In assisting multichannel companies with deciding on whether to use third party warehousing, third party logistics (3PL) or contact center solutions, 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 warehousing advantageously. 

Getting the most from your third party logistics (3PL) provider this peak season starts with your forecasting accuracy. In order for you to get the most from 3PL solutions, you need to have established measurable service levels that are agreed to by both parties as part of your agreement. Establishing these service levels, and having the 3PL vendor meet them requires that you supply realistic forecasts for calls and order volumes by day, by week a month in advance so that the vendor can plan staffing accordingly.

Quite frequently, we assist clients in comparing third-party logistics and fulfillment (3PL) services and costs to the cost of expanding a company’s internal fulfillment operations. These have included ecommerce, wholesale and retail companies.  In the late 1990s or so, we saw 3PL operations which were not always cost-competitive or stable. But in the past several years, some medium and large companies have entered the market with extremely competitive services and costs.

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

Problems:

• You’re a start-up company with limited financial resources; or a company where fulfillment is not a core competency, but you have the need to upgrade your infrastructure (website, order management system, call center and or fulfillment operations) means an increase in expenses or requires new capital.
• You have seasonal spikes that run 10:1 or higher (peak vs. average sales week) and wish you could service these peaks in another way.
• You’re trying to build your business, and know fulfillment and customer service are critical to getting and growing sales—but fulfillment is not your core competency.
• Internal fulfillment costs continue to increase, impacting the bottom line.

In all of these situations,third party logistics might be the answer.

Many multichannel merchants focus on how they can lower operating costs of their supply chain logistics when they consider outsourcing certain tasks. When you use third party fulfillment partners to outsource your operations, you also outsource the investment. Sounds obvious, but the magnitude isn't always clear until you're faced with replacing an order management system, moving into a new fulfillment space or upgrading your website and platform.

We all know we’re coming out of a tough business climate. With many companies ramping up for fall and holiday seasons, there is an urgent need to increase productivity and reduce costs without having to make major capital purchases to do so. Here are some supply chain strategies to reduce your cost per order, increase capacity without expansion, and improve service levels in your supply chain logistics. The source of this information is experience gained in our supply chain consulting work with multichannel companies, as well as from the Supply Chain Summit.

Perform an Operational Audit

A warehouse assessment is a great starting point. Warehouse assessments will identify your needs, and help recognize potential improvements to process, layout and use of space, staff productivity, warehouse management system (and peripheral systems) and freight analysis. The objectives are to lower the cost per order, increase storage capacity within the existing center, reduce inbound and outbound freight costs, and improve service levels and turnaround times.