Introduction
We have entered the era of ecommerce, and online sales – which currently constitute 19.7% of total global retail sales – are expected to surge in the coming years and account for 24% of retail sales worldwide by 2026.
The number of online shoppers globally – which now stands at around 2.14 billion people, equivalent to almost 28% of the world’s population – continues to increase. With the rise in the number of ecommerce consumers, we are seeing heightened customer expectations for fast, affordable, and reliable order fulfilment. Shoppers today demand a first-class, seamless experience from online checkout to delivery at their doorsteps. A recent study showed that 85% of consumers will not shop with an online retailer again after a poor delivery experience.
The success of your ecommerce business rests on your ability to fulfill orders rapidly and reliably and ensure a positive, consistent customer experience across all the channels you sell through – including your direct-to-consumer (DTC) website, ecommerce marketplaces such as Amazon.com and eBay, and social media stores. Many online retailers start out handling their ecommerce fulfilment in house, but discover that, as their business expands, it becomes increasingly challenging to manage the volume, velocity, costs, and complexity of their customer orders – and so they engage third-party logistics (3PL) providers to help them with this.
In this guide, we explain how a 3PL can help you handle the ecommerce fulfilment process and explore the benefits of outsourcing your ecommerce fulfilment operations to a 3PL partner.
Ecommerce fulfilment refers to the end-to-end process of storing, picking, packing, shipping, and delivering products to customers who have placed an order from an online store, and also – when necessary – handling returns and exchanges.
A 3PL can help your ecommerce business handle the entire ecommerce fulfilment process, which is divided into four major steps:
Once your shipment arrives at your 3PL’s facilities, your 3PL will work to minimise “dock-to-stock” time (the amount of time it takes for your inbound shipment to be received by your 3PL, entered into their inventory management system, and stored in their facilities). The goal is to get your products on the shelf and ready to be shipped out to customers as fast as possible. Inventory, after all, is a cost for your business, and the sooner you can convert that cost into revenue, the better.
If you’re looking for short-term storage for products that you would like make available for sale immediately or in the near future, you would probably want to store your goods in your 3PL’s fulfilment centres – to ensure that when the orders come in the products are ready to be shipped out.
On the other hand, if you need to stockpile and store your inventory for an extended period of time – so that you can use it to fulfill customer orders during the holiday season or other peak periods when you see spikes in demand – you would probably opt to keep your stock in your 3PL’s upstream warehouses.
No matter which of your 3PL’s facilities you use to store your inventory, you will want to ensure that your 3PL offers you storage services that are:
- Accurate: Your 3PL should have a robust warehouse management system in place, which will give you real-time visibility and control over inventory levels in their facilities and ensure the accuracy of inventory counts and checks.
- Cost-effective: 3PLs utilise different pricing models for storage – some (like Amazon Multi-Channel Fulfilment (MCF)) charge by cubic foot, while others charge by bin or pallet, stock keeping unit (SKU), or a combination of these or other metrics.
Also, some 3PLs – like MCF – offer a flexible, pay-as-you-go arrangement for storage, while other 3PLs require you to enter into long-term contracts with storage and throughput commitments.
It’s critical that, when selecting a 3PL, you do the research and find a provider that offers a cost structure for storage and other ecommerce fulfilment services that suits the needs of your business.
- Picking: Using warehouse staff as well as cutting-edge automation tools and technologies such as robots, your 3PL will pick the products required for the online order off the warehouse shelves and transport them to order packing stations.
- Packing: Your 3PL’s team will pack your products in the right packaging so the order is ready to be shipped out to the customer. Your 3PL will strive to ensure that your products are packed in a manner that meets your company’s requirements, reduces the risk of damage during shipping, and minimises the size of the parcel (and the cost of shipping it)
- Shipping: After your orders are picked and packed, they’re ready to be shipped to your customers’ doorsteps. Some 3PLs – like MCF – are carriers themselves and can provide shipping services, while other 3PLs can connect you with carriers and often help you to negotiate discounted shipping rates with them.
You’ll want to make sure that the 3PL you are working with offers fast, reliable shipping services. MCF, for example, can deliver your orders as quickly as one day after their ship date, with a greater than 97% on-time delivery rate.
The importance of shipping speed and reliability to the growth of your ecommerce business cannot be overstated – according to recent research, 74% of consumers said that they would increase spending with an online retailer if they’re satisfied with that merchant’s delivery services.
Throughout the order processing phase, your 3PL will help you optimise the speed, accuracy, and efficiency of your picking, packing, and shipping operations – so that you can give your customers a first-class delivery experience.
By engaging a 3PL to handle your ecommerce fulfilment, you will be able to take advantage of their expert capabilities in inventory management, order processing and shipping, and reverse logistics to optimise your order fulfilment process across all your sales channels.
Partnering with a 3PL can bring many benefits to your ecommerce business, including:
And by entrusting your fulfilment operations to a 3PL, you can improve the efficiency of your business in other areas by allowing your team to focus on your core competencies, such as product development and sales and marketing.
Also, your 3PL will work with you to seamlessly integrate their back-end systems with your ecommerce sales channels, order management systems, and other back-end systems you use – so that your ecommerce fulfilment process runs swiftly and smoothly.
- Eliminating the need to hire in-house logistics experts and make capital-intensive investments in logistics infrastructure (such as warehouses) and equipment (such as forklifts) – and thereby reducing overhead costs.
- Driving efficiency across your fulfilment operations – and thereby cutting storage, shipping, and other costs.
A 3PL can help you create a consistent customer experience across the various channels that you sell through.
Also, by enabling you to offer faster shipping speeds, a 3PL can actually help you increase customer conversion across all your online sales channels. Research shows that 22% of abandoned online shopping carts are due to the fact that shoppers thought the shipping options were too slow.