E-commerce is a massive industry that has snowballed in recent years, and it shows no signs of slowing down soon. The latest figures expect this sector to reach $6.3 trillion in 2023. While it’s good news for those in the industry, a fast market growth rate comes with challenges, such as more complicated inventory management.
One way to manage the growing demand for e-commerce is to use third-party logistics or 3PL services. They are logistics providers that specialize in warehousing and distribution services. It can help e-commerce retailers streamline their supply chain, making delivering products when customers want them easier.
In this article, we’ve rounded up five ways 3PL services help businesses gain a competitive edge and market growth.
Less Time Spent on Logistics
Logistics are the backbone of any e-commerce business. Every order you process must be picked, packed, and shipped to the customer. While these may seem like simple tasks, logistics is a time-consuming and complicated process that could take away from your ability to focus on the business.
The 3PL helps you with this by taking care of the logistical functions so that you can devote your time and energy elsewhere, specifically to the sales function and customers. They have years of experience dealing with shipping carriers like UPS or FedEx and know exactly how to get a package where it needs to go without any problems.
3PLs can help you save money on overhead costs, including labor and equipment. By outsourcing their warehousing operations, companies can reduce their storage space requirements and the time it takes for products to get from their point of origin to their point of sale. In other words, they don’t need to rely on expensive warehouses to meet customer demands quickly.
Additionally, 3PL providers do almost everything except take orders themselves. They usually manage them through software systems, which don’t require much human interaction besides uploading inventory levels and receiving notifications when shipments arrive at each destination point. As a result, these menial tasks requiring minimal training time can be avoided, keeping administrative costs low.
Better Customer Service Experiences
Another way that a 3PL can help your e-commerce business is by providing better customer service experiences. It’s especially important for small and mid-sized businesses, which may need more resources to offer various customer support options.
Customers want to be able to track their orders and know when they’ll arrive. They also want accurate information about their deliveries and on-time delivery dates, so they don’t have to worry about missing important deadlines.
Continuous Improvement via Data Analysis
One of the biggest benefits of 3PLs is continuous improvement. Data analysis is the foundation of it, so it’s no surprise that 3PLs can use it to improve their services. To name just a few:
3PLs can use data to improve customer service. How 3PLs manage customer information and address issues, such as lost or damaged packages and late deliveries, will determine how satisfied customers are with their service.
3PLs can also use data to improve efficiency in their distribution network, including identifying bottlenecks or other issues causing delays at specific points in the process, then taking steps to remedy them (for example, by hiring additional staff).
Finally, 3PLs can use data to improve inventory management. They can use previous years’ operations to project future demand and also adjust plans accordingly depending on unexpected changes in orders placed by customers (like seasonal spikes).
Economies of Scale
There are two types of economies in the business world: internal and external. Internal economies refer to economic factors within a single company, while external economies happen between companies. Economies of scale are one such example of an external economy.
It refers to cost advantages that are achieved by large-volume production or distribution. A 3PL can offer a wide range of services, allowing them to achieve economies of scale. They don’t specialize in any particular service but offer all services under one roof for their customers’ convenience and benefit.
Are 3PL Services Expensive?
3PL fees generally cover the shipping and receiving of products from your company to your 3PL provider’s warehouse. They usually have an hourly rate of around $25-50 per the number of laborers required to pack and unpack your products.
The competition is fierce in the e-commerce world. To stay competitive and profitable, you need to think outside the box when financing your company. One way is by taking out a loan for these 3PL services.
It’s natural to feel some hesitancy about borrowing funds. After all, it can be a big financial commitment — and the last thing you want is to lose control of your finances. However, if you approach it with the right mindset and research beforehand, it can be an easy process that helps grow your business sustainably.
For example, if you’re in Tennessee, opt for local credit products, such as CreditNinja Memphis, Nashville, or Johnson City loans. Local lenders tend to give inexpensive rates, are more receptive to offers, and will likely offer personalized services. More importantly, speak with a professional before signing on any dotted line.
It’s possible to save money by using a 3PL service, but you should always ensure it’s right for your business. The key is to consider how much time and effort you save using the service. If you can’t see any potential savings, then there’s no reason to pay for the convenience of outsourcing your transportation needs.