Whether you are new to the world of E-commerce or you have an existing business you may have heard the term E-Commerce 3PL fulfillment. However, you may not be entirely sure what it means or whether it is an option for you and your business.
So, we have compiled this article as a helpful guide to explain exactly what E-Commerce 3PL fulfillment is, how it works and how it could benefit you.
Let’s go back to the basics…
What is E-Commerce Fulfilment?
When we look at the world of E-Commerce the fulfillment refers to the area of your eCommerce business that involves the operational side that comes after you have received your order. This includes:
- The picking of an item in your warehouse
- The packing of your product
- The shipping of your item
- Delivery of your products to your customer’s doorstep
In a traditional business model, fulfillment is completed by the business owner. They have their own stock which they store then, pick, pack, ship, and deliver to their customer.
What is a 3PL?
So, then what is a 3PL, well a 3PL (Third-party logistics) is when a business moves the fulfillment operations to an external company. Outsourcing their E-Commerce logistics processes, which includes all their inventory and stock management, warehousing and storage, and then the fulfillment is completed by them. 3PL providers can allow E-Commerce businesses to accomplish more, as they have the tools, storage, processes, and infrastructure to automate retail order fulfillment. This allowed E-Commerce store owners to focus on other things for example:
- Website Design
- Product sourcing
- Customer Experience
- Social Media Presence
Using a 3PL when you own your stock
If you own your own stock then using a Third-party logistics company is super simple. You arrange for your stock to be taken to their storage facility, some 3PL’s even provide a collection service. They then use a SKU (Stock Keeping Unit) system. A SKU is a product code that you use to search and identify stock from lists, invoices, or order forms.
The 3PL will have an automated system with your site which means when a customer makes an order they are notified with your customers shipping details and the items in their order. They will then use the SKU (Stock Keeping Unit) number to locate your product in their warehouse and ship it to your customer.
The great thing about using a 3PL is that fulfillment is their business, they know it inside out and will therefore be experts in providing a great service, at cheaper rates and usually, they can offer faster service as they are shipping a large number of orders for other businesses as well as yours.
3PL Vs dropshipping
Well, before we compare the two let’s have a look at what is dropshipping. Dropshipping is when an e-Commerce website sells products to a consumer but they are fulfilled (supplied) directly from the manufacturer.
Dropshipping is a widely successful business method. With dropshipping costs reduce drastically, as you don’t need to buy stock, rent any storage space, consider packaging or shipping costs these are all completed by your manufacturer.
But there is a small issue.
When your business grows and you become more successful you will see that there is a low margin of profit as your manufacturer is sending out only one or maybe two items for you per customer meaning you are being charged their highest rate per item. In addition to that fulfillment is not their main priority at all, manufacturing a high volume of goods is, so customer service for a single item is not always a big priority for them. This can lead to your customers being dissatisfied as they don’t receive the service they expect.
3PLs work in two ways in regards to dropshipping. Either, they work directly with your manufacturer to fulfill your orders. This means you may be charged slightly higher rates BUT you and your customers will receive the best customer service.
Or you may decide that as your business is now successful and you have a regular flow of customers that you wish to buy your stock in bulk from your manufacturer. This is then stored at your 3PL and fulfillment is completed by them. This is a great option if your manufacturers are overseas and you are looking for a cheaper yet more customer-focused fulfillment service.
Are a huge chain in the wheel of e-commerce: “During 2018, 3PL market participants generated an economic value that amounted to over 931 billion U.S. dollars.” – Statista
And now when we look at the effects of Covid 19 on the changes in shopping habits the e-Commerce industry has boomed quicker than could have ever been predicted. This is great news for e-Commerce store owners but it has definitely highlighted issues for many retailers in the area of fulfillment. Bad fulfillment leads to a bad customer experience which means customers are less likely to return to your store. Therefore, 3PLs have been invaluable to the e-Commerce industry in providing a smooth and effective fulfillment service.
As you can see fulfillment has a range of potential roadblocks for e-commerce store owners. 3PL companies can really provide you with an amazing stress-free service that keeps you and your customers happy at a low cost. Sourcing a reputable 3PL can be difficult and may take a lot of time to find one who is located in your manufacturer’s areas, who speaks the same language as you, and is willing to provide you with the level of service you require.
This is why it is so important you work with a team you can trust so why not Contact Us at E-commerce Express and let us help you with all your fulfillment needs. Our staff is here and ready to help you with any questions or queries about the 3PL service and what we can do for your business.