offers dedicated customer support, quick service, access to a proprietary portal, and a professional warehouse network. As far as logistics are concerned, it’s best to work with a (3PL) partner to meet your business goals. However, you have to factor in your business direction, shipping requirements, pricing, warehouse, as well as data and information.