How to Choose the Right 3PL for your E-commerce Brand
E-Commerce

How to Choose the Right 3PL for your E-commerce Brand

A guide to choosing the right third-party logistics (3PL) service for your e-commerce or D2C business.

Team Hopstack
LAST UPDATED
May 18, 2022

When it comes to e-commerce businesses, having a Third-Party Logistics or 3PL service provider can bring so many benefits. A 3PL service provider offers an all-inclusive solution for warehousing, packaging, handling, and distribution. An ideal 3PL service provider supports your e-commerce business with reliable logistics solutions and helps you streamline your business workflow. 

In today’s day and age, everything is supercharged with cutting-edge tech, and it is critical to ensure your 3PL service provider is too. The primary reason behind partnering with a Third-party Logistics provider is to maximize efficiency and profitability. On the other hand, having visibility and control over your business is critical. Hence, choosing the right 3PL service provider for your e-commerce business is essential.

This article will dive deeper into understanding Third-party Logistics and how they can help transform your e-commerce business. Not all Third-party Logistics are built the same, and hence it is essential to note that different 3PL providers specialize in different fulfillment strategies. We will also talk about a few things you should know before partnering with a 3PL service provider.

What is Third-party Logistics or 3PL?

Third-party Logistics, or 3PL (as it is commonly known in the supply chain and e-commerce industry), are companies that offer services like receiving, warehousing, inventory management, packaging, shipping, and reverse logistics like return management.

When you partner with a powerful Third-party Logistics provider, almost every step of your warehousing process is simplified. As the 3PL team systematically handles major warehousing activities, you can focus on scaling your business to the next level. That’s not all; you significantly reduce costs when implementing Third-party Logistics for your e-commerce business.

What to Look for in a Third-party Logistics Provider?

As mentioned earlier, not all Third-party Logistics are the same. Each of the 3PL providers offers different specializations and services. It is critical to choose the right 3PL service provider that suits the nature and complexity of your business. Here are a few things to look for when you decide to opt for a Third-party Logistics service provider:

Integration Ability

When looking for a Third-party Logistics provider, it is crucial to ensure that both you and your 3PL provider are equipped with the right set of tools that can easily integrate with each other. There is no one-size-fits-all strategy for integration, and you will have to do your research and understand where you stand in terms of technology. Most of the time, you will have to look for a modern Warehouse Management System that comes equipped with easy integration for Third-party Logistics. Once you do so, both your e-commerce business and the 3PL integration can work harmoniously. 

We recommend consulting industry experts to help you understand what suits best for your business. 

Range of Offerings

There is a long list of things Third-party Logistics offers. And understanding how they can benefit you is essential. You must know what you need beforehand to ensure the most out of a Third-party Logistics partnership. You should not have to choose multiple 3PL providers for something that a single service provider can offer. That is simply counterproductive. Ideally, a Third-party Logistics provider should effectively manage almost everything from your inbound flow to your outbound flow. 

It is also critical to ensure you completely utilize the capabilities of the offerings of the Third-party Logistics service provider. When you do so, you make the entire partnership a seamless experience that maximizes efficiency. 

Modern Technology

Your Third-party Logistics provider at all times should be equipped with the latest technology. In today’s rapidly evolving world, everything is dependent on the convenience and accuracy offered by modern technology. This holds even for 3PL services. If your 3PL services provider has not integrated their systems with modern software and tools, you might encounter the chances of reduced efficiency and accuracy in order processing. Hence it is critical to choose a 3PL service provider with modern technology.

We recommend you go through our article on how Warehouse Digitization can benefit your e-commerce business to learn more.

Customization and Flexibility

An e-commerce business is unique and comes with a unique set of challenges. Your Third-party Logistics provider must offer customized solutions to tackle these challenges. Let us understand this with an example, say your e-commerce business has a product with specific packaging and handling requirements. An ideal 3PL provider should provide solutions to individually cater to that product to ensure all orders are shipped as securely as possible. 

Let us consider another case; it is the holiday season, and you are running a promotion on a specific product in your catalog. This promotion requires the product to be bought in bundles for the offer to be applicable. Whether or not the customer chooses to opt for the promotion is the customer’s preference. In any case, the 3PL provider has to ship the product exactly as ordered. This requires a specific level of customization to ensure everything works smoothly at all times.

Scalability

An e-commerce business is at all times dynamic in nature. This applies to both operations and growth. An ideal Third-party Logistics provider should be capable of growing their operations as and when your business grows to enhance performance and throughput. All of this while keeping speed and accuracy in operations and order processing at optimal levels. That being said, it is also critical to ensure costs are low and consistent regardless of the scenario.

Multi-Tenant Support

In a nutshell, Multi-Tenant support means a software capability where a single software instance can serve multiple user groups. What this implies for Third-party Logistics is that both the primary stakeholders (you or your e-commerce business) and the customers can access and interact with order-related information all in one place. Information such as delivery status, item-level information, operational errors, and much more, with the help of a single powerful software. 

Again, this point comes down to the importance of 3PL service providers using modern software for their operations. 

High Performance

Performance is a crucial part of an e-commerce business. Regardless of what tools you choose for your business, they should work in harmony to make the most impact. Performance can be very subjective. Hence it is critical to measure them using appropriate industry metrics. Third-party Logistics providers should have analytics and reporting modules built within their Warehouse Management and Order Fulfillment Software to track and monitor the performance effectively. 

You will have to do your research to find out which Third-party Logistics service provider is high performing and most suitable for your e-commerce business. Some of the Key Performance Indicators (or KPIs) you should prioritize are Order Fulfillment rate, Order Lead time, Order Return rate, and Weekly Throughput.

We recommend checking out our article on Important Key Performance Indicators to learn more.

Enhanced Network

One of the most important benefits of opting for a Third-party Logistics provider is to enhance your network. According to research, the 3PL industry is expected to grow by a CAGR of 7.1% by 2027. A modern 3PL gives you the ability to increase your fulfillment network. It is critical to have a robust network to beat the competition in any business. You can dramatically reduce order errors and improve accuracy and speed when you do so. It is vital to ensure that the Third-party service provider you choose offers an extensive network of resources and fulfillment centers.

Omnichannel Capabilities

Implementing Omnichannel Fulfillment is essential if your business has both an online storefront and a retail store. Partnering with a 3PL service provider who understands the Omnichannel Fulfillment model’s challenges is vital. With multiple touchpoints and fulfillment centers, it is important to ensure the Third-party Logistics partner has the resources and expertise to operate in these complex scenarios. Doing so will help you reduce operating costs and improve customer satisfaction. 

Take a look at our article on Omnichannel Fulfillment to learn more.

Benefits of Partnering with Third-party Logistics

There is a long list of benefits of partnering with the right 3PL service provider. Here are a notable few:

Professional Expertise

It is challenging to anticipate the market’s demands in today’s rapidly evolving commerce. While that is true, it is more challenging to accommodate the right kind of expertise to keep up with these competitive conditions. Hence, when you partner with a 3PL provider, you enable the ability to hire industry experts for all your business needs.

Reduce Expenses

Third-party Logistics partners are experienced in warehousing and distribution; they come equipped with the necessary resources to keep up with the market. As a result, reducing operating costs and overall expenses.

Optimization

Another significant benefit of the 3PL service providers is that they provide unparalleled optimization at almost every stage of warehousing and logistics. Robust optimization ensures services are tailormade to suit your business needs and you evolve as and when there is an increase in demand.

Customer Satisfaction 

Partnering with Third-party Logistics ensures accuracy in order fulfillment and quick deliveries. As a result, customers get their orders the way they want them as early as possible, improving customer retention and satisfaction.

Increased Profits and Growth

Every investment and every business partnership should be directed toward profitability and growth. The 3PL partnership is no doubt a lucrative option. You improve your profits and gain the ability to grow your business to a whole new level.

Bottom Line

We at Hopstack believe modern technology and collaboration can do wonders for e-commerce businesses and Third-party Logistics providers. Hopstack provides a powerful Order Fulfillment and Warehouse Management/Execution System to streamline your entire workflow. 

If you are an e-commerce business owner or warehouse manager, with Hopstack advanced solutions, you gain the ability to manage your warehouse operations efficiently. If you are a 3PL provider, you get a unified management system for control and order processing. You gain the ability to control and view your clients’ operations from one dashboard. 

Schedule a demo to learn more about how Hopstack is transforming e-commerce fulfillment now!

ABOUT THE AUTHOR
Team Hopstack

Hopstack brings you the latest articles, guides and long-form explainers on topics relating to warehousing technology and automation, supply chain, robotics and the newest trends in these spaces.

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