U.S. e-commerce sales continue to increase, reaching an estimated $870.8 billion in 2021, a 14.2 percent increase from 2020, according to the U.S. Department of Commerce. As sales increase, so do supply chain challenges and the associated fulfillment cost, which are one of the most significant expenses for a brand or retailer. More and more companies are turning to third-party logistics providers (3PL) to help control these increasing costs.
Here are five ways a good 3PL partner can help you lower your fulfillment costs today.
U.S. e-commerce sales continue to increase, reaching an estimated $870.8 billion in 2021, a 14.2 percent increase from 2020
Cost-Effective Warehouse Space
Ecommerce growth has increased demand for warehouse space across North America, and warehouses and fulfillment centers will continue to see “intense pressure” for space through the end of 2023, according to a forecast from Cushman & Wakefield, a real estate services firm. As a result, there will be low vacancy rates and increased rates.
3PLs with existing distribution and order fulfillment centers can help customers avoid renting hard-to-come-by warehouse space and updating it to meet their ecommerce fulfillment needs. Utilizing shared-space distribution centers can also provide additional flexibility as order volumes fluctuate.
3PLs can also help maximize existing space within the warehouse with proper storage solutions, mixing pallet racking, flow racking, shelving, and floor storage designed to optimize the area within the four walls, lowering your storage fees, fulfillment fees and overall distribution costs.
Effective Labor Management
The picking and packing needed for ecommerce fulfillment is more labor-intensive than traditional business-to-business shipments and can require as much as three times more labor.
3PLs tend to have an established workforce and access to temporary staffing to meet surges or dips in demand. Having an agile workforce means you can optimize your labor force by only paying for the labor you need, when you need it.
3PLs will leverage their warehouse management system to optimize the warehouse slotting and streamline picking and packing processes, which increases employees’ efficiency, allowing you to do more with less staff. 3PLs are also investing in technology and inventory management systems and can help facilities incorporate automation and robotics solutions to optimize labor and increase overall productivity.
Negotiate Parcel Shipping Rates
Parcel costs continue to increase, but 3PLs can help you optimize your parcel management and in some cases leverage their bulk shipping business with major carriers to negotiate better rates and help you cut your shipping costs. Technology solutions such as order management systems, parcel analytics and rate shopping software can all uncover more efficient processes and additional shipping cost savings.
Transit time and shipping zones also directly affect shipping rates, so overall network optimization and strategically locating distribution centers closer to customers can help you provide rapid shipping at optimal costs. 3PLs can offer a network of shared distribution centers, that may not be warranted for an individual business.
Reduce Packaging Materials
Package size and weight contribute to overall parcel costs. Filler, which is needed to keep the package contents from shifting and getting damaged during transit, can add weight to a package.
Utilizing the correct size box and reducing packaging materials can result in smaller and lighter packages. Changing the packaging type, such as using a polybag instead of a cardboard box, is another option. The right packaging material depends on product type and the amount of protection needed. Proper packaging sizes can also affect many assessorial fees with carriers, and dimensional weight.
3PLs that can directly handle intermodal and drayage services as well, can help optimize port drayage movements and provide valuable updates throughout the dray process. Visibility, inventory tracking and inventory control are critical, and dray providers are increasingly doing more inventory control and SKU management to help shippers navigate the current challenges. With the right software, a 3PL can track containers as soon as they hit the ocean and track terminal activity, so you will know precisely what is in a container and where it needs to go. A full service 3PL can coordinate with you and direct containers to the right fulfillment center based on shifting inventory needs and current and projected orders.
The right 3PL partner can help you save time and money
Whether it’s optimal management of labor, a focus on sustainable and right-sizing packaging, better negotiated small parcel shipping rates, or the ability to manage your drayage and distribution needs seamlessly—the right 3PL partner can help you save time and money across your supply chain.
Kasia Wenker, Director of Supply Chain Solutions