If you caught last week’s blog on When is the right time to use a 3PL, you know the eight telltale signs that your eCommerce business is ready for third-party logistics. What you might still be wondering, is when not to use a 3PL and the telltale signs that your business isn’t ready to outsource its fulfilment.
While there is no absolute right or wrong time to use a third-party logistics provider, jumping too soon could have negative consequences for your business. Consequences such as:
- Excessive costs;
- Excessive time; and
- Poor user experience.
These consequences might push you to use a substandard provider, raise your product prices, reduce your delivery speeds, or bring your logistics back in-house – vowing never to outsource again. Not ideal for your customers, your business or your growth.
To ensure you take your eCommerce business in the right direction at the right time, we’re sharing the unthinkable: 10 signs to not use a 3PL.
Recap: why do eRetailers outsource their logistics?
This blog isn’t intended to paint a negative image of third-party logistics. When used at the right time, a 3PL brings significant benefits to SME retailers, including:
- Access to expertise;
- Access to technology; and
- Access to resources.
Together, these benefits power you to ship orders quicker, cheaper and more reliably than when fulfilling in-house. This generates a flywheel effect of better customer experience and more positive customer reviews leading to more sales and deliveries and so on.
Definition: the flywheel effect was popularised by Amazon and is when you put in a large amount of initial effort to generate sales that then continue growing on their own.
But to fully realise these benefits, you must be ready.
When shouldn’t you use a 3PL?
In our experience as a multi-channel fulfilment service, there are five signs that a business isn’t yet ready for 3PL:
You’ve just started your eCommerce journey
We all want to start as we mean to go on, but at the very beginning of your eCommerce journey, fulfilling orders in-house is hugely beneficial.
Use this golden opportunity to learn the ins and outs of your business before outsourcing, establishing your exact requirements so you can later partner with a 3PL provider best suited to your needs.
You have a low order volume
When you outsource your eCommerce fulfilment, you’re paying someone else to store your products. With fast-moving stock, this storage fee is minimal because items don’t require storing for long.
However, if you have slow-moving stock, this storage fee begins adding up and denting your profits. Keep slow-moving stock in-house or find a 3PL with low long-term storage fees.
You have small margins
Outsourced fulfilment has many cost benefits. However, if your products have a small or micro profit margin, it’s likely to be more cost-effective to fulfil orders in-house, by yourself.
That’s not to say you can’t outsource fulfilment if you want to, but the return on investment will be significantly smaller than using outsourced fulfilment for products with larger margins.
Your packaging is tailored
Something we see a lot in the luxury homeware market is tailored packaging – picking different coloured ribbons, boxes and inserts to complement the products ordered.
This is great for high-end brands delivering a personalised customer experience but can result in costly 3PL fees and skills, making it cheaper to conduct in-house.
Top tip: if you offer tailored packaging on some but not all items, consider a multi-channel fulfilment strategy, using a 3PL to deliver all branded and non-branded boxed items and in-house fulfilment for any tailored packaging.
You don’t have SKUs, barcodes or ASINs
A 3PL requires your products to have identifiers so they can quickly recognise and locate items when an order comes in. These are usually in the form of a SKU, barcode or ASIN.
If you don’t currently have product identifiers or your manufacturer is unable to provide them, you will need to implement them before using a 3PL.
You operate a fragmented supply chain
Shipping products to a fulfilment centre and having them processed costs money. This cost significantly increases if you’re making multiple shipments of low quantities.
Therefore, using a 3PL when operating a fragmented supply chain or working with suppliers who can’t send products in bulk can be cost-prohibitive.
You sell hazardous materials
Not all 3PLs handle hazardous materials and this affects more businesses than you might think. Nail varnish, batteries and perfume can all come under the category of hazardous.
If you want to use outsourced fulfilment for such products, look for a 3PL specialised in handling hazardous products, with the necessary licences and training.
Your products have a micro shelf life
While established 3PLs are experienced in storing, handling and shipping expiry dated products, if your products have a micro shelf life this could prohibit outsourced fulfilment.
For example, if you sell freshly baked bread, the time it takes to ship loaves in and out of a fulfilment centre will take up too much valuable toasting time.
You want to keep your store small
Not everyone has ambitions to make it big in the field of eCommerce. Hobby sellers and passion projects often use online sales as an added bonus, with no big plans to expand or take over the world. That’s ok.
If you’re comfortable managing in-house fulfilment yourself and you want to continue as a small or part-time seller, don’t feel pressured to use a 3PL provider.
You haven’t found the right 3PL
Your fulfilment costs are spiralling out of control, you’ve maxed out your internal capacity, you’re struggling to deliver orders quickly, and you’re confident that you need a fulfilment partner to help. But you haven’t found the right one.
Never rush into a 3PL relationship, especially when they don’t meet all of your requirements. Take the time to understand what you need, and find a partner who can help your business now and into the future. In particular, you should look for:
- Resources – the space, packaging and staff to suit your fulfilment needs.
- Experience – expertise in delivering eCommerce orders quickly and professionally.
- Technology – the latest technology to increase efficiency and reduce costs.
- Pricing – using economies of scale to offer affordable and competitive pricing.
- Speed – the ability to deliver orders quickly.
- Scalability – the capacity to scale with your business.
- Ethical auditing – ethical auditing by reputable industry bodies.
Further reading: How to outsource your fulfilment, including a checklist of what to look for in a 3PL
When not to use a 3PL – final thoughts
Outsourcing your eCommerce fulfilment to a third-party logistics provider is an exciting step for any business. However, it’s not a step you should rush into.
By ensuring that your business is ready for outsourced fulfilment, you ensure that a 3PL will benefit your brand, customers and bottom line.
If you’re not ready for outsourced fulfilment, that doesn’t mean you won’t ever be ready. Use the above signs to make your business suitable for a 3PL, whether that’s increasing your order volume, establishing your requirements, preparing your stock or connecting with established 3PLs to find the best partner for your business.
eCommerce fulfilment is a journey – enjoy it.
Synergy Retail Support is a 3PL that supports eCommerce brands looking to take their business to the next level. Using experience, technology and knowledge, we can provide your business with a truly personal service that enhances your brand reputation and helps your business to scale.
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One of the most important aspects of growing online retail successfully is finding a courier service that ensures a positive shipping experience (for all parties) and protects against negative feedback. Get it right, and you’re likely to enjoy repeat sales and build a positive reputation influencing, first-time buyers without you paying any cost per acquisition.