5 Steps to help you choose the right 3PL provider
Are you an eCommerce entrepreneur struggling with rapid and unexpected growth?
Or maybe you’ve had some success but your growth has stalled?
Outsourcing your warehousing and logistics to a 3PL will free up your time to focus on creating more magic in your eCommerce business.
But, there is a lot to consider when you outsource your product warehousing and logistics. To help your eCommerce business grow and succeed, here are the 5 steps that will help you choose a 3PL provider.
Step 1: Understand cost structure changes and the impact on your business
Moving to outsourced warehousing and logistics will undeniably have an impact on your cost structure. There have two kinds of costs that every business incurrs; fixed costs, and variable costs – lets clarify them.
Despite the volume of your sales, fixed costs inside your business stay constant every month. They’re sometimes called ‘overheads’ – even if you don’t sell a single product, you’ll incur these costs every month.
Variable Costs are costs incurred by your business as a direct result of a sale being made. These costs vary up and down proportionally with sales volumes.
To ensure that outsourcing to a 3PL has a positive and profitable impact, you need to understand and balance the movements in variable costs against opportunities for fixed cost reduction inside your business.
Step 2: Gain extra time to focus on key areas of your business and drive growth
Spending time and energy coordinating movement of inventory detracts from the focus on core business activities and reduces your ability to drive growth.
For every hour you spend outside the core business, you’re incurring an enormous opportunity cost.
The key to making outsourced warehousing and logistics a profit driver for your business is to ensure that you gain more time every day to do the work you love that drives your business forward.
(Our free eBook has a simple opportunity cost calculation method to help you work this out – you can download the eBook here)
Step 3: Retain control and visibility of your operations
When you physically move your inventory out of your sight and out of your premises, it’s normal to feel a sense of loss of control and visibility.
To ensure the success of your outsourced logistics experience, you need to work with a 3PL provider that gives you complete control and real-time visibility of inventory status and movements.
The right outsourced warehousing and logistics partner will provide you with an advanced order processing and inventory management web portal.
Retaining control and visibility in this way will ensure that your customer’s experience remains positive and that the outsourced warehousing and logistics engagement is a profit driver for your business.
Step 4: Don’t engage a 3PL with the wrong pricing model for your business
To ensure that outsourcing your warehousing and logistics doesn’t become a profit drain on your business, your chosen 3PL provider needs to provide the right pricing model for your business.
When evaluating the pricing models of most 3PLʼs, you need to be aware of:
- Fixed location based storage charges
- Receiving charges, and
- Fees for administration.
If a 3PL provider is offering a simple, generic pricing models but can’t give you a clear understanding of the impact of the costs on your business – be careful. This lack of clarity and control can lead to cost overruns and devastating profit drain.
Step 5: Find the right 3PL provider who’s passionate about understanding your eCommerce business
Want to engage a 3PL provider who’s willing to do the work to understand your business and offer a pricing model based on that understanding?
Make sure their pricing model includes some or all of the following elements:
- Storage charges on a per-item basis
- No Order or Storage Minimum’s
- Handling charges on a per-item basis
- No Fixed Term contracts for 3PL services
You need to feel that your 3PL provider is reliable, professional, and trustworthy – that they’re willing to work with you rather than against you. The best way to do this is to take the time to arrange an onsite meeting so that you can decide this for youself.
Finding a 3PL provider can feel like an impossible task, and there are plenty of horror stories out there, but if you follow the 5 steps above you’re much more likely to find the right provider for you and your business.
Invenco is a Sydney based 3PL provider offering technology based 3PL eCommerce logistics solutions that save you time and support your business growth.
Running an eCommerce business and looking to outsource your logistics to a 3PL?
Concerned about understanding the real cost of outsourcing for your business?
Worried about losing control & visibility of operations?
If so, you need the help of our Profit Drain or Profit Driver eBook.