E-commerce logistics plays a crucial role in business success, yet many brands struggle with high shipping costs, inventory management, and fulfillment delays. Without an efficient logistics strategy, scaling becomes a challenge, leading to dissatisfied customers and lost revenue. Third-party logistics (3PL) providers help solve these issues by handling warehousing, fulfillment, and shipping. By outsourcing logistics, businesses can cut costs, improve efficiency, and focus on growth. This article explores the key advantages of using 3PL in e-commerce.
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3PL Services Reduce Costs Per Order
The cost difference between in-house fulfillment and outsourcing to a 3PL is often significant, leading to major cost savings. This is especially true for businesses that aren’t open year-round at high volumes.
By bringing multiple clients under one roof, a 3PL can make significant investments in technology and automation. These investments are often beyond what an individual business can afford. Many 3PLs already use advanced technology, such as:
- Warehouse Management Software and Inventory Management Systems
- Voice Picking Technologies
- Automated Picking and Goods-to-Person Technologies
- Automated Sorting by Unit and Order Level
- Conveyor Systems
By taking advantage of these tools, a third-party provider can minimize costs and accelerate order fulfillment more than a company could do alone. Additionally, 3PLs offer shipping rate discounts based on shipment size, further reducing costs.
Lower Capital Investment With 3PLs
Using eCommerce logistics providers like Save Rack allows businesses to reduce or avoid major capital expenditures. Companies will be able to save money because they won’t need to build new warehouses, upgrade existing ones, or spend millions on state-of-the-art warehouse automation and management systems.
By using a 3PL, businesses can avoid large-scale projects that will eat into time and resources. Overall operations are negatively affected since they tend to be more delayed and over budget. This adds more concerns for your internal team and takes their focus off growing the business, but partnering with a 3PL shifts those concerns away from your team.
Converting Fixed Costs Into Variable Costs
Fulfillment costs primarily consist of labor (over 50%), while facility costs, material handling, and IT systems remain largely fixed, regardless of transaction volume. These fixed costs turn variable with a 3PL.
With a 3PL, costs vary with the number of orders processed. This helps companies to ramp up or down their costs based on demand. On the other hand, internal fulfillment operations need to maintain staff — and infrastructure — no matter how many orders you have.
Faster Delivery and Reduced Shipping Costs
Amazon, Walmart, and Target are among the big retailers that have raised the bar for quick delivery. They use vast distribution networks to provide two-day delivery for orders. 3PLs help small and mid-sized retailers compete by providing access to strategically located fulfillment centers, giving them a competitive edge.
With several warehouses throughout the U.S., a 3PL can provide coverage to get businesses 85-95% of customers within a two-day delivery window using ground shipping. For most businesses, implementing distribution networks at this scale wouldn’t be possible without a 3PL partner simply because of the cost involved.
Scaling for Peak Seasons
3PLs help businesses manage growth and seasonal peaks efficiently by:
- Handling surges in holiday demand
- Expanding distribution to meet strategic goals
Many eCommerce companies see order volumes increase by 10x or more during peak seasons. Scaling internal fulfillment operations for these spikes is difficult and expensive. 3PLs are equipped to adjust staffing levels and resources as needed, reducing the time and costs associated with hiring and training seasonal employees.
Allowing Businesses to Focus on Core Operations
Managing eCommerce logistics is a time-consuming process. Working with a 3PL enables companies to focus on their key competencies, such as marketing and product development. Many companies realize fulfillment is not their forte and outsource it so they can concentrate on scaling their brands.
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How 3PLs Support eCommerce Fulfillment
Order Fulfillment for eCommerce Businesses
Traditional brick-and-mortar facilities aren’t efficient for eCommerce order fulfillment — that’s why brick-and-mortar stores are finding themselves engaging with 3PLs for eCommerce fulfillment. Moreover, building up an in-house fulfillment system is expensive and complicated, which is why small eCommerce entrepreneurs prefer to use 3PLs.
As labor shortages persist, finding and retaining qualified warehouse staff is another challenge. Partnering with a 3PL eliminates this burden.
International Order Fulfillment
Many businesses use 3PLs to handle international shipping. For example:
- A multi-channel wholesale client uses a West Coast distribution center for western U.S. orders, while an East Coast 3PL handles the rest.
- A Canadian gift company partners with a 3PL to fulfill orders across the country.
- A European 3PL facility manages orders for U.K. and EU customers, reducing shipping costs and improving delivery speed.
Compliance With Big Box Retailers and Amazon
Marketplaces like Amazon, Wayfair, and Walmart enforce strict compliance policies and IT requirements. Instead of developing this expertise internally, many companies work with 3PLs that already have the necessary systems and experience.
Expanding Distribution Networks
Many businesses use multi-node 3PL strategies to reach customers faster. For example, a client may ship inventory to multiple 3PL distribution centers, allowing 90-95% of customers to receive their orders within one or two days via ground shipping.
Reverse Logistics and Returns Processing
Returns processing is a critical component of eCommerce logistics. Many 3PLs specialize in reverse logistics for high-return industries like fashion and electronics. These providers handle:
- Processing returns
- Issuing customer refunds
- Repairing and refurbishing products
- Returning merchandise to stock
- Managing disposal or resale of returned goods
Handling Bulk Shipments
3PLs also manage bulk shipments for retailers and distributors. For example:
- A women’s clothing distributor uses a 3PL to receive and ship bulk orders to department stores.
- A footwear manufacturer outsources fulfillment for millions of shoe pairs.
- A health and beauty company consolidated fulfillment into a single 3PL facility, reducing costs while maintaining two-day delivery times.
Conclusion
Using a 3PL for eCommerce logistics offers benefits such as cost savings of up to 50%, expedited shipping, scalability, and access to advanced technology. By relying on a 3PL, businesses can dedicate their time to growing the business while knowing that they are fulfilling orders accurately and satisfying customers.
Whether you are an emerging eCommerce company or a large retailer seeking to optimize logistics, Save Rack has the solutions you need. Call us now for more info!
