Maybe it will be when your inventory outgrows your garage, or maybe it will be when you spend more time packaging your goods than creating them. At some point, when your business gets large enough, you may decide the best way to fulfill your orders is to outsource the job. Third-party logistics (3PL) providers can handle all aspects of getting your product out of the warehouse and into the hands of your customers, saving you time and money.
However, not every 3PL operates in the same way and choosing a fulfillment provider based only on price might end up costing you more in the long run. To help make the best choice for your business, here are six tips to consider:
Look for 3PLs Who Serve Similar Industries and Clients
Talk to your candidates to see which fulfillment provider has clients with businesses most similar to your own. A 3PL that handles mostly small items will have a different expertise to offer than one that ships large, heavy equipment. If your products fall under hazmat classification, require customs documentation, or require any other special attention when shipping, be sure your fulfillment provider has enough experience in that area to meet your needs.
Also, ask about their employee turnover rates. An experienced, committed staff is more likely to keep operations running smoothly, and they may have a greater depth of institutional memory to share with you.
Location Sometimes Matters
The closer the fulfillment center is to your customers, the faster they will get their deliveries. They will be happier, and everyone benefits from the lower shipping costs. But what if your target market is spread over a wide area?
In the U.S., for example, a fulfillment center located in Maine will serve the New England area fairly well, but customers in the southwest will be waiting an inordinate amount of time for their deliveries. A warehouse located in the Midwest might be a better option for serving all of the lower 48 states. In a different example, if you sell saltwater fishing equipment, you may want to ship from two different warehouses, one on each coast. If you are not certain where your customers live, a demographics service may be helpful.
Find the Best Fee Structures
Knowing the specifics of your own product can help you save money on fees. Receiving fees may be charged by the hour, by the item, or by the pallet. If you have fewer, larger items on each pallet, a per-item fee will cost you less than if your pallet is packed with many small items. Ask if anything about your product – such as its size, weight, or special handling needs – will incur extra picking fees. Find out if packing services are included with the picking fees, or if they are extra.
If the different ways 3PLs determine their fees make a side-by-side comparison difficult, create a hypothetical shipment and do the numbers to see what each warehouse delivery will actually cost you.
See How They Handle Returns
If products get lost or damaged in shipping, or if a customer wants to make a return, some fulfillment providers offer to handle the matter themselves. Returns processing is an important part of customer satisfaction, and an efficient system helps to keep costs down.
Fulfillment providers can help reduce the rate of returns by using strong packaging and preventing errors in packing and shipping. Ask them how they measure their performance in key areas, such as sending packages without error and handling customer complaints efficiently. More about measuring key performance indicators (KPIs) can be found here.
Prepare for the Unexpected
Ask what systems your fulfillment provider has in place for power interruptions, natural disasters, or data loss. Large disruptions are beyond anyone’s ability to prevent, but a good system can help business get back to normal faster.
Even expected disruptions can sidetrack an unprepared fulfillment provider. Busy seasons and unexpected upswings, while welcome, can overload a system that is not prepared to handle more orders than usual.
If You Need Custom Packaging, Find Out Who Can Make It Happen
Some business models count on impressing the customer with a special unpacking experience, which may involve branded packaging, visually pleasing materials, or intricately arranged contents. Some 3PLs will charge more for the extra work involved, and they may still struggle to maintain efficiency if they are not experienced. Other fulfillment providers, especially those that focus on a niche industry, will specialize in just such packaging. A very large fulfillment provider, such as National Fulfillment Services, may also have different branches catering to different industries.
With these tips, you can choose a fulfillment provider who will increase your profits by preventing errors while keeping customers happy.