Growing your business is the lofty goal of most entrepreneurs. To grow sales by 200%, 500%, or more would be a dream come true. But growing pains can be intense. Without outside help, you cannot scale past a certain point. That’s where 3PL (third-party logistics) providers, like Fulfillrite, come in handy.
According to this Shopify post, a 3PL company is one which “receives, holds, or otherwise transports a consumer product in the ordinary course of business but who does not take title to the product.” In short, 3PL companies, like our own, help you with specific fulfillment activities for your ecommerce store or crowdfunding campaign.
In order to understand what 3PL providers do, it helps to understand logistics and supply chain management. Different companies specialize in different parts of the supply chain process. Responsibilities are divided into different categories, including 1PL, 2PL, 3PL, and 4PL.
A first-party logistics provider (1PL) needs goods transported from one place to another. Often times, these are manufacturers, but this can also apply to traders, wholesalers, and retailers. Governments, departments, and individuals can even be 1PL providers. Anybody who needs goods moved is a 1PL provider.
Second-party logistics providers, or 2PLs, own the means of transportation. The shipping lines, airlines, and trucking companies you use when moving cargo are all 2PLs.
Third-party logistics providers, or 3PLs, allow companies to outsource some of their supply chain management functions. For many, that means order fulfillment, returns management, kitting and assembly, and other services that we will go into detail below.
Fourth-party logistics providers (4PLs), arrange all the resources listed through 1PL through 3PL. They create supply chain solutions for clients. They handle everything needed to get goods from point A to point B.
Order fulfillment is the process of delivering a product to the customer. It includes a few different parts, such as receiving, processing, and shipping online orders. Indeed, this is the service that we at Fulfillrite are best known for.
Think of all the steps that go into processing an online order. You start with the order itself, containing a list of the goods and the quantity in which they are desired. This can either be accessed manually or sent automatically to the fulfillment company through different software integrations. When the order is received, someone must pack the goods into a box or mailing bag. After that, postage must be printed and applied.
There are a lot of steps in that process. While each individual step is fairly simple, they can become a massive time sink for a growing business.
Building upon our explanation of order fulfillment, many 3PL companies – Fulfillrite included – provide pick and pack services. Pick and pack services involve picking different parts of an order from storage and packing them into a single box or mailer for one recipient. This may sound simple. In the abstract, it is simple. Yet it can very quickly become more time-consuming than standard order fulfillment.
Inventory has to go somewhere. Physical storage is no easy task – you either have to arrange it on your own or have someone else take care of it for you. As attractive as a small storage unit near you may be, the warehousing services provided by 3PL companies are often more attractive. The main reason? Warehousing in tandem with ready access to other services such as order fulfillment.
Returning to the concept of picking and packing, what happens when you need the same things in a box over and over again? That’s where kitting comes in. Kitting occurs when a 3PL company assembles ready-to-ship kits containing commonly bundled items. Think of it like picking and packing in advance. In the long run, this can be a big time and money saver.
Barcodes are the backbone of 3PL operations. Every unique item, or SKU, in a warehouse must be labeled. This allows the 3PL company and their clients to manage inventory levels. For the 3PL company, it allows them to easily find stored products and pick and pack the correct items.
Every once in a while, though, something goes wrong with the barcode process. Sometimes, business owners forget to create barcodes for their products. Other times, the barcodes are invalid for reasons such as being too small. In either scenario, many 3PL companies – Fulfillrite included – can print and apply barcode labels to your inventory.
By far the greatest argument for hiring a 3PL company to take care of fulfillment for you is time. Once you reach a certain point in your business, time will literally become money. You may already be there, in fact.
Fulfillment is nothing more than a series of simple and repeatable actions done in rapid succession. However, the simple truth is that you are better off having people who handle fulfillment day in, day out take care of the grunt work for you. Every hour spent fulfilling orders is an hour not spent on research and development. It’s an hour not spent on marketing or hiring talented people.
Having an entirely separate company take care of order fulfillment and related services may sound like a pipe dream. After all, that can be very expensive, right?
Fortunately, that’s not the case. Third-party fulfillment often costs little more than what you would spend to fill orders in the first place. Consider, for a moment, the cost drivers that make it expensive to ship orders on your own.
Postage and packing supplies can really add up. When you outsource to a 3PL company, you indirectly benefit from an economy of scale. Companies like Fulfillrite can buy packing supplies in massive quantities at a low per-unit cost. Similarly, we can negotiate for lower postage rates because carriers like UPS, USPS, FedEx, and DHL want to keep our business. The savings are then passed on to you, the consumer. Sometimes it’s cheaper to fulfill orders through a third party than it is to fulfill orders on your own!
Once you start factors in the expense of labor hours, the prospect of cost reduction doesn’t seem so far-fetched.
Real estate is expensive. Storing goods takes space, due to the pesky rule that two objects cannot occupy the same space at the same time. If you try to house your own inventory, you will eventually run out of space.
You can temporarily fix the problem by renting storage units or new buildings, but it increases the complexity of your business. Managing multiple storage locations becomes confusing quickly. Confusion drives up labor costs.
If you see yourself running out of space to store inventory, the most elegant solution is to hire a 3PL company to take care of your goods for you. You don’t have to handle or store products. All you have to do is focus on creating and selling them.
Speaking of focus, we all have limited cognitive abilities. As a business begins to scale, you are faced with new demands on your time and you constantly have to make decisions. This can become dangerous because it can leave you or your employees susceptible to burnout, or at the very least, decision fatigue. Trying to do too many things at once is a sure recipe for failure.
So how does this relate to hiring a 3PL? It’s very simple: a company such as Fulfillrite can take care of day-to-day tasks for you, leaving you mentally free to handle more important challenges. To have your leaders and talented workers applying postage to boxes is not the best way to spend their time.
You can’t keep your eyes on the prize if your eyes are on your mailbox.
A lot of folks are nervous about the possibility of hiring a 3PL company because they think they will constantly have to send order information. This is not the case. Many 3PL companies integrate seamlessly with different online order systems. Data automatically flows from the point of sale to the 3PL company.
As an example, Fulfillrite’s system integrates with: EasyShip, Shopify, WooCommerce, ShipStation, eBay, Etsy, Amazon, BackerKit, and many more systems. Let the computers do the hard work for you!
Every once in a while, an order needs to go back to the sender. Sometimes this is because the product must be returned. Other times, the recipient changed their address without telling you. No matter what, though, you need to be ready for when orders need to go back to your company unexpectedly.
This is yet another manifestation of the time, money, space, and focus concerns above. With reverse logistics, this is especially important because it involves unpredictable and easy-to-forget transactions. Nevertheless, a seamless return process is crucial. Hiring a 3PL company can help with that a lot.
When it comes time to scale your business, don’t go it alone. Many tasks can be delegated to other companies to save you time and money, allowing you to focus on what you’re best at. Delegating order fulfillment and similar services to a 3PL company like Fulfillrite is one of the easiest ways to do this.