There is no silver bullet to making the decision, working with a third-party logistics (3PL) provider can help minimise overheads, accelerate order processing, enhance customer experience, and as will be explained and even increase conversion rates – but it’s not right for every business, let’s explore.
Outsourced Fulfilment Process (End-to-End)
- Sign the contract and agree terms: Once you’ve decided on a particular 3PL, it’s crucial that you align expectations and establish both KPIs and OKRs based on metrics such as order accuracy, order processing speed, on-time delivery performance and customer satisfaction. This way you will be able to monitor performance in real-time and on periodical bases.
- Integrate systems and establish communication channels – Integrate your sales channels such as Shopify, eBay, Amazon, and/or order management system (OMS) with the 3PL’s warehouse management system (WMS) so that SKUs can be synchronised with picking locations.
- Ship your stock to the fulfilment warehouse – this could involve utilising a haulage company to shift pallets in bulk from your own premises, suppliers or your previous 3PL.
- Goods-in team will receive your goods ready for allocation in specific picking locations. Orders can now begin flowing in. Once the warehouse receives an order, the picking team will collect individual or grouped products, and then take them to the packing bench ready for packaging.
- Once the order is packaged, the packing team will generate and apply a shipping label. At this point, your customer will receive a shipping notification.
- Parcels, packets and mail are grouped by carrier, ready for collection by the 3PL’s courier partners. The later into the evening this happens, your conversion rate can increase as much as 15%. The below eCommerce fulfilment case study details why:
As your shipments pass through the courier network, depending on service selection your online shoppers will have access to in-flight delivery options such as timed delivery windows, ‘leave safe’ options, and images of the shipment as it passed through the carrier infrastructure along conveyor belts.
Selecting a 3PL Provider
If you’ve decided 3PL is right for you, the first step is to establish your current order volumes, seasonality of demand, and predicted future growth, not just in terms of your orders but your product range too. Consider whether they only have a UK fulfilment centre, or have their own presence overseas, or at the very least partner warehouses.
3PLs are diverse. Some purely look after the goods intake, picking, packing and distribution of goods, whereas others reach deeper into the supply chain, with services such as:
- Returns management
- Outsourced customer service
- Customs clearance solutions
- Packaging and courier contract procurement
- eCommerce technology stack consultancy
- Bespoke packaging
- Inventory analysis technology (see video below)
In the above example, this provider gives retailers software that monitors their order volumes, volatility and responsiveness of suppliers to deduce when, and when not to re-order goods for stock replenishment. This helps entrepreneurs make more profitable decisions by avoiding understocking, which leads to missed sales, and overstocking, which means capital unnecessarily tied up in inventory that could be better redeployed to other areas.
Future of Fulfilment
By 2027, 26% of warehouses will be automated, which will make insourcing harder to justify. The 3PL industry is set to more than triple in market size over the next decade, outgrowing online retail itself, indicating greater popularity as a proportion of eCommerce merchants. This means fertile grown for fulfilment specialists, and variety for established retail decision-makers and entrepreneurs alike.
Consumers are increasingly demanding fast, free, environmentally-friendly shipping and items to always be in stock. They also anticipate consistent, omnichannel customer experiences. For retailers to thrive, working with a 3PL can be the growth driver they’ve been searching for. But don’t be fooled, scaling an eCommerce business has many other key ingredients.
