The warehouse is the lungs of a business, and you won’t last long if they’re not taking in the right orders and delivering that oxygen-orders to all the parts and people that need it. If your business if coughing, it might be time to consider a third-party fulfillment company (3PL).
Handing off this core business activity can be a little daunting, so we’ve put together a brief list of consideration to help you determine if outsourcing to a 3PL would be beneficial. Remember, at the end of the day it’s about getting products to your customers and keeping the door open.
Start with the Big 3
Choosing a 3PL fulfillment center for your operations should follow a thread common to any outsourcing efforts by addressing three of your core business concerns: cost, accuracy, and speed.
Cost is the simplest consideration for 3PL selection. Look at your warehouse costs from inventory and labor to equipment, labels, packaging, and everything in between. Use all of that information to determine how much you’re paying to store goods and your cost to fulfill the average order. If a 3PL offers the same service for a lower price, then you could in great shape.
If it’s close, compare a WMS budget to a 3PL budget and the savings each promise. In many cases, a 3PL makes sense for companies who are growing and have started to expand beyond their first warehouse or are struggling to keep up when an order spike hits.
How happy are you when an order arrives at your door, and it’s wrong?
Whether you get the incorrect size, a different product, or something is missing, that’s a frustrating experience. And you, as the customer, are going to take that anger out on the company you ordered from, not the people who packed it or made the delivery.
A 3PL partner needs to maintain or improve your accuracy levels. In many cases, they do just that because they’ve got the right picking technology to keep orders moving smoothly. They’re experts in getting the right thing in the right box and sending it to the right place. If you’re struggling with accuracy and seeing returns eat your budget, seek out a fulfillment partner.
Narrowing down this area can be a little difficult because nearly everyone will promise 99% to 100% accuracy. Ask for a promise that goes above and beyond, such as the 3PL paying you when a mistake occurs.
Amazon has created an ever-growing demand for getting a product in two days. We find ourselves getting impatient when we have to wait longer than that, even if we knew up-front that a product would take a while. That’s the reality your customers live in too.
Delivery speed is vital to the success of your business because it can impact repeat customers and overall customer lifetime value. Your warehouse has to get the right order together and out the door just in time. This can be a major issue when your picking is slow, you don’t have a correct product or packaging inventory count, or you have more orders than you can handle.
Remember, you don’t get the points for speed if a package arrives in the two days, but the contents are wrong.
Breaking your promise on the speed of delivery can anger customers and lead to emails and tweets that ask for a full refund of the shipping cost. 3PLs can save you from a headache if you’re struggling here.
The thing to ask your 3PL partner is how fast they can reach the places your customers are. Look at average orders as well as your furthest fulfillment needs. Think of it like a coverage map that cell phone companies used to promote. Make sure your metros are covered by any 3PL on your shortlist.
Mix in Your Unique Needs
Each business operates a little differently, so your 3PL partner will need to be able to accommodate that. Look for what makes your business unique and what helps you stand out from your competition.
It might be that your products are awesome and can’t be damaged. Or you commit to being green, so you can’t use any plastics in your boxes or fill materials. You might be all about style, so your 3PL needs to support colorful boxes and tissue and stickers. If you’ve made delivering on promises core to your business identity, then remember that this extends to order accuracy and speed.
Unique challenges can also be around your products that may have a special temperature or humidity needs, shipping requirements because of the materials included or an inventory that completely changes every other month.
Find these and then ask each 3PL on your shortlist for information about how they’d support you.
See If It Can Scale
You’re looking at a 3PL fulfillment center because you want to offload warehouse activities while you build up your operation. You want to grow.
The 3PL should be able to accommodate that growth. Take your projections to the 3PL and see if they can match the potential demand and what that does to your costs. Ask if they’ll have the space to carry the additional needed inventory and if they’re able to get products to customers in new markets.
While you’ll want the main location of the 3PL fulfillment center to be near your average customers, make sure you look at capabilities to serve the additional regions you plan to market to and reach shortly.
Match Culture and Capability to Your Business
We’ll leave you with a thought that some companies forget: you’re going to have to deal with your 3PL pretty often. You’ll talk to us when things go wrong and when everything is fine. If your products or strategy or boxes or even your tape change, you’ll be talking with us.
Find someone you like talking to and working with or it’s going to be a frustrating experience for you and the 3PL.
At Red Stag Fulfillment, we make a variety of guarantees about our service, such as reaching 97% of Americans within 1-2 days or a 100% order accuracy rate. We think those are great, and you probably do too. That said, we always take the time to speak with each potential customer to learn more about them, their business, and their culture.
If you’re comfortable with how your 3PL operates, whether it’s us or someone else, then you’re more likely to have a positive experience. That flows down to your customers, who will benefit by getting better service and (hopefully) buying more products.
Get to know the 3PLs you’re considering and see if the cost, accuracy, and speed needs can be met. After that, think of each as a person and select the one you’d hire for an internal position. You deserve to be happy with your choice.