Why E-Commerce Brands Need 3PL Solutions More Than Ever

For today’s customers, shopping means shipping. The expectation is for fast, free delivery and a consistent user experience. That’s a challenge for traditional retailers, whose?supply chains are not built for same-day delivery. Even for e-commerce retailers, fierce competition makes it difficult to invest and adjust without compromising growth. In the face of higher demand and more complex shipping, e-commerce brands are turning to third-party logistics (3PL) solutions. Here’s why the case is compelling for outsourcing distribution, logistics, warehousing, transportation, and fulfillment to a 3PL partner.?

The Broad Case for 3PL Solutions in E-Commerce

E-commerce and 3PL solutions are each thriving in the always-on digital economy. E-commerce already represents 16% of retail sales in the United States, and the pandemic has injected a significant boost for growth. Online orders have increased by 80% in North America since January 2020. The 3PL sector has also enjoyed its steady rise, and the forecast is that the global?market will reach $1 trillion by 2022.?

E-commerce and 3PL make a natural partnership in the circumstances. Both are focused on driving efficiency and scaling to satisfy customer demand. Despite today’s end-to-end global supply chain, the last mile is all that counts for the consumer. As shoppers become more specific and more impatient in what they expect from an online retailer, not all e-commerce stores are positioned to respond.?

By partnering with a 3PL provider to handle fulfillment, warehousing, and transportation, e-commerce owners can focus on their core business activity. And it works. In one study,?90% of 3PL customers saw an improvement in their operations?after working with a 3PL partner so that e-commerce owners can be confident in return on their investment.?

3PL Solutions for the Omnichannel Experience

The logistical challenge in satisfying customers who expect an omnichannel service, with seamless transitions from brick and mortar to online, is considerable. 3PL logistics support can help e-commerce owners deliver a segmented approach, breaking away from the rigid, one-size-fits-all model. That means providing the agility to distinguish between premium customers who will pay extra for same-day delivery and those who will settle for a broader delivery window.?

An expert 3PL logistics provider can empower e-commerce brands to offer various delivery options, step up to spikes in demand and provide the essential always-on experience. They can absorb the need to stay on top of technology, minimize financial investment, maximize speed and feedback value into the supply chain through data collected at each touchpoint.?

Unlocking the Value in 3PL Warehousing

For e-commerce owners, plugging into the warehouse management system of a 3PL partner solves the?mismatch between supply and demand. Warehousing space costs for any e-commerce business, but valuable intelligence can be gleaned from inventory management and stock control data. A 3PL warehousing solution has the resources to release that value.?A study by McKinsey?illustrates the potential: whereas most stores operate on a 2% to 4% margin of earnings before interest and taxes, improved automation and efficiency can push the figure to 5% to 9%.

3PL warehousing partners can also offer a range of value-added services that the typical e-commerce store simply cannot embrace without putting excessive stress on the budget:

• Automation and paperless warehousing to maximize efficiency
• Strategic warehousing locations to minimize last-mile delivery costs
• Order picking, packing, and processing across the unit, case, and pallet volumes?
• Shipping-document generation

Next-Generation 3PL Fulfillment

The pressure on e-commerce brands to over-deliver in fulfillment comes from two sources. On the one hand, Amazon has set a formidable benchmark. The retail giant already enjoys a 60% market share in e-commerce in the U.S. and has scaled up to 3PL itself through Amazon Fulfillment. Amazon has over 100 active warehouses in the U.S., with more planned. The other challenge is the pandemic, which has accelerated e-commerce at a fearsome pace and increased the need for micro fulfillment options, such as click and collects and pop-up distribution centers.??

Whatever the competitive climate, the goal is still to decrease the time between order and delivery. In that respect, 3PL fulfillment partners can bring significant benefits:

• Bar-coding system to track inventory?
• Custom packaging, repackaging, and assembly to ensure that branding is consistent from online to unboxing?
• Return and exchange fulfillment. Some?15% to 40% of online purchases are returned, particularly clothing and shoes. While it’s not an area any e-commerce store will embrace, improving post-sale service can reap handsome dividends where customer lifetime value is concerned

Closing the Gap With 3PL Transportation

Transportation is arguably the most coveted service for e-commerce businesses that 3PL partners can offer. Few small or medium-size companies have the infrastructure to provide fast service at a competitive cost, yet that is the standard Amazon has planted in the mind of the typical consumer. With a network of distribution centers and efficient fleet-management resources, 3PL transportation partners can cover the last mile at an affordable cost and offer the following value-added benefits:

• Real-time data to give end-to-end transparency of product flows
• GPS tracking for full visibility of supply chain
• Trustworthy last-mile fulfillment from the customer’s perspective

Outsourcing back-end processes to an experienced 3PL provider allows e-commerce stores to focus on what they do best, building a brand. The e-commerce landscape is brutal, and the?cost per unit of an online order?can be five times that of a brick and mortar, according to an analysis by McKinsey. With that in mind, anything an e-commerce brand can do to secure a competitive advantage on the logistical side is likely to deliver rewards on the bottom line.?

Sources

Shopify –?3PL Guide 2021: What is Third Party Logistics and How to Choose?

Korn Ferry –?2019 THIRD-PARTY LOGISTICS STUDY

Deloitte –?FMCG, and retail (e-commerce) REBOOT

McKinsey –?Future of retail operations: Winning in a digital era

McKinsey –?Supply chain of the future: Key principles in building an omnichannel distribution network