In modern retail, the pressure to meet growing customer demand is greater than ever. As ecommerce continues to rise, businesses are experiencing a significant increase in orders.
According to a Statista report, ecommerce sales reached an estimated 5.8 trillion U.S. dollars and are expected to grow by almost 40% within three years. While the tremendous growth is great news for businesses looking to expand operations, it presents significant logistical challenges for organizations of all sizes.
As companies begin scaling, items such as managing inventory, fulfillment and shipping in-house become increasingly complex. As a result, many businesses find themselves stretched thin, trying to keep up with customer expectations while maintaining profitability.
More brands are now turning to third-party logistics (3PL) providers to help keep the balance between growth and revenue. The following sections offer a closer look at seven signs that it's time to bring on a 3PL partner to promote continued growth throughout the organization.
A third-party logistics provider, or 3PL, is a company that manages logistics and supply chain functions on behalf of another business. Generally, the main areas of support include warehousing, order fulfillment, shipping and returns management
However, the overall goal of a 3PL partnership is to help companies scale their operations by leveraging industry expertise, technology and infrastructure that would be too difficult or costly to develop internally.
Partnering with a 3PL can deliver several key benefits for growing businesses. One of the biggest advantages is the ability to realign resources.
Many organizations that try to scale often spend more time away from their core operations. 3PL partners can lighten the load by completing logistics tasks and allowing teams to focus on other important areas like product development, marketing, or customer service. A 3PL company can also provide access to advanced technology and economies of scale that would otherwise be unattainable.
Depending on your organization's current supply chain structure, 3PLs can assist in various ways, including:
While some organizations worry that outsourcing operations can lead to issues, many companies with a 3PL partnership experience reduced costs and enhanced operational efficiencies.
Many executive teams realize the value of having a 3PL partner, but it can be challenging to determine when to bring one on board. The following seven signs indicate that your company could benefit from outsourcing some of its supply chain operations.
Often, one of the first signs that it's time to consider outsourcing with a 3PL is order volume. When your order volume surges beyond what your team can handle efficiently, it's a clear indicator that the business has outgrown its current logistics capacity. An inability to keep up with demand can result in delays, bottlenecks and poor customer experience. While hiring more staff might seem like a solution, it's often costly and inefficient.
Instead, partnering with a 3PL allows your organization to scale up or down according to demand without the overhead of hiring, training and managing new staff members.
Another sign that it's time to look for outside supply chain support is inconsistent shipping times. Today's customers expect fast, reliable shipping with the option of same-day or next-day delivery. If your brand struggles to meet customers' expectations, it can lead to negative reviews and lost sales. In fact, a FarEye survey revealed that 85% of consumers would not return to shop from an online store after just one poor delivery experience.
Working with a 3PL can provide flexible shipping options to mitigate the risk of late deliveries. Most partners have established relationships with carriers and access to multiple shipping methods that help provide better delivery times and more cost-effective shipping solutions.
While many organizations focus on growth and expansion, space is often an issue that doesn't get noticed until it's a problem. However, if you're constantly reconfiguring storage or renting additional space to accommodate product line expansion, it may be time to partner with a 3PL.
Many 3PL providers have access to large-scale warehousing facilities that accommodate fluctuating inventory needs. Multple locations is also essential for scaling or reaching a variety of geographic regions. For example, Cart.com has an extensive nationwide network of 12 fulfillment centers with over 8.5M square feet of warehouse space that businesses can use to expand operations.
Shipping costs can quickly eat into your profit margins, especially if you can't negotiate favorable rates with carriers. Since 3PLs work with multiple clients, they often have greater leverage when negotiating shipping contracts, allowing them to pass those savings onto your brand.
Another cause of higher shipping costs is inefficient packaging and routes. An experienced partner can help optimize both processes through data and technology. For instance, route optimization software is a great tool to efficiently move products from point A to point B while reducing shipping zones and minimizing hidden fees.
What often happens as organizations scale is that quality tends to dip. Resources are stretched then, and team members are trying to balance an increased workload, which can lead to frequent fulfillment errors. If you've noticed an increase in customer complaints about wrong or incomplete orders, it's often a sign that your fulfillment process needs improvement.
Working with a 3PL can help reduce the margin for error through automation and a streamlined process. Many partners already have state-of-the-art order management systems that ensure accuracy at every stage of the fulfillment process. Instead of investing significant capital upfront on the technology, your organization can access the software through a partnership.
According to the National Retail Federation, $428 Billion in merchandise was returned in 2020. Since then, the number of returns has only increased, causing more pressure on the supply chain process. Even though returns are inevitable in ecommerce, managing them efficiently can be challenging. A slow or clunky returns process can frustrate customers and harm your brand's reputation.
One way to navigate the challenges of the returns process is to work with a 3PL specializing in reverse logistics. These partners are experts in streamlining the returns process to help minimize costs and improve customer satisfaction.
Most 3PL partners will assist in the following areas:
As customer shopping habits evolve, brands are tasked with managing orders from multiple sales channels, including ecommerce platforms, brick-and-mortar stores and marketplaces like Amazon. This omnichannel approach adds complexity to fulfillment operations, as brands must coordinate inventory and shipping across various channels.
Typically, omnichannel fulfillment has three main challenges – inventory synchronization, fulfillment speed and integration. While companies may be able to handle each issue internally, it often puts a significant strain on resources. One of the best ways to bolster an omnichannel approach is through a 3PL partnership.
A 3PL can help centralize these processes, offering technology solutions like order management systems that ensure real-time inventory updates and seamless shipping across channels. With the ability to integrate multiple sales channels into one streamlined system, a 3PL can also offer advanced fulfillment strategies like ship-from-store or ship-to-store.
Whether your company plans to launch a new product line, increase its footprint or expand operations, a 3PL partner can help make the process go smoothly.
Cart.com combines best-in-class 3PL services and fulfillment software with a team of experienced supply chain professionals to help brands enhance their organizational efficiency. Contact our team today to learn how we can help your company expand operations through a 3PL partnership