As you progress in your Amazon selling journey, there may come a time when you decide that you need to outsource certain aspects of your business—such as logistics, shipping and fulfilment—in order to focus on growth.
Choosing a third-party logistics (3PL) provider can seem like a daunting and complex task, but having knowledge of best practices can help simplify your selection and decision-making processes. Below, we will discuss the following best practices in detail:• Assess your current fulfilment processes and needs
• Consider your goals and future needs
• Evaluate a provider’s capabilities
• Prepare a checklist of questions to vet a prospective provider
Before you read on, do check out our article on the basics of 3PL
. It provides a comprehensive overview on 3PL, including the different types of outsourced logistics and 3PL companies, pros and cons of engaging a 3PL company, Fulfilment by Amazon (FBA)
When should you outsource to a 3PL?
It can be challenging figuring out when you should outsource to a 3PL. There are no hard and fast rules, and the right time to outsource will vary depending on your business situation, needs and goals.
It can be helpful to ask yourself the following questions:
• Is the number of errors in our fulfilment flow increasing?
• Are we constantly falling behind on order processing?
• Is our customer base growing more quickly than we can keep pace with?
• Are we running out of storage space?
• Is there a significant increase in our shipping expenses?
• Are we spending an increasing number of man hours on fulfilment and shipping?
If you have answered yes to most of the questions listed above, it could be time to look into outsourcing to a 3PL or signing up for FBA
. The latter is a service that enables sellers to tap into Amazon’s fulfillment resources, customer support service and logistics expertise.
Best Practices for Choosing a 3PL
Assess your current fulfilment processes and needs
The first step you need to take is to assess your current fulfilment processes and needs. By getting a clear picture of your present situation, you will be better able to identify areas of improvement and business objectives you want to establish. This will help you figure out which types of 3PL services you require, and how a provider could come into the picture to help you achieve your goals.
If you are presently managing fulfilment in-house, you need to start with reviewing your fulfilment infrastructure and processes.
Begin by collating reports on order accuracy, customer satisfaction, customer service complaints and inventory control. The data that you gather from these reports should help you identify areas in your fulfilment processes that you can improve on. It can also help to speak with your team, and ask them about fulfilment pain points they face, as well as their ideas on how your current processes can be improved on.
All these data and insights should be summarised, so that you have all the information you need at hand when you meet with prospective providers for an initial discussion. Additionally, you should have the following information ready for the discussion:
• Monthly order volume
• Average basket size
• Total SKUs
• Product weight and dimensions
• Common product combinations
• Average number of items per order
• Types of ecommerce software you use
Consider your goals and future needs
Having clarity on your goals and future needs is critical for two key reasons.
Firstly, it can help you in your decision to choose a 3PL provider that you can grow with—and avoid having to re-select and onboard a new provider when your business scales. Secondly, the more information you can share with a 3PL early on in the process of working together, the better equipped they will likely be in meeting your fulfillment needs.
In addition to your goals and future needs, it can also be helpful to share the following information with a prospective 3PL provider:
• Business priorities
• Business projections
• Marketing plans
• New markets you are planning to expand into in the next two to three years
• New products you are planning to launch in the next two to three years
Evaluate a provider’s capabilities
There are three key factors that can help you evaluate a provider’s capabilities. You need to consider if a provider:
• Has experience working with businesses that are similar to yours
• Places a priority on continuous improvement
• Is able to meet your standards of service and protect your brand image
The first question you should explore is: does the provider have extensive experience in my industry, and do their strengths align with my needs? Many 3PLs work with clients from a variety of industries, so you need to check if a prospective provider has experience working with businesses that are similar to yours. This ensures that the provider will have the right expertise to identify and fill the gaps in your supply chain.
For instance, if you are selling mainly heavy and bulky products, working with a 3PL that is experienced in packaging and shipping heavy items can help minimise the risk of damage. And if you are selling fragile items, working with the right 3PL can help you achieve significant cost savings. That’s because you want to work with a provider that has experience in shipping these products safely, while using the minimum amount of packaging required.
The second question you need to consider is: is continuous improvement a priority for your prospective provider? Given that ecommerce and fulfillment technologies are ever-evolving, it is critical that you choose a 3PL who continually evaluates their capabilities, and embraces new solutions to stay ahead of the curve. In this way, they will be well-positioned to suggest best practices to help you stand out from the competition.
The final question you should ask is: is the 3PL able to maintain your standards of service, and protect your brand image? This is particularly important if your prospective provider is handling customer service on your behalf.
As they will have direct interaction with customers, how they handle these interactions can have a significant impact on your brand image. You need to ensure that your prospective provider has a track record in providing stellar customer service, and is committed to upholding your brand image.
Prepare a checklist of questions to vet a prospective provider
Here is a non-exhaustive list of questions you can ask during your initial discussion with a prospective 3PL provider:
• What is your onboarding process like?
• Can I review your service-level agreement (SLA)?
• What types of products do you specialise in?
• Do you have experience working with businesses that are similar to mine?
• Do you offer flexibility and scalability? Can I easily increase or reduce the amount of shelf space for my products?
• What kind of contract do you require?
• Do you have an all-inclusive pricing mode, or are there additional fees for account management and setup, warehousing, shipping or picking and packing?
• Do you provide a calculator that I could use to estimate my revenue and costs?
• Can I have a cost breakdown of your service fees?
• Is there a minimum or maximum monthly order volume?
• How are order errors or lost inventory managed?
• What is your pick and pack process like?
• How do you manage seasonal peaks in demand?
• Do you have product size and weight restrictions?
• Can I visit your warehouses or distribution centres?
• Who are your shipping partners?
• Do you offer same-day order processing?
• How do you handle returns processing?
• Do you offer additional services such as kitting, customisation or light assembly?
• Will I have a dedicated account manager?
• What is your average customer response time?
• What are the operating hours for your customer support team?
Technology and security
• Which warehouse management system (WMS) do you use? Can you share more information about its integrations and capabilities?
• What integrations do you offer?
• What types of security measures do you have in place? (This question relates to internet security protocols, as well as warehouse security measures.)
• Do you perform security audits on a regular basis?
The content set out in this article is for information only and should not be construed as formal advice, including financial advice. The information in this article should not be a substitute for your own judgement about demand for your products. Many factors may influence actual demand for your products, including price fluctuations, consumer demand shifts, and changes in competing offers for those products. This article is not a guarantee of future results, and sellers remain responsible for determining their product selection, prices, inventory levels and third party service providers they work with.
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