F. Curtis Barry & Company Blog

3PLs play an integral part of many ecommerce and wholesale distribution supply chains. But if your company has ever researched costs, you will find that no two vendors have similar models when it comes to storage fees. Understanding how vendors charge for storage can be difficult, especially if you are starved for data.  

At a high-level 3PL storage costs follow one of two pricing models, on demand type storage, and dedicated space models which are more fixed cost. To understand which model is more advantageous for your ecommerce business or whole distribution, we need to look at each option further.  

After months of working with prospective third-party logistics (3PL) vendors, you likely received hundreds of pages of selling materials, email correspondence, and many verbal promises. The 3PL contract is important as it will record for you:

• the statement of work (SOW) and the 3PL services you are contracting for
• the standards of performance
• the pricing of various 3PL services
• the payment terms
• a host of legal clauses such as warranty and guarantees, and termination of the agreement

This blog acts as a checklist of contractual considerations to assist you in negotiating a 3PL contract that is fair and a win/win for the client and the 3PL provider acting as your outsource fulfillment provider. 

Companies that utilize third party fulfillment (3PL) services sometimes reach a point where they consider transitioning from the 3PL services to internal warehousing and order fulfillment. Some of what drives these decisions is to control costs, whereas others have had a bad experience with 3PLs and now only trust themselves with their product. Using a 3PL isn’t for every company.

Reviewing contracts for third party logistic (3PL) providers can be a daunting task – especially for those not familiar with the process.  One of the most critical aspects in any 3PL contract is the language surrounding pricing and rate increases.  It is vital to ensure that the language is fair for both the customer, as well as the 3PL.   

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.

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. 

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, both in supporting kitting and light assembly, to order fulfillment and reverse logistics.

Whether you have an online store, 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.

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.