F. Curtis Barry & Company Blog

For some e-commerce businesses and multichannel companies, working with a 3PL for your warehousing, fulfillment needs and supply chain management can be a cost-effective option. Within our distribution consulting services, one of the main questions we are asked is “how cost effective is a 3PL fulfillment company compared to my internal order processing cost – are there cost savings to be recognized?”

There are many advantages to using third party logistics (3PL) including shipping orders, kitting, light assembly, value-added services, as well as reverse logistics for retail, eCommerce businesses, and wholesale distribution.  Companies can receive competitive costs; achieve cost savings by avoiding capital expenses for facilities including automation and systems; concentrate on marketing and merchandising rather than managing the fulfillment process.

There are hundreds of competent third part fulfillment (3PL) facilities in operation today. Many have multiple facilities, which allows clients to be closer to the customer and save shipping costs. Additionally, private equity investors have acquired many major 3PL companies and consolidated them into 3PLs with dozens to hundreds of facilities. Many of these have specialized fulfillment for different channels like retail fulfillment or direct to consumer.

Entrusting your customer service and fulfillment to a 3PL company is a big step. Like using other outside services, it’s important to manage the process and to reduce errors and exceptions in order to provide high-level service at an affordable cost.

Productivity and quality are usually measured in pieces per hours, cartons shipped, etc. When executed well, the following 8 steps will make your 3PL partnership that much more cost effective and stronger as a strategic function.

As 3PL consultants, in our experience assisting multichannel companies with deciding on whether to utilize third party logistics (3PL), we have found that many companies have been able to grow their businesses profitably by outsourcing.  Our blog post, 10 Ways Companies Can Profit from Ecommerce Fulfillment Services, shows how many of our clients use third party fulfillment advantageously. 

Outsourcing is not for every company, as many clients feel they want total control of the customer service and that they can have a lower cost per order by providing fulfillment services through internal operations.

One major aspect of our warehouse consulting is to compare 3PL fulfillment and logistic services to the cost of a company’s internal fulfillment operations. These typically include ecommerce, wholesale and retail companies.

To help in the decision process, here are 10 ways multichannel businesses we’ve worked with have used and benefited from 3PLs:

For many companies, using 3PL solutions for warehouse and distribution functions can be the best way to support growth. There are many options for utilizing third party logistics. One misconception is that they are just warehousing and transportation partners.

However, many 3PLs offer a range of services from value added services to order fulfillment and returns. These value added services are often needed when supporting retail and marketplace partners.

Whether consumer, or wholesale distribution, choosing a 3PL for parts of your supply chain can provide cost savings. These cost savings come from reduced labor and management, elimination of capex and reduced shipping costs by using the 3PLs rates. In addition, 3PL solutions can provide improved customer service and customer satisfaction.

Working with a 3PL can have many benefits, which typically include the following aspects.

For many companies, the high cost of warehouse leases and labor are pushing them to consider outsourcing warehouse operations.  While there are a significant number of 3PL fulfillment and logistics options, the decision isn’t always straightforward.