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Guide to optimizing your ecommerce fulfillment with a 3PL provider

This guide will provide you with everything you need to know about outsourcing your ecommerce fulfillment to a 3PL provider.

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The end-to-end ecommerce fulfillment process The benefits of outsourcing your ecommerce fulfillment to a 3PL
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We have entered the era of ecommerce, and online sales – which currently constitute 19.7% of total global retail sales – are expected to surge in the coming years and account for 24% of retail sales worldwide by 2026.

The number of online shoppers globally – which now stands at around 2.14 billion people, equivalent to almost 28% of the world’s population – continues to increase. With the rise in the number of ecommerce consumers, we are seeing heightened customer expectations for fast, affordable, and reliable order fulfillment. Shoppers today demand a first-class, seamless experience from online checkout to delivery at their doorsteps. A recent study showed that 85% of consumers will not shop with an online retailer again after a poor delivery experience.

The success of your ecommerce business rests on your ability to fulfill orders rapidly and reliably and ensure a positive, consistent customer experience across all the channels you sell through – including your direct-to-consumer (DTC) website, ecommerce marketplaces such as Amazon.com and eBay, and social media stores. Many online retailers start out handling their ecommerce fulfillment in house, but discover that, as their business expands, it becomes increasingly challenging to manage the volume, velocity, costs, and complexity of their customer orders – and so they engage third-party logistics (3PL) providers to help them with this.

In this guide, we explain how a 3PL can help you handle the ecommerce fulfillment process and explore the benefits of outsourcing your ecommerce fulfillment operations to a 3PL partner.

Stay up to date with new Amazon Multi-Channel Fulfillment features, best practices, and more.

The end-to-end ecommerce fulfillment process

Ecommerce fulfillment refers to the end-to-end process of storing, picking, packing, shipping, and delivering products to customers who have placed an order from an online store, and also – when necessary – handling returns and exchanges.

A 3PL can help your ecommerce business handle the entire ecommerce fulfillment process, which is divided into four major steps:

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1. Receiving
If you are partnering with a 3PL, the first step in the ecommerce fulfillment process is to send your inventory from your manufacturers or suppliers to storage facilities – which could be warehouses, distribution centers, or fulfillment centers – in your 3PL partner’s network so that you can ensure you have enough stock on hand to satisfy customer demand.

Some 3PL’s provide transportation services – like Amazon Multi-Channel Fulfillment (MCF), which works with Amazon Global Logistics and Amazon Freight – to ship your inventory to their storage facilities.

Once your shipment arrives at your 3PL’s facilities, your 3PL will work to minimize “dock-to-stock” time (the amount of time it takes for your inbound shipment to be received by your 3PL, entered into their inventory management system, and stored in their facilities). The goal is to get your products on the shelf and ready to be shipped out to customers as fast as possible. Inventory, after all, is a cost for your business, and the sooner you can convert that cost into revenue, the better.
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2. Storage
The second step in the ecommerce fulfillment process is to store your inventory within your 3PL’s network of storage facilities until it’s ready to be sold to customers. The key to successful warehousing is to keep the just the right amount of stock in the right locations at the right times – so that you can meet demand, prevent stockouts, and minimize inventory costs.

If you’re looking for short-term storage for products that you would like make available for sale immediately or in the near future, you would probably want to store your goods in your 3PL’s fulfillment centers – to ensure that when the orders come in the products are ready to be shipped out.

On the other hand, if you need to stockpile and store your inventory for an extended period of time – so that you can use it to fulfill customer orders during the holiday season or other peak periods when you see spikes in demand – you would probably opt to keep your stock in your 3PL’s upstream warehouses.

No matter which of your 3PL’s facilities you use to store your inventory, you will want to ensure that your 3PL offers you storage services that are:

Also, some 3PLs – like MCF – offer a flexible, pay-as-you-go arrangement for storage, while other 3PLs require you to enter into long-term contracts with storage and throughput commitments.

It’s critical that, when selecting a 3PL, you do the research and find a provider that offers a cost structure for storage and other ecommerce fulfillment services that suits the needs of your business.

You should also look for 3PL providers that have an extensive network of warehouses and fulfillment centers in those locations where your customers are based. This will enable your 3PL to strategically position your inventory so it’s as close as possible to your customers – thereby reducing shipping times and operating costs. MCF, for example, has a global network of over 200 fulfillment centers that you can utilize to store your goods.
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3. Order processing
The next step in the ecommerce fulfillment process is order processing. Once an online order has been placed by a customer, your 3PL will commence order processing, which involves three key procedures:

  • Picking: Using warehouse staff as well as cutting-edge automation tools and technologies such as robots, your 3PL will pick the products required for the online order off the warehouse shelves and transport them to order packing stations.
  • Packing: Your 3PL’s team will pack your products in the right packaging so the order is ready to be shipped out to the customer. Your 3PL will strive to ensure that your products are packed in a manner that meets your company’s requirements, reduces the risk of damage during shipping, and minimizes the size of the parcel (and the cost of shipping it)
  • Shipping: After your orders are picked and packed, they’re ready to be shipped to your customers’ doorsteps. Some 3PLs – like MCF – are carriers themselves and can provide shipping services, while other 3PLs can connect you with carriers and often help you to negotiate discounted shipping rates with them.

    You’ll want to make sure that the 3PL you are working with offers fast, reliable shipping services. MCF, for example, can deliver your orders as quickly as one day after their ship date, with a greater than 97% on-time delivery rate.

    The importance of shipping speed and reliability to the growth of your ecommerce business cannot be overstated – according to recent research, 74% of consumers said that they would increase spending with an online retailer if they’re satisfied with that merchant’s delivery services.
Throughout the order processing phase, your 3PL will help you optimize the speed, accuracy, and efficiency of your picking, packing, and shipping operations – so that you can give your customers a first-class delivery experience.
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4. Reverse logistics
The final step in the ecommerce fulfillment process is one which in most cases is not necessary: reverse logistics (or returns management). For ecommerce companies, effectively handling returns is critical factor in preserving customer trust and loyalty. Your 3PL can help you streamline the entire reverse logistics process – from providing customer service to handling the shipping of returns to evaluating returned goods and determining if they should be added back into your inventory pool or disposed of.

The benefits of outsourcing your ecommerce fulfillment to a 3PL

By engaging a 3PL to handle your ecommerce fulfillment, you will be able to take advantage of their expert capabilities in inventory management, order processing and shipping, and reverse logistics to optimize your order fulfillment process across all your sales channels.

Partnering with a 3PL can bring many benefits to your ecommerce business, including:

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Improved operational efficiency
By leveraging the deep expertise and experience of your 3PL’s team as well as their logistics network and resources, you can boost the speed, efficiency, and accuracy of your end-to-end order fulfillment process and drive greater operational excellence.

And by entrusting your fulfillment operations to a 3PL, you can improve the efficiency of your business in other areas by allowing your team to focus on your core competencies, such as product development and sales and marketing.
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State-of-the-art systems and technologies
Many 3PLs utilize the latest and greatest warehouse automation and robotics technologies that can automate and optimize your order fulfillment operations as well as the most sophisticated software systems for inventory management, order processing and tracking, returns management, and analytics and reporting – and by working with these providers, you can gain access to these systems and technologies.

Also, your 3PL will work with you to seamlessly integrate their back-end systems with your ecommerce sales channels, order management systems, and other back-end systems you use – so that your ecommerce fulfillment process runs swiftly and smoothly.
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Superior delivery performance
Partnering with a 3PL can help you improve your performance across all your key performance indicators (KPIs) for order fulfillment including click-to-delivery speed, on-time performance, undamaged package delivery rate, inventory and order picking accuracy, cost per unit shipped, dock-to-stock time, and more.
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Reduced operating costs
By enlisting the services of a 3PL provider, you can increase your bottom line by:

  • Eliminating the need to hire in-house logistics experts and make capital-intensive investments in logistics infrastructure (such as warehouses) and equipment (such as forklifts) – and thereby reducing overhead costs.
  • Driving efficiency across your fulfillment operations – and thereby cutting storage, shipping, and other costs. For example, by working with MCF, beverage retailer Poppi decreased its order fulfillment costs by 30%.
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Greater customer conversion, satisfaction, and retention
Partnering with a 3PL can enable you to ensure an exceptional experience for your customers from online checkout to delivery – and this will translate into higher customer satisfaction and retention rates.

A 3PL can help you create a consistent customer experience across the various channels that you sell through. If, for example, you want to offer customers the same Amazon Prime shopping benefits they know and love – like fast, free delivery and a seamless checkout experience – on your DTC site, then you can do so by using Buy with Prime (which is powered by MCF).

Also, by enabling you to offer faster shipping speeds, a 3PL can actually help you increase customer conversion across all your online sales channels. Research shows that 22% of abandoned online shopping carts are due to the fact that shoppers thought the shipping options were too slow.
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Enhanced ability to scale your business
Engaging a 3PL to handle your ecommerce fulfillment can help you power the long-term growth of your business. Your 3PL partner will work with you to handle supply chain volatility and spikes in demand during peak shopping periods and will also assist you in identifying and pursuing opportunities for expansion across new sales channels, product lines, and markets. Wherever your ecommerce business journey takes you, your 3PL provider will be there with you every step of the way.

Tags:  Order fulfillment, Ecommerce, Multi-Channel Fulfillment, Guide
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