Managing warehousing and distribution services across the end-to-end supply chain—from post-production storage to distribution across various channels and ultimately, delivery to customers—is a huge logistical and financial challenge for most ecommerce companies.
To meet customer expectations, which are continuously rising, ecommerce businesses must be able to maintain the right amount of inventory in the right locations across their supply chain network at the right times. Only then can they:
- Meet inventory demand rapidly and reliably while preventing stockouts.
- Minimize operating and overhead costs for inventory, storage, distribution, and fulfillment.
- Manage spikes and drops in order volume due to seasonality, sales and promotions, business expansion or contraction, or other factors.
That’s why many ecommerce retailers turn to third-party logistics (3PL) providers to help them transport inventory from the manufacturing facility all the way to their customers’ doorsteps. Providers of third-party logistics services specialize in managing the logistics of the ecommerce supply chain and can help you handle the complexity and costs of managing your inventory across your supply chain. Some 3PLs, like Amazon Supply Chain Services (ASCS), a complete end-to-end supply chain solution, have global footprints and access to the latest technology, so you can store and ship your inventory closest to wherever your customers are—and help you expand into new markets to scale with ease.
In this blog, we will explore three key benefits of outsourced fulfillment services, and how 3PL logistics providers can help with your storage and distribution challenges.
Key benefit #1: flexibility as business conditions change
If you operate a retail business today, you have to cope with constant change, which is driven by a whole host of factors including:
- Shortfalls in supply due to production delays, unavailability of raw materials, or poor inventory management
- Fluctuations in demand due to seasonal spikes or sudden surges in customer orders
- Supply chain bottlenecks due to transportation issues, container shortages, or other factors
- The expansion of your business into new markets and product areas, or across new sales and distribution channels
- Business contraction due to adverse economic conditions or other factors like seasonality
To successfully steer your business through this dynamic and unpredictable environment, you must be agile and able to quickly adjust your operations to accommodate changing conditions.
When it comes to inventory management, flexibility is critical. For example, you may need more warehouse space to store safety stock in the run-up to the holiday season, or you less warehouse space for if your manufacturer is experiencing production delays.
If you own or rent your own warehouse, you’ll have a set amount of space in which to store your goods, which makes it difficult to rapidly recalibrate your inventory management operations when business conditions change. Depending on the situation, you may end up running out of storage space or getting stuck with empty warehouses. This is where third-party warehousing and distribution services can help.
Outsourcing your storage and distribution operations to a 3PL, however, can give you greater flexibility and control. Some 3PL logistics services, like ASCS’ Multichannel Fulfillment (MCF) service, include access to a global fulfillment network, offering flexible storage capacity: you can control how much stock you store in their facilities at any point in time, and when you want to utilize those goods to fulfill customer orders. By providing flexible storage capacity and distribution services to meet the evolving needs of your business, a 3PL can help you navigate today’s complex, ever-changing business landscape.
Key benefit #2: decreased operating costs
Another chief benefit of outsourcing your warehousing and distribution services to a 3PL is that you can significantly cut costs for inventory storage.
If you run your own warehouse, you must either buy or rent warehouse space, and this can quickly become a major capital expense involving payments for rent, taxes, utilities, security, and employees to manage storage and security at your facility. These overhead expenses can really add up and take a hefty toll on your bottom line.
By having a 3PL handle your warehousing and distribution services, you can avoid having to pay all the fixed costs associated with running your own warehouse.
Typically, all you have to do is pay one bill from your 3PL that includes charges for various services such as processing, storage, and transportation. The simplicity and transparency of this payment arrangement make it easy for you to get a good grasp of your inventory management costs, and (as agreements with 3PL logistics services typically have predefined rates) to forecast your storage and distribution costs in the future.
Chances are that your business will end up saving money, as many 3PL warehousing and distribution providers offer cost-effective inventory storage and distribution solutions. ASCS, for instance, offers simple, “pay-as-you-go” through its MCF service for storage in Amazon’s fulfillment centers – with no hidden fees or long-term commitments.
It’s important to note, though, that many 3PLs do require you to enter into long-term storage contracts, which stipulate that you must make a multi-year commitment to use a specific amount of space in their storage facilities and maintain a minimum level of throughput. Make sure you read the fine print of any contract you are signing with a 3PL to ensure that the agreement fits your business needs.
Generally speaking, outsourcing your warehousing and distribution services to a 3PL can enable you to eliminate the significant overhead costs (as well as the financial responsibility and risk) involved in running your own warehouse, and this will benefit your bottom line over the long haul.
Key benefit #3: improved operational efficiency
The third key benefit of outsourced fulfillment services, with the right 3PL partner, is that you can streamline your storage and distribution operations.
When you engage third-party logistics providers, you gain access to their network of warehouses and other logistics facilities and resources and can leverage those assets to boost the efficiency of your supply chain operations.
For example, by leveraging MCF, you can tap into the ASCS global network of over 2,000 logistics facilities, which will enable you to:
- Strategically position your inventory in fulfillment centers so you can store it as close as possible to where your channel partners and customers are located and thereby minimize shipping times and costs.
- Consolidate your inventory into a global pool, which you can use to fulfill orders across all your sales and distribution channels.
- Integrate your storage, distribution, and fulfillment operations.
- Offer more accurate delivery estimates and real-time delivery updates, thanks to Amazon’s state-of-the-art ecommerce integrations.
- Add on supply chain services as you scale, including freight, air cargo, and warehousing. With multiple supply chain services provided by one partner, you have fewer relationships to manage.
- Access the latest technology—since 2020, Amazon has invested more than $30 billion in its supply chain network and technology.
Third-party logistics services with access to the latest technology and a global network, like MCF, can help you improve the speed and efficiency of your logistics operations, so you can easily store your products and get them to your customers as quickly as possible.
Key benefit #4: outsourced fulfillment gives you operational efficiency, at scale
A strong 3PL partner can help you achieve operational agility, lower costs, and improve efficiency across your end-to-end supply chain, so you can provide fast, reliable delivery to your customers, wherever they’re located. When you engage a 3PL warehousing and distribution provider with a global footprint and cutting-edge technological integrations, like ASCS, you’ll be best equipped to set your business up to drive growth, reach new audiences, and scale with ease in an increasingly competitive ecommerce market.
