Order fulfillment is an integral part of every eCommerce business. Once your business has grown to the point where you can no longer keep fulfillment in-house and you are ready to outsource it, working with the right third-party logistics (3PL) provider can help you tremendously. Partnering with a 3PL can save you time, money and allow you to free up resources to focus on more strategic tasks, such as marketing and product development.
However, choosing a fulfillment company can seem like a daunting task. With today’s competitive and evolving eCommerce landscape, you need a fulfillment solution that goes beyond the traditional pick, pack, and ship model. Learn the top considerations when evaluating potential 3PLs to find a partner that can not only meet your customer expectations today but also help you grow and evolve to meet customer expectations tomorrow.
Modern 3PLs are technology companies, not just traditional service providers. They develop streamlined shipping and fulfillment solutions that empower eCommerce merchants to run their business. The tools provided by these 3PLs power their network of fulfillment centers and help merchants maintain control over their inventory levels, orders, and shipments.
Connecting your online stores
Integrating the eCommerce platform (and any marketplaces) you’re selling on with the 3PL’s technology is the first step to having a unified shipping strategy. If the 3PL’s technology already has built-in integrations, you can sync your store and import your products and orders with just a few clicks. Otherwise, you can use a custom API to connect your systems. These integrations enable a two-way flow of information that combines data sources for a more cohesive view of your business’s performance.
Technology integration includes the mapping of shipping options from those listed on your shopping cart to those the 3PL uses. Once these match, the 3PL’s technology should be able to automatically select the carrier, service, and even fulfillment center that can ship each order to your customer in the most efficient and cost-effective manner according to the customer’s selected shipping option.
Automatically sending orders to the 3PL
Once your store is connected to the 3PL’s technology and they have your inventory, their fulfillment center(s) will pick, pack, and ship items as soon as each order is placed. Rather than having to manually submit orders to your 3PL each day — risking potential delays, data entry errors, and missed orders — you won’t even have to think about it. Orders that are placed before a local cutoff time each day will be guaranteed to go out the same day.
Keeping customers in the loop with shipment tracking
Integration between your sales channels and fulfillment provider’s technology helps keep customers updated on the status of their shipments. Once an order has shipped, the 3PL’s system can automatically send confirmation back to your eCommerce platform, which in turn will forward tracking information to your customers. If customers ask you questions about their orders, you can quickly and confidently answer them with the most up-to-date information.
Leveraging data to make better supply chain decisions
A 3PL’s technology should provide analytics that help you identify trends and spot bottlenecks, including insight into how you can reduce shipping costs and time in transit. By continuously analyzing data such as shipping destinations, you can understand where you should store your inventory at the SKU level to optimize shipping routes. In addition, you can view real-time stock levels at each fulfillment location and set reorder notification points for the quantity at which you need to restock. This helps you connect the upstream activities of purchasing and manufacturing to the downstream activities of sales and product demand, which will ultimately make more accurate purchasing and production decisions.
With 73% of shoppers expecting affordable, fast deliveries and 24% of customers canceling an order due to slow shipping, the number and locations of a 3PL’s fulfillment centers will directly impact the cost and speed at which your orders are delivered.
Storing inventory near your customers
The single greatest factor in choosing a fulfillment center location is proximity to your customers. Based on shipping zones, when the shipping destination is close to the shipping point of origin, the shipment costs less and takes less time to arrive. If your customers tend to live in one region, using a fulfillment center near them would be ideal. However, your customers may be more evenly distributed across the country. If this is the case, choosing a fulfillment center in an urban area can help reach a significant number of customers, as compared to a warehouse in a rural area that’s not as close to the general population.
As the majority of the population continues to move to big cities, working with a 3PL that has fulfillment centers near major metropolitan areas means you can be closer to the buying power. The best way to determine your optimal fulfillment center location is to analyze your order history. There are tools that can provide recommendations on how to distribute your inventory, including the exact product counts to send to each fulfillment center, based on your customers’ locations.
Using multiple fulfillment centers to distribute your inventory
3PLs get discounted rates from shipping carriers based on shipment volume, but the greatest savings for shipping costs come from distributing your inventory across multiple locations. If you use more than one fulfillment center, a 3PL’s technology can automatically route each order to the one closest to the destination. If you can keep the zones you ship to low, you reduce time in transit and shipping costs.
The image below shows the difference in shipping zones when using one fulfillment center compared to three fulfillment centers. The yellow dots represent fulfillment center locations across major cities in the United States that orders would be shipped from. When you introduce more fulfillment centers into the equation, you will see a reduction in shipping zones.This helps ensure each order will be delivered as efficiently as possible.
When using one fulfillment center (like the map on the left), you’d have to use expedited air to ship an order from the west coast to the east coast within a day or two. When using multiple fulfillment centers, you can get an order shipped from a fulfillment center to the surrounding area in the same time (and at a much lower cost) via ground shipping.
Aside from technology and strategic fulfillment center locations, there are other considerations for choosing a 3PL that will vary based on your own unique needs. These may include capabilities such as international shipping, returns processing, the ability to book freight, white label service, custom branded boxes or other kitting services, and more.
Furthermore, you may want to investigate how they handle customer support, whether you’ll be assigned a dedicated Account Manager (and if it will cost you extra), if they have customer support on-site at each fulfillment center, whether they own and operate their own fulfillment centers, and more. Ultimately, try to determine how they will help you scale.
RELATED: Guide to Order Fulfillment
To compete online, today’s eCommerce companies need more than traditional pick-and-pack fulfillment services to meet customer expectations around deliveries. They need the technology and tools that connect the systems they use and power a strategic fulfillment network. Finding a 3PL partner that can meet your needs can save you save time, headaches, and money. To learn more about outsourcing fulfillment for your eCommerce store, or to get started with a modern, tech-enabled 3PL, check out ShipBob.
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