Ecommerce companies of all sizes – from small start-ups to Fortune 500 enterprises – rely on third-party logistics (3PL) providers to handle their inventory management and order fulfillment. These 3PL partners are supposed to help companies navigate today’s business landscape, boost their efficiency and on-time delivery performance, and streamline their supply chain operations – but, in many cases, they don’t.
Indeed, many ecommerce players find that working with 3PLs – instead of eliminating their logistics headaches – can actually lead to increased supply chain complexity and costs. One of the primary reasons for this phenomenon is that companies engage numerous 3PL providers at the same time, and this can create issues – particularly when it comes to inventory management.
When you outsource your inventory storage and distribution to multiple 3PLs, you have to manage multiple inventory pools across multiple sales channels – and this can become a major source of irritation and inefficiency for your organization.
That’s why many companies are realizing that – when it comes to inventory management – it can be advantageous to “put all your eggs in one basket” by pooling your inventory with one 3PL provider and letting them handle all your warehousing and distribution operations across all your sales channels.
In this blog, we will highlight the three key benefits of consolidating your inventory with a single 3PL provider.
Key Benefit #1: Reduced costs for fulfillment and storage
One of the key benefits of pooling your inventory with one 3PL provider is that it can enable you to cut supply chain costs, which is a critical business objective for most ecommerce firms.
When companies consolidate their inventory with a single 3PL, they typically see cost reductions in two areas:
- Fulfillment costs: By pooling your inventory with one 3PL provider, you can leverage economies of scale to drive down your actual costs of fulfillment. Simply put: As the volume of your orders with a 3PL increases, the price that you pay for fulfillment tends to decrease. There are two reasons for this: 1) By placing all your inventory with a single 3PL provider, you can position yourself to negotiate better contracts with lower fulfillment costs and 2) Many 3PLs give discounts for high-volume orders. For example, Amazon Multi-Channel Fulfillment (MCF) is a 3PL that offers up to 50% discounts for multi-unit orders.
Storage costs: 3PLs charge for inventory storage – and so the longer your stock sits in a 3PL’s fulfillment center or warehouse, the more you will rack up in storage fees. By consolidating your inventory with a single 3PL, you can expose that one pool of inventory to multiple sales channels – thereby increasing the chance that it will be sold and decreasing the amount of inventory you have in the warehouse (and your 3PL storage costs). Also, by selling off and utilizing your stock, you can avoid the additional costs involved in collecting your excess, stranded inventory from your 3PL provider and shipping it back to your facilities (unless, of course, you just want to write it off).
MCF allows you consolidate your inventory into one global pool that you can utilize to fulfill orders through Amazon.com or “off-Amazon” sales channels, and this multi-channel exposure ensures that you will be able to sell more – and store less – inventory.
Key benefit #2: Improved operational efficiency
Besides being a source of increased operating costs, distributing your inventory among numerous 3PLs can also be a driver of increased complexity across your logistics operations. Indeed, it can be a time-consuming and labor-intensive endeavor to manage relationships with multiple 3PL partners – each of which has a different standard operating procedure for inbounding shipments of your inventory, invoicing and billing, and other processes.
By pooling your inventory with a single 3PL, you can minimize the amount and time and effort you spend managing your 3PL workflows, consolidate the inbound stock shipments you send to your 3PL’s fulfillment centers, and drive improved operational efficiency across your organization.
Key benefit #3: Increased opportunity for business growth
The third key benefit of consolidating your inventory with a single 3PL provider is that it can open up opportunities for your business to scale and grow.
If you partner with a 3PL – like MCF – that has a global network of fulfillment centers and logistics resources, you can:
- Strategically distribute and position your inventory around the world so it’s close to where your customers are.
- Gain greater visibility over inventory across your end-to-end supply chain (as it’s gathered together in a common inventory pool).
- Make data-driven decisions on how to best utilize your global inventory pool to satisfy customer demand across different markets and sales channels.
- Eliminate the need to constantly search for new 3PL providers in various locations around the world as your business grows.
If you consolidate your inventory with a 3PL partner that has a global presence, you can set your business up to succeed today and scale in the future.
Navigating today’s complex business world is challenging – and so ecommerce companies are always looking for ways to simplify and strengthen their supply chains.
Pooling your company’s inventory with a single 3PL provider is one strategy that can do precisely that. By consolidating your inventory with one 3PL, you can streamline your end-to-end logistics operations, cut fulfillment and storage costs, boost efficiency, and unlock opportunities for growth and expansion.
Just remember that – if you choose to pursue this pooled inventory strategy – it’s critical that you partner with a 3PL provider, like MCF, that possesses the operational excellence and global logistics network you need to support your long-term business growth around the world and across all sales channels.