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Logistics is the backbone of any DTC ecommerce business. All the best practices and marketing tips in the world don’t mean anything if you can’t get your products to your customers.
But guaranteeing fast, reliable shipping and delivery for your customers is difficult––it requires planning, preparation, and a lot of overhead costs. For growing ecommerce brands looking to scale quickly, outsourcing logistics to a 3PL, or third-party logistics provider, might be the best way to move forward.
In this piece, we’ll examine the pros and cons of using a 3PL over in-house logistics, and compare popular solutions like leveraging Amazon or Shopify fulfillment.
What is a 3PL?
A 3PL partners with an ecommerce store to handle their logistics. They take care of a variety of different tasks related to managing merchandise, storing, picking, packing, and sending products directly to your customers.
Using a 3PL to manage your inventory logistics is not the same as dropshipping. With dropshipping, a third-party wholesaler sends your customers merchandise with which you have little to no involvement. A 3PL on the other hand, works with the products you choose—you’re simply outsourcing a portion of your business to make things easier and scale your store faster.
The Pros & Cons of Outsourcing Logistics to a 3PL
There are several reasons why you might consider outsourcing such a critical component of your business, such as logistics not being a core skillset of your business or the increased overhead of managing them in-house. While seeking expertise of those for whom logistics is their core business may sound like a no-brainer, it’s important you understand the pros and cons to working with a 3PL.
Here are a few advantages of using a 3PL:
- Less investment/risk: You don’t have to invest in an expensive warehouse, storage, packing, or shipping supplies. You can even provide branded shipping supplies to your 3PL to ensure you maintain brand consistency.
- Savings on shipping: 3PLs often handle merchandise from several sellers and tend to ship products in bulk. This means that they can negotiate contracts with carriers that make shipping more affordable. Not only does this save you shipping costs, but you can pass those savings on to your customers, making shopping with you more attractive.
- Leverage expertise: 3PLs have a lot of experience in picking, packing, storing, and shipping different kinds of merchandise. By letting them do what they do best, you can focus on growing your business without having to worry about being able to manage an increase in order load.
Then again, as logistics is so important for your ecommerce store, you may not feel comfortable leaving someone else to take over. While using a 3PL has many advantages, logistics is important and it won’t be the right choice for all brands. Some of the disadvantages of using a 3PL may include:
- Loss of control: When you outsource your logistics, you ultimately give up control over the delivery process. This can be both a good and bad thing, depending on your 3PL partner. Even though you’re working with an expert, inevitably there will be occasional mishaps. When this happens you’re still responsible for any errors your 3PL makes, leaving you to make things right with your customers.
- Limitations: While a 3PL often has many options available for personalizing your customer’s delivery experience, like white glove service, they’re not perfect. Their limitations will become your limitations. Be sure to fully understand what those limitations will be.
- Upfront costs: Obviously, working with a 3PL comes with a cost. These costs, at least in the short-term, will be far less than if you had to rent your own warehouse, hire your own warehouse team, buy or develop your own inventory management system, and so on.
- Distance from merchandise: Depending on where your 3PL has warehouses, there might be a considerable distance between your HQ and your merchandise, which could make quality control a challenge.
When deciding whether working with a 3PL is right for you, think about how much you’ll need to scale and what the cost will look like. A great 3PL partner will be transparent with you about their processes, whether their inventory management system (IMS) will be compatible with your point of sale or checkout software, and their realistic limitations.
Casey Armstrong of ShipBob had this advice for choosing a great 3PL partner:
“[Get] a demo of the merchant application—what does the technology look like? What levels of transparency do you actually get? With some solutions you’re going to get an insane level of transparency that you probably never thought was possible, including forecasting, and what does it look like when you toggle different fulfillment centers on and off from a delivery speed and a delivery cost perspective—those are things we have in our analytics dashboard. Others, it’s going to be email and Excel.”Casey Armstrong, ShipBob
Listen to more of Casey’s advice on preparing for holiday logistics and using a 3PL on the Cart Insiders Podcast.
Omnisend Note: Be sure to check that your 3PL’s inventory management system integrates with your current tools, like your email marketing tools. You’ll still want to use your order confirmation and shipping update workflows!
Fulfillment by Amazon, The Shopify Fulfillment Network, and the 3PL Landscape
There are a ton of 3PL partners out there, including the two we are going to overview today, Amazon (with FBA, fulfillment by Amazon) and the Shopify Fulfillment Network.
Fulfillment By Amazon: Is it worth it?
Amazon is the stand-out leader in the ecommerce industry––and it’s not even close. So it’s no surprise that many merchants with their own independent ecommerce stores are also selling their products on Amazon’s marketplace.
While some stores are choosing the FBM (fulfilled by merchant) option, an increasing number are taking advantage of FBA (Fulfillment by Amazon). With FBA, Amazon warehouses, picks, packs, and sends your merchandise directly to their millions of customers.
With the largest logistics network in the world, the offer to use FBA can surely be tempting. However, FBA isn’t without its drawbacks, and it’s important to consider the pros and cons of using FBA while selling on Amazon.
Advantages of FBA:
- Leverage Amazon’s ever-expanding logistics network
- Ability to leverage Prime for faster and free shipping
- Amazon handles customer service inquiries
- Automatic integration between Amazon’s platform and fulfillment, as it’s all handled by Amazon
- By adding the service MCF (Multi-Channel Fulfillment), Amazon can even handle fulfillment of your orders across non-Amazon platforms, including your stand-alone store
Of course, the typical pros you’d find in another 3PL company hold true with FBA, but Amazon is a different beast that comes with its own unique disadvantages.
- Lack of control of customer service––even with Amazon handling things like returns and refunds, you’ll still need to follow up on things like reviews.
- You don’t have as much personal 1-on-1 contact with your customers
- Lack of personalization/branding in packing and shipping
- Potentially increased storing rates during peak seasons which could affect your bottom line
- Amazon can choose to limit the amount of inventory it holds for you based on your inventory turnover ratio (or charge you more for slow-moving products).
While Amazon FBA comes with a lot of advantages that are unique to their ecosystem, their disadvantages come from being given a significant amount of control over your business.
Shopify: One Platform, Full Service
For ecommerce merchants on Shopify, Shopify Fulfillment might be a great option for scaling your logistics. The Shopify Fulfillment Network, launched in 2019, marries your online store with integrated logistics.
Advantages of SFN:
- No need to worry if Shopify’s IMS integrates with your store—it’s all native integration.
- Unlike FBA, you maintain control over branding and your customers’ unboxing experience.
- As it’s all on the same platform, you have more control over your data.
- Designed to consistently choose the least expensive shipping options for merchants.
- Offers Amazon-level 2-day shipping.
- SFN natively offers fulfillment regardless of the channel, meaning you can sell across Amazon, Etsy, eBay, your Shopify store, and more with no extra cost—unlike with FBA.
Shopify’s well-reputed support also applies to SFN, assuring you that you’ll be able to get any inevitable issues ironed out.
- Currently, only open to US sellers.
- Need to hit certain requirements in order to be eligible for SFN:
- Offer fewer than 2000 SKUs
- You must ship at least 10 orders per day
- You can’t ship more than 10,000 orders a day
- There are certain restricted items SFN won’t manage.
It’s also worth noting that while the Shopify Fulfillment Network is already likely to cover your needs, it might be less well-established than that of FBA or another 3PL partner.
While Shopify offers a great solution for those who sell in their ecosystem and fulfill their requirements, it doesn’t cover those who don’t. Therefore, it’s important to do your own research and find a great 3PL partner for your store’s growth.
When thinking about outsourcing your ecommerce store’s logistics, it’s important to think about your 3PL as a business partner who should be just as invested in your store’s growth and success as you are.
While there are a lot of factors that go into making this decision, it’s critical to properly assess each of these potential partners and determine whether it’s the right time for your business, which fulfillment options are the right fit, and which partner will be the perfect match for both you and your customers.