Things to Think About Before Choosing a Third Party Logistics (3PL) Provider
Let’s talk logistics.
You’re an ecommerce store, right? So fulfilling orders is at the crux of everything you do. The success of your business hinges upon it. This is something that can make or break you. Having inventory and fulfilling orders is probably just as important as being visible on google, if not more so. I’m willing to argue. It’s utterly paramount to be visible on Google, as I have said many times over, but being able to fulfill your orders is tantamount to being visible.
Let’s paint a picture.
Say you’re the bee's knees at making sure your site is visible on Google. Say that your website is visually stunning and super easy to maneuver and has virtually everything anyone could desire from an ecommerce store. So, word spreads. Pretty soon everyone is willing to purchase from your shop. There’s only one problem--you can’t fill orders fast enough. Sure, everyone can find you. But what’s the next step? Consumers want to have security and a sound mind when it comes to the fulfilling of their orders. In this day and age of instant gratification, consumers want their product and they want it a year ago. The last thing you want is to be regarded as a site that can’t provide. It won’t bode well for you, my friend.
It may not be necessary for you to consider alternative options in regards to fulfilling orders, but, for some of you, this is a very real thing to think about.
Let's talk about third party logistics providers (3PLs) .
Third party logistic providers, or 3PLs (some people call them TPLs, but I won’t here), are parties that handle a company's inventory and any logistics such as shipping, packing, returns, and the like. They, quite literally, do the heavy lifting for you. 3PLs are legally bound to responsibly store and maintain your merchandise, but they do not take ownership of your inventory, nor do they generate revenue from the sales of your products. Their revenue comes from doing business with you. I
f you’re apprehensive about the idea of letting someone hold your inventory because your inventory holds some secret that you don’t wish to divulge, don’t worry about that. Most 3PLs have non-disclosure agreements. If they don’t have one, then they probably aren’t a 3PL you’d want to consider. In addition to contemplating their NDA status and the others I’ve mentioned, there are a few more things to think about before choosing a third party logistics provider.
1. What is your volume?
How many orders do you typically fulfill? Ten? Twenty? Fifty? If you’re not fulfilling a lot of orders daily, then it may not be time for you to consider a 3PL just yet. However, if you’re doing ten or more every day, then it’s certainly something to start thinking about. Your goal is to increase your business. You also don’t want to wait too long to make that kind of decision. For anything more than 30, you should probably already have one. Remember the picture I painted? You don’t want to watch your fire fizzle out just as you’ve successfully stoked the flames.
2. Where is your inventory stored?
Do you have your inventory in a storage container? A shed in the backyard? Your house? Are you unable to find product? If you’re beginning to look like you belong on an episode of Hoarders, then it may be time to think about a 3PL. The 3PL you choose will store and categorize all of your merch for you. It will be clean, neat, organized, and ready to ship. If your current system is working for you, though, you may not need a 3PL yet.
3. Are you responsible?
This question is twofold. Are you good at accepting responsibility and are you responsible in general? Do you notice that some of your orders get lost or go unfulfilled? If you said “yes”, “sometimes”, or even “not really” it may be time to consider a 3PL. As mentioned, 3PLs are legally bound to responsibly store and maintain your merchandise. And if there’s even a slight issue with you fulfilling your own orders, you may not be able to handle it on your own. That’s nothing to be ashamed of. Everybody needs help somewhere.
Now, the reason I ask if you’re good at accepting responsibility is because in the event that your 3PL messes up and the customer’s order is lost or otherwise mishandled, they will turn to you (or your company) and you will not be able to place blame. You are the face of your company, not the 3PL. If this is something that you’re just not willing to handle then perhaps take a seat, sip some tea, and reassess your options.
4. What is your budget?
In the long term, it’s probably much more cost-effective to have a 3PL. Initially, however, the costs of getting started with your 3PL can creep up. This is due to integration of software, taking stock of inventory, uploading SKUs, etc. These are merely initial set-up costs. They are not revolving. If you find that you’re unable to pay the price to start up with a 3PL, then it may not be time for you to have one. Additionally, if the price you’re paying to store your merch is still lower than what it would be to switch to a 3PL, it may not be time just yet. Conversely, if your company is growing yet you’ve got plenty room to spare in regards to shipping and storage, why not go for it? Most 3PLs don’t charge for storage, so that’s a way to save a buck.
Of course, there are other things to consider--there will always be other things to think about before choosing a third party logistics provider. This is a weighted decision and not one to be considered lightly. It could make or break you. If you do find that it is time to partner with a 3PL, there are no shortage of options.
Do the research and make an informed decision. At the very least, I would insist that the company have an NDA. Regardless of whether or not you’re harboring the elixir of life, you still don’t want your 3PL to be able to ramble on about your product to anyone, especially your competitors.
While the idea of having to choose a 3PL seems daunting, I say look at the silver lining. If you need help with your merchandise because your orders have become so vast, that means your company is growing. That makes it all worth it, doesn’t it?