Ecommerce has exploded in popularity over the last decade, with online sales continuing to grow at a rapid pace. As ecommerce businesses scale up, order fulfillment can become a major challenge. Most early-stage ecommerce companies start out fulfilling orders in-house. However, this can quickly become unsustainable as order volumes increase. This is where partnering with a 3PL (third party logistics) provider for order fulfillment comes in.
The logistics experts at SEKO have put our heads together and outlined what we know to be the key reasons why 3PL order fulfillment enables scalable ecommerce growth:
- Cost Savings
- Flexibility and Scalability
- Advanced Technology
- Supply Chain Expertise
- Access to Discounts
- Focus on Core Business
- Risk Management
- Focus on Customer Experience
- Global Expansion Potential
COST SAVINGS
One of the biggest advantages of 3PL order fulfillment is the significant cost savings. By outsourcing fulfillment operations, ecommerce businesses avoid having to invest in their own warehouse space, staffing, and materials handling equipment. Fulfillment costs become variable instead of fixed, only paying for the specific services utilized from the 3PL partner. As sales fluctuate or the business scales up or down, there is flexibility to adjust the services and resources needed from the 3PL. This results in major cost savings compared to being stuck with fixed investments in fulfillment infrastructure and labor.
For example, a 3PL partner can provide access to a network of fulfillment centers across the country. An ecommerce firm may only need to use one or two centers initially when volumes are lower. As sales ramp up, they can seamlessly add more fulfillment centers and scale up storage and processing capabilities. In contrast, if the company built its own fulfillment center, much of that capacity would sit idle in the early stages resulting in wasted overhead. The variable cost structure of outsourced fulfillment provides businesses with agility and optimizes spending according to current needs.
FLEXIBILITY AND SCALABILITY
Partnering with a 3PL provider offers tremendous flexibility and scalability. The best 3PLs provide access to a national or global network of fulfillment centers located in strategic geographic regions. This allows ecommerce companies to store inventory close to end customers, resulting in faster delivery times. It also means capacity can easily be added in new regions to be closer to new customer bases.
The extensive fulfillment network also enables flexibility in scaling up storage space and distribution capacity as sales grow. The 3PL handles staffing, infrastructure management and expansion. Ecommerce businesses don't have to worry about purchasing more warehouse space, hiring more staff, or investing in new materials handling equipment. They simply pay to utilize more services and capacity from the 3PL partner as order volumes increase. This makes growth much smoother and more cost-effective than in-house fulfillment.
ADVANCED TECHNOLOGY
Leading 3PL providers invest heavily in advanced fulfillment technologies including warehouse management systems, automated picking and packing solutions, robotic process automation, IoT inventory tracking, and more. By outsourcing to a technology-enabled 3PL, ecommerce retailers can take advantage of these innovations without large fixed investments.
The advanced automation and systems that 3PLs implement allow them to achieve greater accuracy, speed, productivity and insight across the fulfillment process. As an ecommerce company scales up, they benefit from the 3PL's technology infrastructure which is designed to handle sizable volumes efficiently. This prevents fulfillment from becoming a bottleneck to growth. The 3PL's technology investments also free the ecommerce company to focus resources on their own tech innovation in areas like customer experience and the online storefront.
SUPPLY CHAIN EXPERTISE
Order fulfillment seems straightforward on the surface but in reality involves detailed logistical expertise in areas like inventory management, materials handling, packaging solutions, and more. 3PL partners employ teams of supply chain experts to continuously optimize fulfillment and identify cost savings throughout the distribution process. Their specialized knowledge and experience ensures the systems and processes can smoothly scale to meet increasing sales volumes as an ecommerce business grows. The 3PL is able to assess changing needs and recommend customized solutions whether that involves adding more regional fulfillment centers, implementing automation to boost throughput capacity, reconfiguring inventory allocation across locations, upgrading transportation solutions, refining quality control procedures, or other operational enhancements. A seasoned 3PL becomes an invaluable supply chain advisor and optimization partner helping ecommerce retailers scale their fulfillment capabilities
ACCESS TO DISCOUNTS
By leveraging the large shipping volumes of a 3PL, ecommerce retailers can take advantage of discounted rates from major carriers like UPS, FedEx and USPS. These companies offer lower rates to 3PLs based on their high volumes across customers. This results in major savings on shipping costs compared to what a small or mid-sized ecommerce company could negotiate on their own.
As shipping accounts for a significant portion of total order fulfillment costs, these volume discounts provide meaningful cost reduction. The savings expand further as the retailer's sales volumes grow over time. The 3PL continuously negotiates lower rates based on aggregated order volume across their clients. The ecommerce company benefits from these increasing discounts without any extra effort.
FOCUS ON CORE BUSINESS
Outsourcing order fulfillment allows ecommerce companies to focus time, capital and human resources on core business functions rather than being distracted by logistical operations. Leadership can devote higher energy towards priorities like product innovation, customer research, marketing, UI/UX design, and entering new markets. The 3PL partner becomes an extension of the business, managing fulfillment while internal teams focus on growth.
For high-velocity ecommerce firms, not getting dragged down into fulfillment details is crucial. The 3PL frees the executive team to stay focused on the big picture. All businesses have limited time and resources. Outsourcing fulfillment maximizes allocation of those resources towards core capabilities and accelerating growth.
RISK MANAGEMENT
Managing your own fulfillment operations in-house carries major risks. What if there is a sudden surge in orders that internal systems can't handle? What if you have to recall thousands of products already shipped to customer doors? These kinds of scenarios can be extremely costly without the proper infrastructure and processes in place.
3PLs are experienced at assessing and mitigating fulfillment risks based on years of managing distribution for many clients in many industries. They have contingency and disaster recovery plans ready for unusual situations. 3PLs also carry insurance policies to cover damages, errors, or loss of inventory. This provides protection as an ecommerce company scales up. The 3PL absorbs and manages many of the growing risks associated with fulfillment.
FOCUS ON CUSTOMER EXPERIENCE
Surveys consistently show the delivery experience is one of the most important drivers of customer satisfaction and loyalty for ecommerce brands. 3PL order fulfillment allows retailers to focus resources on optimizing the customer journey before and after the purchase transaction. Providing an exceptional delivery experience becomes the responsibility of the 3PL partner.
Top 3PLs offer features like real-time tracking, flexible delivery options, responsive customer support, and proactive communication. Fulfillment is handled seamlessly allowing the brand to focus on exceeding customer expectations during browsing, purchase, onboarding, and engagement phases of the journey. This leads to higher lifetime value through improved retention and repeat purchase rates - critical metrics for online retailers.
GLOBAL EXPANSION POTENTIAL
For ecommerce firms with ambitions to expand globally, choosing a 3PL partner with worldwide fulfillment capabilities is a strategic move. 3PLs operate networks of fulfillment centers across North America, Asia, Europe, and other regions. This allows retailers to smoothly expand into new international markets without having to build out fulfillment infrastructure from scratch.
The 3PL manages import/export compliance, international shipping options, duties and taxes payments, and other complexities associated with global order fulfillment. They serve as a plug-and-play global distribution network for entering new regions. Global 3PL capabilities provide ecommerce firms with an efficient pathway to tap into growth opportunities worldwide.
Between scalability, flexibility, technology and specialized expertise of order fulfillment makes enlisting a 3PL partner the go-to solution for high-growth ecommerce businesses. They allow retailers to focus resources on core priorities like the customer experience while outsourcing logistics to specialists. As sales grow, the 3PL scales distribution operations up or down in lockstep providing a variable cost structure. For ambitious ecommerce brands looking to realize their expansion potential domestically and globally, partnering with a top-tier 3PL provider is a strategic choice to enable long-term scalable growth.
