Supply chain problems expected to last the rest of 2022 and possibly longer. Because of that, companies need to make sure they are handling their business as efficiently as possible to avoid adding to the problem. With all the struggles and challenges of day-to-day operations, a 3PL provider can be a great way to outsource.
3PL providers can be a great solution because they can help optimize your processes and make your e-commerce business more efficient. In this article, we’ll list some reasons why a 3PL provider can help your business be more efficient.
What Is a 3PL?
A 3PL is a third party logistics provider that can handle multiple aspects of your e-commerce business, including:
- Inventory management
E-commerce continues to grow at a remarkable rate and it’s going to get even bigger in the future. U.S. online retail sales are forecast to grow another 16.1% in 2022, totaling $1.06 trillion in transactions.
Many retailers are finding it difficult to manage all of their inventory, warehousing, and fulfillment on their own. They are looking to third party logistics as a way to improve efficiency, save money, and improve profit margins.
How a 3PL Provider Makes Your Business More Efficient
Working with a third-party logistics provider offers several significant benefits to improve operations. Here are seven of the top ways efficiency improves with a 3PL.
We’ve seen how challenging logistics has been over the past few years. Many e-commerce companies have struggled with shipping, warehousing, and fulfillment issues, resulting in unhappy customers and lost revenue. A 3PL service is an experts with years of proven experience to smooth out supply chain and fulfillment issues.
With deep industry knowledge and contacts, 3PLs offer streamlined systems to maximize every aspect of your operations. They have both experience and an outside viewpoint that can navigate the intricacies of e-commerce. For example, relationships with shippers and carriers translate into better rates and more efficient fulfillment.
2. Proven Processes & Technology
3PLs have proven processes that have been refined over the years across multiple clients. They’ve gathered the best practices in logistics and put them to the test to find the optimal way of doing business.
They’ve tested and refined their tech to develop the most efficient solutions. They have robust inventory management, warehouse management, and logistics software. Because of that, 3PLs have proven technology to improve processes from shipping to warehousing to pick, pack, and ship.
Efficient technology provides e-commerce companies with increased transparency as well. You will be able to see real-time information about your operations to identify any bottlenecks or issues before they become customer-facing problems.
3. Lower Costs
When you increase your efficiency, you lower your costs of operation. With a logistics provider, you can reduce or eliminate your investment in warehouse space, technology, shipping, and employees to handle your operations. This frees you up to focus on growing your business.
There are often considerable cost savings because of the efficiency of 3PL operations. When you handle warehousing and fulfillment yourself, you have fixed overhead costs regardless of volume.
You’re tying up capital in floor space and labor no matter how many transactions you handle. With a 3PL, your fulfillment center costs are tied directly to order volume rather than fixed costs. This also helps you more accurately forecast your costs and profit margins.
4. Expanding Your Reach
Choosing the right 3PL provider can help you expand your reach for even greater efficiency. For example, instead of shipping from just one central location or region, you can typically utilize multiple locations across the country.
This lets you scale efficiently by distributing inventory in optimal locations. You can improve ship times for customers and may see cost savings in fulfillment with lower shipping rates. That includes quicker reverse logistics too.
If you are entering new markets, 3PLs can be invaluable. Rather than negotiating unknown territory on your own, 3PLs have likely been there and done that. This experience can help you grow faster and expand quickly.
Let’s say you want to target a customer base on the West Coast.You would have to spend the time and capital to find, secure, and build out warehousing space on the West Coast (and hire staff). Instead, you could work with a 3PL fulfillment center that’s ready and waiting to solve your transportation woes.
3PLs are also experts at international shipping and international freight forwarding. That means you can leverage this knowledge to import, export, store, and fulfill your e-commerce orders anywhere.
5. Handling Reverse Logistics
Along with the growth in e-commerce over the past few years, there’s also an increase in return rates. In 2021, more than $761 billion worth of merchandise was returned to retailers, increasing by 16.6% from the year before according to the National Retail Federation.
Returns are expensive. They need to be processed, inspected, repacked, and put back into inventory. Damaged goods need to be written off.
3PLs can handle your reverse logistics smoothly and efficiently and avoid the headaches caused by returns. Solid customer service in that area is key to happy customers.
6. Compliance Policies
If you want to work with platforms such as Amazon, Walmart, Rakuten, Target, eBay, or others, they have stringent compliance policies and specific IT requirements. When you want to be a multichannel seller, implementing the necessary infrastructure to meet these requirements can take time and be expensive.
Because 3PLs work with these e-commerce platforms every day, they already have the infrastructure and the compliance mechanisms in place.
How 3PL Providers Meet Consumer Demands
Consumers now expect a seamless, fast, and efficient experience with every order. The only way to compete successfully is with relentless efficiency to meet customer expectations while holding the line on costs.
The right 3PL providers help e-commerce companies optimize their inventory, warehousing, and fulfillment at a fraction of the cost of managing it themselves.
Reach out to Tradefull and see how we can help you today.