Signs that Your Business Needs Third-Party Logistics (3PL)
Your business is growing faster than you can keep up. With rushes of orders come rushes of adrenaline, and you find yourself glad to be where you are. Yet with new success comes a problem: keeping old promises. If this sounds like you, then a third-party logistics company would be of tremendous service.
Third-party logistics (3PL) sounds complicated, but the core concepts are pretty simple. Companies in the third-party logistics industry provide distribution, warehousing, and order fulfillment services. Many mom-and-pop shops manufacture or receive their goods, store them in their garage, and pack their own items into USPS mailers. For a while, that approach works beautifully, but it simply doesn’t scale. This is a problem that third-party Blogistics companies, like Fulfillrite, seek to address.
Let’s be honest with each other: Running a business is hard, and you have to keep costs under control to survive. Outsourcing can save you time and streamline your operations. It may even save you money in the long-run. Nevertheless, you never want to haphazardly step into an ongoing business relationship. For that reason, we will be covering the 6 signs that tell you when your business may need to outsource to a third-party logistics company.
- Your customer base is growing faster than you can keep up.
Starting a business is notoriously difficult. Yet the effort involved in scaling a business is often underestimated. Having a crowd of adoring customers can be a wonderful development for your business. Truly, it is what all growth-minded entrepreneurs seek! As the din of the crowd raises from a whisper to a roar, though, you may find yourself unable to satisfy demand.
It happens all the time. At Fulfillrite, our clients so often experience rapid growth and need a helping hand. It’s easy to ship a handful of products every day, especially if your business is small. When you start sending 10, 20, 50, or more orders per day, the demands on your time caused by order fulfillment will become immense.
At this point, a third-party logistics company like ours can completely take that off your hands. In fact, if you send enough orders, not only will the additional cost over the price of postage be minimal, it might even be cheaper!
- Order fulfillment is becoming slow or inaccurate.
Sometimes we are fortunate enough to see waves of customers coming before they crash upon the shores of our business. Sometimes we aren’t. If you find yourself with sporadic bursts of orders that you are not able to fulfill in a timely manner, it will start to cause problems.
Customers may complain about long shipping times, and others might try to withdraw their purchases entirely. Slow shipping weakens customers’ perception of your quality. This will affect the number of repeat customers you get, which is critical to your business’s success. Worse still, you might end up sending a disproportionately high number of packages to the wrong places!
Once you see your quality of order fulfillment drop to this point, third-party logistics is not a “nice to have” anymore. It is a need.
- Shipping is chipping away at your profits.
When you hire another company to take care of business functions for you, the general expectation is that costs will go up. The hope, when outsourcing, is that the business will reallocate resources and generate more revenue to offset the cost. Did you know that hiring a third-party logistics company can actually reduce costs?
Third-party logistics companies have two advantages not available to most companies. First, they are often able to negotiate lower rates with carriers like UPS, USPS, FedEx, and DHL. Second, their entire operation is optimized to ship products effectively. Accounting for postage and materials alone, you may already save money. Once you add in labor, you almost certainly will.
There is only one caveat: you need to be sending orders fairly often. Once you start sending 100 or more orders per month, you can really see the cost benefits. Order fulfillment quickly becomes more cost-effective under these circumstances. The same principle applies for crowdfunding campaigns like Kickstarter or IndieGoGo, which result in a massive surge of packages to be sent.
Hiring a third-party logistics (3PL) company is an excellent way to address common business problems. Rapid growth and increasing complexity can hinder your ability to provide great service. Employees may be talented, but their energy is finite. The costs associated with handling inventory and order fulfillment may become excessive, or you may simply run out of space.
Your business might be growing faster than you can handle. Alternatively, you might be planning for the future. No matter what, third-party logistics should be on your radar. Even if you don’t need it today, you may need it tomorrow!