Dec 30, 2022 | Article
Debating whether to use 3PL or 4PL can be challenging because only a few business owners know the difference. While both services may appear interchangeable, there are key differences in technologies, capabilities and typical applications.
If you want to introduce 3PL or 4PL into your supply chain management strategy, this guide will outline the major differences and how to choose the appropriate solution.
Logistics Terminology Explained
Whenever a customer purchases a product online, logistics providers become responsible for shipping them. Below are the different logistics services and what they offer.
First-Party Logistics (1PL)
First-party logistics (1PL) companies employ in-house freight carriers that transport goods and products from point A to point B. A 1PL transaction involves two parties: a manufacturer and a buyer.
For instance, a local farm (point A) might transport ingredients directly to a grocery store (point B).
Second-Party Logistics (2PL)
Second-party logistics (2PL) transport goods using owned assets, such as planes, boats or other vehicles. 2PLs are typically used in international shipping and wholesale goods.
For instance, a local farm might use an outsourced delivery service to ship ingredients to direct buyers.
Third-Party Logistics (3PL)
Third-party logistics (3PL) outsources delivery and additional services, including picking, packing and shipping. Some 3PL fulfillment services also offer warehouse management capabilities, such as real-time tracking, through connected software.
For instance, a local farm might use a 3PL solution to pack and ship goods, then deliver them to grocery stores more quickly.
Fourth-Party Logistics (4PL)
Fourth-party logistics (4PL) covers all supply chain management, including execution. 4PL providers, also known as lead logistics providers, act as consultants, giving the company feedback to improve operations.
For instance, a 4PL company might inform a local farm of changes in supply and demand, allowing them to make the necessary adjustments.
Fifth-Party Logistics (5PL)
Fifth-party logistics (5PL) or logistic aggregators employ highly advanced solutions – such as robots, automation, blockchain and Radio Frequency Identification (RFID) devices – to improve efficiencies within a company’s entire operation.
For instance, the same local farm might outsource all its logistics operations, focusing solely on production.
What Is a 3PL?
A 3PL, or third-party logistics company, ships products on behalf of a client. 3PLs act as an intermediary but do not take ownership of the imported products. A company might hire a 3PL provider if its supply chain becomes too complex to manage natively.
The types of logistics services a 3PL provides can range from warehousing to packaging and freight forwarding. Asset-based 3PL services directly manage a company’s resources to perform its services.
What Is a 4PL?
A 4PL, or fourth-party logistics company, controls a business’s entire supply chain strategy and has comprehensive oversight of warehouses, freight forwarders and shipping companies. A fourth-party logistics provider can make recommendations regarding changes to production and shipping strategies.
Hiring a 4PL company might make sense if you need more resources and staff to oversee transportation and other supply chain operations.
Differences Between 3PL and 4PL
While businesses have more hands-on involvement with a 3PL provider, there is an extra degree of separation with a 4PL provider. In addition, the relationship between companies and 3PLs might be more transactional than with 4PLs.
Below are other key differences between 3PLs and 4PLs.
Order Fulfillment
While 3PLs oversee fulfillment operations like warehousing, packing and shipping, 4PLs take it further by managing all supply chain activities. This includes transportation services, supply chain software and potential stopgaps in your process.
Supply Chain Optimization
Working with a 3PL can give your business the upper hand in supply chain optimization. 3PLs demand more client involvement, so you can still make the decisions you feel is best for your business. For example, you can optimize fulfillment by picking strategically located fulfillment centers close to your customers.
In addition, 3PLs provide clients with access to shipping data, increasing demand forecasting accuracy and enabling better-informed decision-making.
Storage Capacity & Delivery Footprint
Compared to 3PLs, 4PLs have a more extensive warehouse network, better storage capacity, and broader geographical coverage. In addition, 4PLs can store heavier items and provide more accurate lot tracking.
Financial & Operational Scalability
3PLs typically run more expensive than 4PLs because they demand longer-term contracts to cover daily order volumes. Not only do 4PLs run cheaper, but they also offer more flexible and scalable contracts – 4PLs are on-demand, charging clients only for the resources they use.
Customer Communications
Because 4PLs act as a business’s intermediary, all customer queries run through them before reaching you. This can cause significant delays.
Conversely, 3PLs work directly with merchants, allowing them to resolve issues quickly. Plus, 3PLs deploy the same customer service teams for businesses and merchants, which helps everyone stay on the same page and on top of customer demands.
Integrated Technology
While 3PLs can provide comprehensive warehouse management, they rarely offer the kind of advanced technology that a 4PL can. While both 3PLs and 4PLs use integrated warehouse management software (WMS), 4PLs often take their technological capabilities further with autonomous vehicles and robotics.
How the 3PL Process Works
While no two 3PLs are identical, these logistics service providers typically offer the following services:
- Transportation: 3PLs transport goods from warehouses to buyers. Occasionally, they might tap shippers like UPS, USPS and FedEx.
- Fulfillment and distribution: If necessary, a 3PL provider will manage warehouse operations, including storage, inventory tracking, rates and shipping strategies.
- Finances: 3PLs that provide cost control can lower freight forwarding rates. Financial 3PLs are more common with larger enterprises.
Advantages of 3PL
A third-party logistics service provider can make your supply chain more cost-effective and efficient. Below are a few other benefits you can reap from hiring a 3PL:
- Reduced operational costs: Outsourcing your logistics operations to an outside party is significantly cheaper than hiring an in-house team. You can pay for work as it is completed and invest more in core business processes like marketing and sales.
- Optimized space: If your warehouse is too small to stock all your inventory, hiring a 3PL eliminates the need to pay for a larger space. Instead, you can finance the space you need and scale as necessary, improving your business’s cash flow.
- Minimized inefficiencies: With the appropriate technology, 3PLs can increase speed and efficiency while reducing errors. By automating information transfer, your logistical operations become more accurate.
- Industry expertise: A reliable fulfillment provider has ample knowledge of the logistics industry and how best to reduce costs, increase savings and give your business a competitive edge.
Disadvantages of 3PL
3PLs may not be suitable for all businesses, as they can pose the following considerations:
- Forfeited control: Trusting a third-party fulfillment provider could be difficult, as you have to give up full control of the delivery process. In addition, guaranteeing a positive customer experience is challenging because you lack direct oversight.
- High upfront costs: Because most 3PLs adhere to a long-term strategy, investing in their services can be incredibly costly upfront.
How the 4PL Process Works
The goal of a fourth-party logistics service provider is to oversee your entire supply chain. To do so, it typically provides the following services:
- Transportation: A 4PL service will move your finished goods to one or more 3PL warehouses for distribution.
- Inventory management: 4PLs employ technology for real-time inventory tracking and provide better data visibility for merchants.
- Shipping: Most 4PLs provide last-mile shipping, which involves transporting packages from fulfillment centers to their final destination.
Advantages of 4PL
There are many reasons you might choose a 4PL company instead of a 3PL. Below are a few advantages that might convince you to hire these transportation providers:
- Comprehensive supply chain solution: With a 4PL, you’ll get a single point of contact for all your transportation and operational needs. Your business can eliminate inefficiencies and avoid wasteful logistical practices.
- Improved customer connectivity: While giving up control of your consumer management process can be daunting, hiring a 4PL provider can drastically improve customer satisfaction. 4PLs can increase engagement and answer queries from your target audience.
- Advanced technology: In contrast to 3PLs, 4PLs employ more advanced automation technology like robotics and integrated software.
Disadvantages of 4PL
Despite its bells and whistles, 4PL fulfillment isn’t always the solution. Here are a few cons to look out for:
- High dependency: Because 4PLs play a critical role in your daily operations, transitioning out of one can be extremely difficult. Think about a 4PL as your strategic partner before entering a long-term contract.
- Expensive: Compared to 3PLs, 4PLs may not be appropriate for small business budgets.
3PL vs 4PL: What’s Best for Your Company?
Whether a 3PL or 4PL is best for your company will depend on your business goals and current capacity. While 3PLs are eCommerce companies’ most common logistics model, there are also many reasons to choose a 4PL.
For instance, 4PLs can provide excellent logistical solutions for your supply chain if your business is on an enterprise level. On the other hand, newly expanding businesses can benefit from delegating their fulfillment responsibilities to 3PLs with logistical experience.
Key Takeaways
Both 3PLs and 4PLs provide significant advantages that can increase sales, improve your ROI and encourage business growth. However, your choice will depend on your business’s unique requirements. Before you make a decision, remember these key takeaways:
- There are five types of logistics services: 1PL, 2PL, 3PL, 4PL and 5PL. Each model introduces new intermediaries.
- 3PLs follow one of the most common logistics models, providing transportation services and some warehouse management. They are ideal for growing businesses that need to focus on other operational aspects, such as marketing and sales.
- 4PLs provide a more comprehensive solution for enterprise-level businesses that want to delegate fulfillment tasks. They are most appropriate for established companies that are ready to develop a franchise.
- The core difference between 3PLs and 4PLs is the level of logistic services they provide. While 3PL allows for direct communication between merchants and buyers, 4PL creates a second degree of separation that tends to make businesses more dependent on its services.
For a warehouse management solution you can always rely on, ShipHero has the answer for you. With over 99% shipping accuracy and 30% faster delivery speed, we can significantly reduce your warehousing costs and increase picking efficiency threefold.
Learn more about our warehouse management and outsourced fulfillment solutions today.
3PL vs 4PL FAQs
Is 4PL better than 3PL?
Whether 4PL is better than 3PL depends on your business needs. For enterprise-level businesses with more complex logistics processes, 4PL may be more appropriate.
What is an example of 4PL?
An example of 4PL is a logistics company that manages a merchant’s entire supply chain, from logistics to order fulfillment. While a 3PL will only be in charge of fulfillment and delivery, a 4PL will also handle communications between merchants and buyers. For instance, if a buyer is running out of a particular product, a 4PL will inform the merchant that they need to start producing a new batch.
What services does a 4PL offer?
While they differ from provider to provider, some services that a 4PL could offer include:
- Transportation
- Warehousing and storage
- Picking and packing
- Distribution and order fulfillment
- Last-mile and same-day delivery
- Optimized inventory placement
Dec 30, 2022 | Article
Automating your warehouse involves a variety of factors, from the size of the warehouse to floor space to safety measures. It’s about integrating automation technologies into warehouse systems, such as warehouse robots and automated guided systems, to optimize order fulfillment and enhance customer satisfaction. These automated warehouse systems are designed to improve order accuracy and streamline the movement of goods.
What is Warehouse Automation?
The goal of warehouse automation is to automate as many repetitive tasks and processes as possible within a warehouse with the goal of increasing speed and efficiency and reducing human assistance. This automation can come in both the form of software and physical robotics which move throughout the warehouse. Talking to an expert can be highly helpful when trying to decide how to automate your warehouse as they will assess your current warehouse workers, processes, and your goals, to help you find the technology to make those goals a reality.
How Automation Pays Off
Yes, warehouse automation can cost a lot upfront. But the return on investment (ROI) can be worth it. Think about:
- Labor Savings – Less labor needed can mean big cost savings over time.
- Higher Productivity – Tech can work all the time, which means more output and more revenue.
- Fewer Errors – Tech makes fewer mistakes than people, which cuts down on costs.
- Better Space Use – Some tech, like AS/RS, can use vertical space, saving costs in warehouse space.
Yes, the upfront cost is high, but long-term savings and efficiency costs with industrial automation can lead to a positive ROI over time.
What Influences the Costs of Warehouse Automation?
The cost of warehouse automation depends on numerous factors. Size matters; large-scale operations may need thousands of pallets moved daily, which requires a significant investment in automation technologies. On the other hand, small-scale operations might only need a few automated forklifts or drones to improve efficiency and reduce warehouse labor costs further. The people involved in these operations also play a role in determining the cost.
Other cost-influencing factors include the complexity of your supply chains, the level of human intervention currently required per automated solution, and the dimensions of your fully automated solution, warehouse system and infrastructure.
For instance, retailers like Walmart may have multiple large-scale distribution centers requiring advanced automation. These are the things to consider when planning for warehouse automation.
The Costs of Different Automation Technologies
There’s a wide range of various warehouse management and automation systems available, each with its unique cost basis. Conveyor belts, automated storage and retrieval systems and cloud computing can provide enhanced visibility into the picking process and minimize error rates, but they also involve substantial initial expenses and ongoing maintenance costs. These technologies provide valuable insights into warehouse management system operations.
Here are some general stats for your warehouse costs with industrial automation costs available.
- If you want a system which focuses on picking improvement, you will likely find the cost to be between $500,000 to $1 million
- In searching for a mechanized operation system you’ll find the cost range between $1 million to $5 million, and some enterprise systems can even get up to $15 million
- If you want to look at a “dark warehouse” with no operators, you could expect around $25 million
- But these are just estimates. Each warehouse is unique with different needs which means the price to automate your warehouse operations will be specific to you.
More advanced options, such as collaborative mobile robots such as warehouse robots and cobots (collaborative robots), might have higher upfront operating costs. However, their benefits like improved safety, productivity, and error-proofing of automated systems may make them a worthwhile investment in certain cases.
Leveraging Government Aids for Automation
To encourage businesses to upgrade their tech, governments often provide grants and tax incentives. If your automation includes AI, robotics, or similar technologies, you might qualify for these benefits. Tax credits or accelerated depreciation could also be part of your financial strategy. This varies by region and business, so seek advice from a local business counselor or tax professional.
Calculating Total Ownership Cost in Automation
The total cost of ownership (TCO) is essential when considering warehouse automation. This figure includes your initial investment, plus ongoing costs like maintenance, upgrades, and staff training. Regular upkeep keeps your automation tools running well.
Over time, you’ll need to upgrade your system to stay on the cutting edge. Plus, your team will need training to use these new tools. Calculating TCO gives you a realistic picture of your investment and helps you make wise choices about which automation technologies offer the best return.
Real-world Examples of Warehouse Automation Success
- Amazon – Amazon’s automated warehouses host over 200,000 robots globally as of 2020. Robots move shelves to workers, saving time and effort. The result? They can handle up to 700 orders every hour.
- Ocado – Ocado, a UK online grocery, uses “swarm” robots to pick groceries. With precision and speed, they handle over 3.5 million items or 65,000 orders weekly.
- Adidas – Adidas’ SPEEDFACTORY is mostly using automated systems. The result is quick response to demand, less overproduction, and fewer transport distances.
- Zalando – Zalando used robots to deal with growing order numbers. Robots improved efficiency and cut down processing time.
Balancing Costs and Benefits of Warehouse Automation Solutions
Warehouse automation is not merely a cost but an investment. With the growth of online sales and the e-commerce market, companies need to deliver results quickly and accurately to their customers. Enhanced productivity and reliability through automation technologies can significantly impact your bottom line. The reasons for implementing warehouse services and automation solutions often outweigh the costs.
Additionally, industrial automation systems can also provide scalability and flexibility to existing labor,, which is vital in adapting to changes in customer demand. For example, a sudden surge in orders can be handled more efficiently with an automated system than with manual labor.
When Does Automation Make Sense?
It makes sense when the warehouse automation cost outweighs the existing warehouse operating budget and expenses. Managers need to keep in mind the risk versus reward. The key is to find a balance between significant cost savings investing in technology and automation cost while ensuring it delivers the right results in terms of productivity, safety, and customer satisfaction.
For instance, if a large portion of your expenses goes towards warehouse automation, reducing costs go towards moving and tracking goods manually, your warehouse automation RoI will be high. Moreover, if error rates are high due to human error and intervention in manual tasks, technologies such as artificial intelligence could offer valuable error-proofing measures.
Factors to Consider when Implementing warehouse automation solutions
When you’re choosing automation tech, think about: Budget – What are the costs of buying, installing, and upkeep of automation equipment? Remember to weigh initial costs against long-term savings. Operations Size – How big is your warehouse and how many goods do you handle? This will help you decide what tech will help most.
Fragile items may need different automated storage and retrieval when put to light systems rather than heavy ones. Existing Systems – Current systems in your warehouse might affect which tech fits best. Future Plans – If you plan to grow your warehouse or operations, your tech needs to grow too.
How Warehouse Automation Impacts Other Operations
Automation doesn’t just affect your warehouse. In fact, automation can affect other major parts of your business in a good way. As an example, if you automate as many processes as possible within your warehouse using both robotics and inventory management software, you’ll see a ripple effect towards other aspects of your business.
Think about how this automated solution would roll over to your other operations. Especially cost to automate, with higher accuracy and more data to feed major decisions within your company. The automation you implement today will continually service your business down the road.
Future Trends in Warehouse Automation
The whole warehouse floor space and automation landscape is continuously evolving with technological advancements. Let’s delve into a few future trends that experts predict will shape the whole warehouse space industry:
Enhanced Machine Learning and AI Capabilities
Artificial Intelligence solutions are playing an ever-increasing role in automation. Advanced algorithms can analyze large volumes of data to forecast demand, optimize inventory, and streamline the supply chain to develop more complicated automation solutions. We’ll likely see even more integration of these technologies with cloud computing into warehouse operations.
Collaborative Mobile Robots (Cobots)
As warehouse robotics technology advances, we’re likely to see increased use of Cobots – robots that are designed to interact with humans in a shared workspace. They enhance human capabilities, allowing for higher productivity levels. Collaborative mobile robots are predicted to work alongside humans, not replace them.
Autonomous Mobile Robots (AMRs)
AMRs are a game-changer for warehouse operations. They can navigate additional warehouse space without human intervention, significantly increasing productivity and efficiency. Experts forecast that AMRs will be more integrated into warehouse operations in the future, handling tasks like picking, packing, and transporting goods.
Internet of Things (IoT) and Smart Warehouses
IoT allows for real-time tracking and data collection, leading to enhanced operational efficiency. The concept of “smart warehouses” is anticipated to become more prevalent, utilizing IoT for inventory management, predictive maintenance, and energy management.
Drone Technology
Aerial inventory technology could soon play a bigger role in warehouse operations. They can be used for tasks like inventory checks and transporting small items within the same warehouse layout, reducing human effort and time. Drones equipped with RFID technology can quickly locate and identify items in large warehouses.
Advanced Analytics
The future of warehouse operations will involve making data-driven decisions. Advanced analytics tools can provide insights from vast amounts of data, enabling better demand forecasting, optimized logistics, and improved efficiency.
Sustainability Focus
As businesses strive to reduce their environmental impact, we’ll see more efforts towards making warehouse operations eco-friendly. Automation can contribute to this goal by reducing waste and improving energy efficiency.
Enhanced Cybersecurity Measures
As warehouses become more automated and digital, the importance of cybersecurity grows. Future trends are likely to see increased focus on securing systems and data.
These future trends highlight the potential for innovation and transformation within the warehouse automation space. As automated warehouse technology continues to advance, different warehouses that embrace these trends are likely to see significant improvements in efficiency, productivity, and overall operational effectiveness.
Final Thoughts on Warehouse Automation Costs
Investing in warehouse automation systems requires careful consideration of a variety of factors, beyond smart warehouse cost, including size, safety, and the nature of your supply chain.
The goal of successful warehouse automation strategies for operators should always be to improve efficiency, reduce waste, and increase customer satisfaction. While costs can be high, the potential benefits for productivity and growth can make automation a vital arm of modern warehouse operations.
In the past, robotics have specifically focused on the manufacturing sectors, but now they are hitting the logistics sector with powerful improvements in automated warehouse systems. Warehouse automation may have a big price tag up front, but these processes bring your facility into the future and allow you to compete faster and more accurately than other warehouse processes which don’t yet have automation within them.
You’ll find many cost reductions both in labor and space come with automating your warehouse. However the transition to an automated warehouse system and facility can’t be taken lightly, it must be deliberately strategic with a plan that could last months or even years to implement.
Dec 29, 2022 | Blog, Podcast, Warehouse Management Software
How To Get Creative with Product Optimization: Offerings and Strategies
If there’s one thing you can count on in the eCommerce world, it’s that things are constantly changing. What works today might not work tomorrow, so it’s crucial to stay ahead of the curve and keep your product offerings and strategies fresh. In this PalletSide Chat episode recap, we’ll give you tips on getting creative with product optimization and increasing your AOV. Alex also talks about utilizing hot buzzwords to stay ahead of the competition. So if you’re looking for ways to increase AOV and stay ahead of the curve, this blog post is for you!
Find Certainty in the Uncertain
The state of the economy is a hot topic of conversation these days. Everyone has an opinion on what’s happening and what needs to be done to fix it. But when it comes down to it, there are only so many things that we as individuals can actually control. Interest rates and consumer spending habits are important factors affecting our businesses. But at the end of the day, what really determines our success is how we respond to these macro trends. Do we let them get us down, or do we focus on the things we can control and execute our plans flawlessly? So let’s dig into some of those controllable factors and figure out how to make next year a success despite all the uncertainty.
“The key to overall success I think in 2023 … is looking at how you really optimize revenue, especially from existing customers.” – Dan Van Meer.
We’ve All Struggled
We’ve all been there. You’re scrolling through Twitter, and you see someone flexing their successful eCommerce business, and you can’t help but feel a little discouraged. You think to yourself, “Why can’t I be like them? What am I doing wrong?” The reality is that everyone struggles at one point or another in their eCommerce journey.
Even the people who seem to have it all together have had their fair share of struggles. The key is not to compare yourself to others and to keep pressing on. There is no one magic solution to success in eCommerce; the key is to keep trying new things and keep going. So, if you’re feeling down about your eCommerce journey, just remember that even the most successful people have been in your shoes before. Keep pressing on, and you’ll eventually find success.
“I’ll be vulnerable here. We spent a good three years completely paralyzed because we had no idea … what we were doing.” -Alex Lewkowict.
Product is King, and Offer is Queen
As any entrepreneur knows, a successful business requires hard work and dedication. However, even the most passionate entrepreneurs sometimes need help to achieve their goals. This was the case for Alex. Despite his best efforts, he found it difficult to generate sales and grow his business. That is, until he received some sage advice from a friend: “product is king, offer is queen.”
With this new perspective, Alex focused on creating a solid product offering. He also revised his marketing strategy, ensuring that his ad spending focused on creative and targeting. The results were immediate and substantial; within months, Alex turned his business around and saw record sales. This just goes to show that, when it comes to business, sometimes it’s the little things that make all the difference.
“[Wush] was our Trojan horse. And it goes back to my saying, product is king, offer is queen. As soon as we understood that, it changed everything.” – Alex Lewkowict
Lifetime Value (LTV)
If you’re in the business of selling things, it’s important to understand your customer’s Lifetime Value (LTV). This measures the total revenue customers will generate throughout their relationship with your company. The higher your LTV, the better. If you have a product with a higher barrier to entry, it’s more expensive and thus a more significant decision for potential customers. In this case, you’ll need to spend more on marketing to get people to buy because it’s not an impulse purchase.
At Black Wolf, they quickly learned that their biggest hurdle wasn’t their products’ price point but their LTV. They market themselves as a premium brand. Their COGS (Cost of Goods Sold) is high, and their margins are slim, so it’s always been a struggle to increase their AOV. They launched with an AOV of $18, and through a few expansions to their line, they managed to scale up to $40.
But Black Wolf couldn’t get past the $40 mark, no matter how hard they tried. It was frustrating because everyone kept telling them that the key to winning in eCommerce is having a high AOV of $50 or even $100. But they just couldn’t hit those numbers. So Black Wolf had to find another way.
“We had to change our business model to fundamentally shift the trajectory of marketing our skin care products online.” -Alex Lewkowict.
Average Order Value (AOV)
Rather than looking at AOV as simply the total value of an order, businesses should consider it an opportunity to optimize revenue. There are many ways to do this, but the key is to focus on existing customers. Acquiring new customers is always expensive, so it’s essential to ensure you’re getting the most out of your existing customer base.
One way to do this is to optimize AOV on initial orders. Upselling or cross-selling complementary products can do this. Another way to optimize AOV is to focus on recurring orders. This could involve creating subscription models or offering discounts for loyalty. Businesses can unlock various new revenue streams by thinking creatively about how to increase AOV.
Trying to Increase AOV
Black Wolf’s old strategy wasn’t working as planned – people weren’t biting at the more premium, larger bundles they were offering. They could’ve gone two ways: Make the products even more expensive or desirable, or lower the barrier to entry (aka make it cheaper/more accessible). So, they decided to go with the latter and offered a free trial with a 60-day subscription. And it worked like a charm! The CPA decreased significantly, which led them to change their business model and shift their marketing strategy for skincare products online.
To expand their brand and increase their AOV, they knew they needed to diversify their product offerings. So, they saw an opportunity when they came across ear cleaning as a high search/low competition category. They knew that to get their new product into retail stores and ultimately onto TV, they would need to come up with a catchy name. That’s how Wush by Black Wolf was born. Wush has been hugely successful for them, selling in stores like Bed Bath and Beyond, CVS, Rite Aid, and HSN. And they’re not just selling any old product – Wush is a luxury item with a significant margin. Plus, their CPA is lower than it was for their skincare products.
“So you got to make sure that you’re not afraid to admit that what you have is not working and just rejigger.” – Alex Lewkowict.
Cross-Marketing
So how do you effectively cross-market all those things to your existing customer base? When Black Wolf launched a hair care line, they made it salon-grade. And the idea is to use salons and barbershops as the lead magnet for their brand. When you get a product that your barber recommends, you trust and love it, and then … you want to find it for cheaper. Using this strategy has been working well for Black Wolf.
“You can have the best creative in the world, but it really comes down to the fundamentals of what are you selling and how much are you selling it for? What is the offer? What is the product?” -Alex Lewkowict
Do What You’re Good At
No matter your business, it’s always important to focus on your strengths. The saying goes, “If you can’t be the best, be the best at being the best.” Dan and Alex set out to talk about increasing AOV, but they quickly realized that the most important thing is offering a great product. You can have the best supply chain in the world, but if your product isn’t up to par, you’ll never succeed. Conversely, you’ll never reach your full potential if you have great development but poor operations. The takeaway is that you need to focus on what you’re good at and build a strong foundation. Once you have a solid foundation, you can branch out and experiment with other business areas. But always remember: it’s important to stick with what you’re good at. Otherwise, you’ll never be the best at anything.
“Learning from your mistakes, big and small, is pretty key to success.” -Dan Van Meer.
Stay Ahead of the Competition
So, what are some things you can control in your business as they head into 2023? Alex and Dan have highlighted a few key factors that will help you increase sales and stay ahead of the competition. For example, learning from others’ successes and failures is a great way to gain insights that will help your business grow. Additionally, increasing AOV with new product offerings and strategies can be another successful way to boost revenue. If you want to read more about these tips and find out additional ways to succeed in 2023, stay tuned for more great podcast episodes!
Do you have marketing questions that have been keeping you up at night? Or warehousing challenges that have left you feeling defeated? Well, don’t suffer in silence any longer! The PalletSide Chat podcast is here to help. In each episode, hosts Dan and Alex tackle a wide range of topics related to the pallet industry, offering advice, insights, and solutions. And now they’re inviting listeners to join the conversation. So if you have a question or comment, don’t hesitate to reach out to podcast@shiphero.com and let your voice be heard! Who knows, your question might be answered in a future episode!
Episode Glossary:
- AOV (average order value): An eCommerce metric that measures the average total of every order placed with a merchant over a defined period.
- LTV (lifetime value): The estimated revenue a customer will generate over their lifetime with the brand.
- CPA (cost per action): An online advertising model in which payment is based on qualified action, such as sales or registrations.
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Watch on YouTube or Listen on Spotify
About the Hosts: As VP of marketing, Dan Van Meer is always on the go. From overseeing project management and data analytics, he has his hands in a little bit of everything. Most importantly, he ensures that all creative work – from graphic design to digital marketing – is high quality and on-brand. Co-host Alex Lewkowict is quite the renaissance man. He’s been an adolescent entrepreneur, successful CEO, and Founder of a men’s skincare line, and he created One23 Fulfillment. Did we mention he made the Forbes 30 under 30 list?
Dec 23, 2022 | Blog, Fulfillment, Warehouse Management Software
It’s no secret that the shipping industry has seen significant changes in the last few years. Retailers have had to adjust their operations due to port delays, labor shortages, and inflation. As we move into 2023, there are several key trends that retailers should be aware of. From load balancing to sustainable packaging and fast order fulfillment, here are seven shipping trends to watch out for in the new year.
1. In 2023, Supply Chain Concerns Will Persist
Anyone who’s tried to order a simple item online lately knows that supply chains are majorly screwy right now. Thanks to a global pandemic, war conflict, and port delays, shipping and manufacturing delays have become the norm rather than the exception.
In February 2022, only about 34% of container vessels arrived at their destination with no delay. And according to our research, 39% of brands say shipping and manufacturing delays and shipping costs will continue to be a top supply-chain-related challenge over the next 12 months.
Fortunately, most retailers acknowledge it will take time to unravel the challenges associated with shipping delays and the supply chain. In the meantime, there are some things consumers can do to ease the burden.
2. More Efficient Shipping with Load Balancing
No retailer wants to be known as a company with terrible shipping. Customers expect efficient shipping; anything less can damage a company’s reputation. Shipping is one of the most significant expenses for a retailer. So, this is where load balancing has come in.
Load balancing is a popular method of reducing shipping and warehouse costs by distributing shipments evenly across multiple carriers. Getting products closer to your customer through distribution centers helps to avoid service disruptions and delays. Studies have shown that load balancing can save up to 25% on shipping costs. In addition, load balancing can reduce your total costs by up to 13%.
While load balancing has many benefits, it is not without its challenges. It takes coordination and a good warehouse management software system to work efficiently. However, the savings are definitely worth the effort. Load balancing has only gained popularity in recent years, but it is expected to grow even more as retailers realize the benefits.
3. Agile Supply Chains
Agile supply chains are designed to be highly flexible and responsive, so businesses can quickly make changes as needed. Shifting from ‘just-in-time’ to a more stable ‘just-in-case’ model allows brands to respond to more supply chain setbacks.
While it may be impossible to insulate one’s company from another global pandemic, operating with more robust inventory levels may help companies to overcome supply chain obstacles and maintain the integrity of fulfillment channels. In other words, the days of “set it and forget it” shipping are long gone.
Businesses need to be prepared for anything and everything, which means having a supply chain that can quickly adapt as needed. Recently, I discussed this same challenge with Shopify and other leaders in fulfillment; you can find the full article here.
4. The Future of eCommerce is Green
As the world becomes more conscious of the need to protect the environment, sustainable packaging is set to become one of the most critical industry trends.
Order fulfillment companies are already beginning to place a greater emphasis on sustainability, with 46% of customers indicating that they are more likely to purchase a product online if they recycle the packaging.
In addition to meeting customer demand, this shift will also help reduce eCommerce emissions, which currently account for six times as much pollution as products purchased in-store.
Placing their sustainable shipping and returns values at the forefront of their offering makes it easier for customers to buy in. Sustainable packaging isn’t just good for the environment – it’s good for business too.
5. Keep Customers Happy with Transparent Shipping
Customers today expect more than just fast delivery times; they also expect accurate delivery times. That’s why delivery time accuracy and transparency are becoming increasingly important for businesses of all sizes.
Customers expect brands to be upfront about delivery times with today’s supply chain disruptions and ever-changing shipping costs. After all, no one likes getting their hopes up for a package that ends up being late.
But it’s not just about meeting delivery expectations—it’s also about setting realistic ones in the first place. Brands that overpromise and underdeliver risk damaging customer relationships beyond repair. Research shows that 32% of customers have abandoned a cart because “the estimated shipping time was too long” and 22% because “there was no guaranteed delivery date.”
Looking ahead to 2023, developing transparency and trust around shipping will be critical to building long-term customer relationships—relationships strong enough to weather any industry challenges that come your way.
6. Shipping Cost Relief is in Sight
We all know how important shipping is to eCommerce. And, after a rocky few years, 2023 is shaping up to be a good year for shipping. Thanks to continued innovation in logistics and transportation, we can expect cheaper shipping costs and less port congestion.
While there may still be some disruptions in the supply chain, retailers are finally starting to feel some relief. According to the Freightos Baltic Index, in Q4, the global average cost of shipping a container is $3,429, compared to a whopping $10,396 in October 2021. Lower container costs and fewer backlogs should help retail brands keep shipping rates lower for consumers. So far, so good!
7. 3PLs: Make eCommerce Shipping Easy
As eCommerce businesses continue to grow and expand, many find they need more help than they can handle. This is where third-party logistics providers (3PLs) come in. 3PLs specialize in managing all aspects of the shipping process for their clients, from warehousing and fulfillment to transportation and tracking. By partnering with a 3PL, you can free up valuable time and resources so that you can focus on what you do best.
With pre-negotiated contracts and a network of fulfillment centers spread across the country and worldwide, a 3PL can offload the time and stress of managing shipping logistics in-house while keeping costs down. As e-commerce continues to grow, we can expect even more innovation from 3PLs as they strive to provide the best possible service to their clients.
Order Fulfillment Solution for the Modern Retailer
If you’re feeling overwhelmed by the logistics of shipping in 2023, never fear! ShipHero is here to help. We’ve outlined the seven most important shipping trends for retailers this year, and we’ll continue to monitor these trends as they evolve.
Plus, ShipHero offers an end-to-end, full-service fulfillment solution that leverages the reach of our seven owned and operated warehouses (strategically placed across the country and Canada). So, if you’re looking for a way to outsource your supply chain and shipping needs, consider partnering with a 3PL like ShipHero. Let us take care of the fulfillment so you can focus on what you do best – selling products!
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Maggie M. Barnett, Esq. COO of ShipHero
About the author: Maggie M. Barnett, Esq., is the COO of ShipHero. She is responsible for planning and executing the overall operational, legal, managerial, and administrative procedures, reporting structures, and operational controls of the organization. Barnett’s greatest strengths are leadership, risk mitigation, change management, and a passion for business transformation. She is known for her expertise in delivering operational excellence and ability to provide guidance and mitigate risk. Her leadership of ShipHero is grounded in a servant mentality, always doing the right thing for our stakeholders. Her passion for ShipHero comes from the ability to drive operational excellence throughout the organization impacting the lives of our employees, customers, and partners.
Follow Maggie on Twitter & LinkedIn.
Dec 22, 2022 | Blog, Podcast, Warehouse Management Software
How to Cut Shipping Costs without sacrificing Customer Satisfaction
In this PalletSide Chat podcast episode, we’re sharing a panel, hosted by our own COO Maggie Barnett for FounderMade East. Speaking with Brett Tepper from ModKat and Rich Brewer from Boutique Brands, they discuss practical solutions for keeping shipping costs low and customers happy. They cover everything from optimizing fulfillment processes to utilizing technology effectively.
Most business owners know that reducing shipping costs is a major priority, but it can be tricky to do so without alienating customers. It can be daunting, but with the right advice, it can be done without sacrificing customer satisfaction. This expert panel will teach you how to keep your customers happy while shaving dollars off your shipping bill. Tune in for the tips and tricks these experts have gleaned from their own experiences running successful eCommerce businesses in an ever-changing landscape. Shipping rates may be skyrocketing, but that doesn’t mean your eCommerce business has to suffer!
The Litter Box Business
When it comes to litter boxes, even the most design-savvy among us can be taken by surprise. Just ask Brett Tepper and his business partner, who found themselves unexpectedly in charge of cat box duty. What they discovered was a litter box that was, in their words, “not happening.” The following day, Tepper’s business partner came in with an idea for a better design.
Thus began a journey that would take them from Walmart to Taiwan and eventually result in a successful product. Today, Tepper and his partner continue to work with the same manufacturer, and their litter box remains one of the most popular on the market. They are considered “OGs” of the Shopify world, as they were one of the first 300 people to use the platform. Who would have thought such a simple, but smelly, idea could lead to success?
“So I had a few developers lined up, and then one of the developers said, ‘Have you heard of Shopify?’ So I started looking into it, and I was like, ‘This is it.’ Yeah, they have been with it since.” -Brett Tepper.
How ModKat Handles Exploding Freight Costs
ModKat prides itself on being able to adapt to change. So when the pandemic hit and their sales exploded, it was a happy challenge. However, soon they found themselves facing a different problem: exploding freight costs. Freight bills soared from $6,000 per container to $12,000, then $18,000, eventually topped at an astonishing $32,000. They knew they had to make tough choices to keep their business afloat. They started by eliminating free shipping, then slowly escalated prices.
With four primary sets of SKUs, ModKat has increased pricing on their higher-end litter boxes. The downside to shipping litter boxes is that they are big, so they all hit dim weight and can only fit a few per container. With a 40-ft HQ container, they can only fit about 550 of their largest litter boxes. This directly affects the pricing scale, so that’s where most of the cost-cutting has been done. Fortunately, they have enough margin on the refills to keep them at the same price. The other great thing about the litter box liners is that they fold flat and ship small, so freight doesn’t affect them as much.
How ShipHero Has Helped
If you’ve ever worked in eCommerce, you know a lot goes into fulfilling orders. And if you are doing it yourself, a whole other stress level comes with it. That’s why ModKat outsourced fulfillment to a 3PL when Tepper started his business. But then, around 2012, he got a 5,000-square-foot space and started prepping orders himself. Tepper mentions that it was great and awful at the same time. He learned a ton about how fulfillment works and why 3PLs work a certain way. But after a year, he realized it wasn’t a tenable situation and returned to using a 3PL. He’d been with the same one for seven years but recently switched to ShipHero. If you’ve thought about fulfilling orders yourself, Tepper says go for it – but be prepared for many long nights (and early mornings).
ModKat went back to dim weight and because of that, they had four warehouses with their old 3PL, and keeping inventory in all four warehouses was difficult. That was taking up a ton of their time, just ordering correctly for all warehouses. So, knowing that ShipHero did load balancing was a massive thing for ModKat. Then on top of that, ShipHero also consolidates shipments. Which saved them a ton of money on shipping costs. So all of those things allowed ModKat to focus on other parts of their business rather than just managing logistics all the time.
Boutique Brands
In the world of fast fashion, speed is everything. That’s why Rich Brewer of Boutique Brands has made it his mission to streamline the fashion ecosystem and help his employees move more quickly. By streamlining the process from manufacturing to reselling, Brewer and his team can turn inventory faster and keep up with the latest trends. And they’re not stopping there. They’re also constantly reviewing their website and ensuring they appeal to customers. It’s all about staying ahead of the competition and keeping costs down.
Automation, Automation, Automation
As an eCommerce business knows, shipping costs can eat into profits quickly. But what happens when a company returns to charging for shipping? It’s not easy to tell customers that they now have to pay after getting used to free shipping. And it’s even harder to do it in a way that doesn’t damage the customer relationship. That’s why it’s important to have systems that allow you to rate shop among carriers and find the most cost-effective option for each shipment. By automating the process as much as possible, you can minimize the impact on your bottom line and keep your customers happy.
The Return Process
Returns are allowed at Boutique Brands. There are, however, some brands that charge shipping to and from their stores. Occasionally, customers have to print a label and pay for it, but Brewer is working to simplify the process. They have yet to do exchanges, which Brewer wants to implement because that will cut down on the total loss of revenue from returns if they can use a system like Happy Returns. It automatically creates a product on Shopify. Customer service teams can then click a button and be done. Brewer is currently engaged in analyzing what’s working, what’s not, and who has the best return on investment for returns.
“We are more or less just maximizing every automation we can maximize.” -Rich Brewer.
Provider transparency
Provider transparency is something that has become increasingly important in recent years. Consumers want to know where their products come from and how they are made. They also want to be able to track their orders and see precisely where they are at all times. This level of transparency can be challenging to achieve, but it is something Flexport is working hard to provide. While the data isn’t always up to date, ModKat appreciates the insight Flexport (a freight-forwarder) gives them into the supply chain process.
Recently, ModKat has been dealing with some supply chain issues beyond its control. They have had to ration inventory and cancel orders, and their customers have understandably been frustrated. In response, they created a feature on their website where people can sign up to be notified when an item comes back in stock. They thought this would help alleviate some of the frustration, but it turns out that people get even more frustrated when they get 100 notifications that an item is back in stock, only to find that it’s already sold out again. Despite the challenges, Tepper is grateful for his loyal customers and will continue to do everything he can to keep them happy.
Preparing for the Next 12 Months
Over the last three years, the world has been turned upside down. We have seen economic turmoil, political upheaval, and a global pandemic. So what are ModKat and Boutique Brands doing to prepare for the next 12 months? For starters, they’re stocking up on essentials. ModKat is ordering like crazy, trying to get as much inventory as possible. They’re also trying to figure out ways to pep up their customers. At some point, they plan to reintroduce free shipping or offer discounts. But the most important thing is that they’re getting back on their feet. The sales are picking up, and they see more customers every day. ModKat is excited about the future and ready to take on whatever comes its way.
For Boutique Brands, maximizing automation is their key to success. By using data to select styles that are in demand, and cost-effective carriers, brands can reduce costs while still providing the latest trends to customers. Additionally, expanding social media outreach and implementing loyalty programs can help increase brand visibility and customer engagement. By taking advantage of these various marketing and operational strategies, Boutique Brands can stay ahead of the competition and keep their businesses growing.
“We’re actually ramping up our influencer campaigns, our UGC, our loyalty programs. All of this stuff is going into play to basically drive more business to help mitigate the additional costs.” -Rich Brewer.
Turn the Challenges of Today’s Marketplace into Opportunities for Tomorrow’s Success
If there’s one thing that’s certain in eCommerce, it’s that shipping rates are always on the rise. Carriers announce new rate increases yearly that can eat into your profits if you’re not careful. But don’t despair – there are still ways to keep your shipping costs under control, even in the face of rising rates. Optimizing your fulfillment processes and utilizing technology effectively can minimize the impact of rate hikes on your business. By streamlining your operations and using shipping rates as a lever to drive customer loyalty, you can turn the challenges of today’s marketplace into opportunities for tomorrow’s success. So don’t let rising shipping rates get you down – use them to fuel your eCommerce success.
The FounderMade East panel was hosted by ShipHero’s COO, Maggie Barnett, and she was joined by Brett Tepper, the co-founder of ModKat, and Rich Brewer, the product manager at Boutique Brands. This session is packed with great information for anyone in eCommerce, whether you outsource your fulfillment or manage it in-house. So, take a moment and listen to the full panel or watch it on YouTube!
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About the Panel Host: Maggie M. Barnett, Esq., is the COO of ShipHero. She is responsible for planning and executing the overall operational, legal, managerial, and administrative procedures, reporting structures, and operational controls of the organization. Barnett’s greatest strengths are leadership, risk mitigation, change management, and a passion for business transformation. She is known for her expertise in delivering operational excellence and her ability to provide guidance and mitigate risk. Her leadership of ShipHero is grounded in a servant mentality, always doing the right thing for our stakeholders. Her passion for ShipHero comes from the ability to drive operational excellence throughout the organization impacting the lives of our employees, customers, and partners.
Follow Maggie on Twitter & LinkedIn.
