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October 25, 2024
Watch: How Gnarly Nutrition Scaled with iDrive's Proactive Shipping & Fulfillment Solutions
Read the full transcript of our chat with iDrive customer Gnarly Nutrition.
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For an eCommerce store, fulfillment and logistics are everything. The more you scale, the more challenging it is to keep up with demand. To keep up with growing sales, you have to scale infrastructure for pick and pack, inventory management, warehousing, and delivery. A seamless and efficient order fulfillment process is essential for a thriving eCommerce business. Of course, a great product is important, but delivering it to your customer accurately, efficiently, and in a timely fashion is equally critical.
In response, eCommerce is increasingly leaning on outsourced logistics. While the retailer focuses on making and selling great products, the fulfillment provider handles the delivery aspect. That increased specialization gives you a higher quality of service, while efficiencies of scale mean the logistics provider can often reduce total costs by increasing volume across more stores. As a result, close to 60% of all products in the U.S. are delivered via a third-party logistics provider (3PL).
But with more than 21,000 3PL’s operating in the U.S., choosing from such a large pool requires extensive research. To select the ideal fulfillment partner, you need to identify opportunities to streamline business operations, which means understanding what you need and why.
In this article, we’ll discuss the top 10 tips for choosing the right fulfillment partner for growth.
A logistics partner handles one or more aspects of the fulfillment process on your behalf. Their services can include receiving from manufacturing, preparation (e.g., processing inbound goods into final sale boxes or for FBA), storage, pick and pack, and order delivery. You also enjoy specialized offerings like packaging, labeling, return order processing, customer service, customs processing, last-mile delivery, and more.
Further, inventory management, warehouse management, and delivery management are usually included as part of the deal. A full-service logistics partner will provide data and insights on products in inventory, outbound shipments, warehouse distribution, and even real-time tracking for trucks with WMS (warehouse management software), IMS (inventory management software), and TMS (transportation management software).
That all translates to consultative expertise, as the right fulfillment partner can offer you cost-saving insights into inventory management strategies, optimal transportation routes, customs and import management, and more. Your logistics partner essentially becomes an extension of your business and can help with operations, cost management, and improving operations, so be thorough when establishing your selection criteria.
3PL, 4PL, 2PL, warehousing, fulfillment, last-mile delivery — logistics can easily feel overwhelming. So, it’s important to stop and figure out what your eCommerce store needs and why. Outlining business requirements will help you match them to a capable provider.
However, it’s not as simple as, “If you’re a subscription box company, contract with a service that has experience handling subscription boxes.” Look at the services you want, the requirements to deliver said services, what you want to expand to, etc. Ask yourself:
It’s essential to understand your demands so you can communicate them clearly to your provider. A good fit will be able to handle your needs now and in the future.
Despite the abundance of logistics companies in operation, not every one can accommodate your business. You’ll need to research and look into each potential partner’s reliability, customer service, and experience. Keep in mind that even if you intend to outsource only one component of your logistics (such as delivery to shipping carriers), you’re still taking on that company as part of your business, so it’s important they meet your quality and efficiency standards.
Onboarding a new logistics provider is time-consuming and expensive, so you want one that’ll work well with your business for the long term.
Location is as important in fulfillment as it is in real estate. If you plan to outsource storage, your new warehouses must be able to ship products to customers in a timely and efficient manner. Often, that necessitates distributed warehousing with locations spread across the geographic area you serve. For example, Amazon uses four primary geographic locations to distribute across the U.S., with additional warehouses inside those regions to ensure next-day and same-day delivery are possible almost everywhere.
Most logistics partners won’t be able to provide that level of coverage, so pinpoint what you need. Then, seek out warehouse distribution that optimizes shipping times and costs for the area where you want to operate. Keep in mind that splitting inventory will increase expenses and the risk of stockouts if your inventory sells faster in one location than another. Over time though, sound inventory management can counteract those issues. Choosing efficient storage locations allows you to optimize your supply chain for fast shipping while avoiding unnecessary expenses.
Many logistics providers work with a warehousing network to move your inventory into a partner’s storage space. Some, meanwhile, own all of their warehouses. Both approaches work well, so choose the one that fits your needs.
Expect your logistics partner to charge a considerable amount for their services. As a reference point, Shopify quotes costs for pick and pack ranging from $0.20 to $5 per item. Working with FBA, you can anticipate total expenses for picking, packing, and delivering a product to start at about $1.55 for a simple Blu-ray disc. But when you add the complexities of placement fees, storage fees, and extra expenses for slow-moving inventory, that seemingly straightforward cost can quickly become convoluted.
The last thing you want is to think you understand your logistical costs, only to be hit with surprise or hidden fees. It’s therefore critical that your fulfillment partner offers straightforward pricing and a clear idea of how much their services will cost. Often, that’ll include charges for setup, shipping, management, maintenance, software, consultancy, labeling, packaging, pick and pack, and more. The full list will depend on which services you use.
Even with the provider’s margin worked in, you’ll likely find a partner is cheaper than doing everything yourself. For example, iDrive Logistics is able to secure low rates from major services like Amazon fulfillment thanks to the volume at which we negotiate. This yields costs that are much less than what you’d get on your own. Those economies of scale are important in every aspect of logistics, down to your partner consolidating shipments from multiple customers in the same truck so it costs less to move goods to your warehouse.
It’s important to look at what technology each potential fulfillment partner uses because it impacts what they can offer you and also determines how their system will interact with your own tech stack. Ask questions about what you’ll receive (e.g., real-time inventory tracking, transportation tracking) and if it can be incorporated easily into your own system.
Transparency in your partnership enables you to view data and analytics in as close to real time as possible. Your fulfillment partner should be up-front about pricing, order status, inventory, transportation, audits, changes in packaging, customer service, returns, etc., and robust software is required to support that transparency.
Will your fulfillment partner continue to be a good fit for your eCommerce store in five years? While you can’t precisely predict what your brand will scale to over a longer period, it’s important to align goals for your short-term growth. In that regard, you’ll normally want to contract with a company that can meet your needs concerning aspects like customer service, volume, and service requirements over that period.
That all relates back to the initial needs assessment, which should be mapped to your organization’s demands over the next five years.
Your logistics partner functions as an extension of your business, so they must be responsive, care about the customer experience, and give dedicated support and account management. Usually, you can assess these capabilities while evaluating candidates and during an initial trial period. If a prospective choice is slow to reply (or completely unresponsive) to questions or concerns while trying to make a sale, they’ll be just as neglectful when you’re a customer.
Inevitably, something will occur that’ll require customer service and support, so make sure your partner has a quality team on hand to resolve issues quickly.
Many fulfillment partners include extra services that can make or break a deal. For example, if your 3PL offers in-house print services, they can custom brand your packaging, add packaging inserts, and help you improve your unboxing experience. 3PLs also provide kitting and bundling services, which allow you to expand your offerings and run campaigns to increase shopping cart values without extra costs or splitting inventory into kits up front.
Additionally, with last-mile delivery services, your logistics provider will deliver your products as close to the final destination as possible to reduce carrier costs. These and other extra options can have a meaningful impact on your business, so look for partners with perks that match your demands.
No one wants to think about returns, but they’re an important part of eCommerce. That’s especially true if you sell on Amazon (which has a return rate of 5%–15%, depending on the category) or in the fashion industry (which has a return rate over 24%). Given that frequency, the ability to handle reverse logistics seamlessly is a vital part of eCommerce, which makes your fulfillment partner selection that much more critical.
Reverse logistics encompasses:
On your own, you have to route returns to a separate warehouse, individually inspect those products, and then likely trash the items even if they’re still in good condition, because it’ll cost more to return them to your inventory. When your logistics provider takes care of this for you though, the process is smooth and significantly cheaper more often than not.
With the overwhelming number of logistics providers on the market and their varying services, it’s easy to struggle with your selection process. iDrive Logistics can help you make your choice with:
We then use this data to craft tailored recommendations to help you choose the right fulfillment partner for your organization. With iDrive Logistics' experience and industry knowledge, you can confidently select a service to streamline operations and achieve your fulfillment goals.
If you’d like to learn more about how iDrive Logistics can help, contact us today!
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