Owning an eCommerce business is a lot like running a company in any other field. Business owners need to focus on staying competitive and outperforming the competition if they want their companies to grow and thrive. In the world of eCommerce, that typically means getting products to customers as efficiently as possible.
Outsourcing warehousing and distribution to a third-party logistics company (3PL) is arguably the best way to ensure products get where they need to go quickly. While some eCommerce merchants are hesitant to take on more operating costs, the smart ones will quickly see that the math works out in favor of outsourcing warehousing and distribution to 3PLs. Read on to find out about the advantages of working with warehousing and distribution services.
Successful 3PLs have years of experience in supply chain management and already know how to handle difficult situations. They understand the value of maintaining a well-managed warehousing system and know how to work effectively with distributors at different levels of the supply chain.
Warehouses aren’t just large storage buildings. They’re designed specifically to house inventory meant for quick sale. Products get moved around constantly as a result, which means organized inventory management is essential. Outsourcing warehousing to an experienced 3PL means working with industry experts that have already implemented effective inventory management, product processing, customer service, and risk management procedures.
Modern distribution channels typically have four stages:
While it makes sense for some companies to employ direct distribution channels that skip intermediaries and allow manufacturers to provide products directly to consumers, this situation is rare. Indirect distribution is much more common, particularly in eCommerce. Online-only businesses often purchase goods in bulk from wholesalers, or even from larger retailers, for sale to consumers. This kind of business model requires extensive experience working within complex distribution channels.
Outsourcing warehousing and distribution to a skilled 3PL can save eCommerce merchants money. Because these companies make it their core function to assist with storing, managing, packing, and shipping products, they can save money on labor and transportation costs. Much of these savings can then be passed on to the 3PL’s clients, who would otherwise be paying higher prices for rent, dedicated employees, and standard less-than-truckload transportation costs.
Saving money on warehousing and distribution allows growing eCommerce retailers to invest in other areas of their businesses. For example, companies can put the money saved on warehouse rent, labor costs, and transportation into marketing campaigns to target new audiences, expanding the possibilities for future growth.
Successful business owners are very good at what they do, and in the case of eCommerce merchants, that means selling products. Most business owners are not trained experts in the fields of warehousing and distribution, which means those that choose to tackle those chores in-house can find themselves struggling to keep track of everything.
Outsourcing that specialized work to a third-party logistics company allows business owners and their key employees to redirect their focus on what’s important. Instead of trying to handle everything, they can focus on core business functions and let the pros at their partnering 3PLs do the same.
Customer Service Improvements
Providing excellent customer service is the key to running any kind of successful business, and customers stand to benefit more than anyone from an online retailer outsourcing its warehousing and distribution services. Here’s how that happens.
Fast, On-Time Deliveries
A good 3PL will maintain warehouses throughout different regions of the country and have an extensive shipping network in place that guarantees on-time deliveries. The products are well-organized within the warehouse, which means they can be picked, packed, and shipped almost immediately.
In an ideal world, customers would always order the right products, and they would always arrive in pristine condition. The reality of the situation is quite different, as over 20% of online purchases are returned. Working with a skilled 3PL means business owners don’t have to worry about handling customer returns, and customers will have the easiest possible time navigating what can otherwise be a frustrating process.
Better Customer Care
Taking advantage of third-party warehousing and distribution solutions allows retailers to focus their energy on customer care. Instead of paying high prices for warehouse rent, shipping, and other associated expenses, they can take the money saved by working with a 3PL and put it towards hiring more customer care associates. As every business owner knows, keeping customers satisfied always needs to be a top priority.
Flexibility and Scalability
Retailers that work with 3PLs for warehousing and distribution have a far greater level of flexibility as they scale up their businesses. Some eCommerce businesses begin as mom-and-pop shops run out of garages, while others follow drop-shipping models. Either way, there needs to be space to expand that allows retailers to continue meeting customer demands.
Working with a warehousing service doesn’t just make it easier to scale up a small or mid-sized business as the customer base expands. Retailers that take this approach to inventory management can also take advantage of added flexibility to accommodate the seasonal nature of many retail businesses. Instead of paying for space that will go unused during off-seasons throughout the year, they’ll be able to pay for only the space required to meet order fulfillment needs.
Find the Right Provider
Third-party logistics companies come in all shapes and sizes. Some partner primarily with companies in certain industries, while others offer more generalized services. Business owners should take their time looking for the right 3PL partner. Look into what kinds of core services and add-ons they offer, what their pricing is like, and how other companies have felt about working with the 3PL in the past.
If a company doesn’t feel like the right fit, move on to another one. Business owners that take the time to investigate options thoroughly will find that it pays off in the long run in the form of decreased costs and increased profit margins.