Apr 20, 2021 | Blog, Fulfillment
Fulfillment centers, also known as 3PLs, provide a great option to expand your fulfillment capabilities. ShipHero Fulfillment provides an easy outsourced fulfillment option without the need to engage with a 3PL directly if you’re running a Shopify store and are looking for simple fulfillment services.
Online shopping has made it easier than ever for consumers to find the products they want at the best price. As brick-and-mortar stores slowly fade into the background, eCommerce stores are taking advantage of nearly limitless scalability and a worldwide customer base.
Though the convenience of online shopping is a major draw for many consumers, a positive customer experience is still vital for success. If purchases take too long to process or if shipments are delayed, your business could suffer and you may lose potential repeat customers. Rather than limiting your inventory to prevent backups and shipping mishaps, consider using a fulfillment center to manage your store’s inventory. These companies help your business deliver global eCommerce order fulfillment.
Fulfillment centers, also known as third-party logistics companies (3PLs), provide a great option to expand your fulfillment capabilities. If you’re an eCommerce merchant selling products on Amazon or another eCommerce platform, a fulfillment center handles all the order processing for you. They’ll receive the order, prepare it for shipping and get the order delivered to the customer. ShipHero Fulfillment provides an easy outsourced fulfillment solution for many eCommerce merchants running on a variety of marketplaces including Shopify, WooCommerce and more.
In this article, we’ll explore fulfillment centers as a convenient option for online merchants. You’ll learn what a fulfillment center is, how it compares to warehousing and the specific benefits of using a fulfillment center. We’ll also provide helpful tips for choosing the right fulfillment center for your business. Another option if you’re looking to outsource your shipping is to use a fulfillment service, a new option for using a fulfillment platform to manage and ship your orders without engaging with a fulfillment center directly. We’ll add an article that details more about this and how you could use Shopify store fulfillment.
What is a Fulfillment Center?
A fulfillment center is a location, typically a large building, that fulfills eCommerce retail orders. A fulfillment center handles the entire order process, from picking and packing to shipping.
Without a fulfillment center, an eCommerce retailer must take items from their inventory, pack them and send them through a shipping carrier to the customer. If you run an especially popular business, you may be swamped with orders and spend most of your valuable time processing shipments instead of developing your business.
Not just that, but more orders mean a larger chance of human error in the shipping process. If your team loses focus because they’re overwhelmed, they may make mistakes that result in unhappy customers.
To prevent errors and save valuable resources, third-party logistics companies often offer fulfillment center access to their clients.
How Do Fulfillment Centers Work?
Fulfillment centers work by storing your inventory so your 3PL’s team can process orders whenever they come in. Here’s a quick overview of how fulfillment centers process your orders:
- You receive customer orders, which will then be forwarded to your 3PL provider.
- The fulfillment center team picks the ordered items from storage for packing.
- The shipping carrier accepts the ordered items and delivers them to the customer.
The general process is similar to doing it yourself, but fulfillment centers do it at a larger scale to take the burden off your hands. Fulfillment centers are generally more experienced in fulfilling orders, so they can do it more efficiently.
Fulfillment centers can process business-to-business (B2B) and business-to-customer (B2C) orders cost-effectively. B2B orders are usually shipped to the client’s shop or storage, while B2C orders are shipped to the customer’s residence.
Understanding the Challenges of Online Stores
Online stores provide customers access to a wide range of products they might not have access to in traditional brick-and-mortar stores, depending on their location. By shopping online, consumers also can compare prices. However, online shopping is about more than just finding the best price; it’s also about efficient shipping and an overall positive customer experience.
On the seller’s side, online shopping opens up a whole new customer base that isn’t limited to a specific region. Though this creates the potential for much higher sales margins, it does come with a few challenges. Overselling, for example, is a common problem among online merchants. This happens when the merchant receives more orders for an item than they have the inventory to fulfill. They are then forced to contact their customers to tell them that the item is out of stock or shipping will be delayed. Both options can lead to low customer satisfaction levels and potential lost sales.
All it takes is one angry customer to write a bad review that could dissuade other customers from buying your products.
In addition to overselling, many online merchants encounter specific shipping issues such as mispicks and misships. A mispick happens when the merchant selects the wrong product for an order, and a misship occurs when the wrong item is sent to the customer.
Both of these situations result in returns. Plus, there’s a high probability that the customer will simply cancel the order instead of waiting for the correct item to be sent.
The larger an online business’s inventory, the higher the risk for problems. It might be time to consider a fulfillment center if you’re currently trying to manage your inventory directly and experiencing these and other issues.
Fulfillment Center vs Warehouse: Comparison
The term fulfillment center is often used interchangeably with warehouse, but the fact is that they are different. Both are large buildings used to hold business inventory, but the services offered can differ.
A warehouse is a long-term storage solution used to store products for an extended period. In many cases, a warehouse is an industrial space designed to house inventory items in bulk. If you were to walk into an inventory warehouse, you’d see products being moved by a forklift on large pallets stacked high with large quantities of similar products. Warehouses are primarily used by wholesalers and businesses that fulfill B2B orders.
Generally speaking, a warehouse is usually the best option for retailers that have a diverse inventory and stock large quantities of products. Large retailers sometimes have the capital to purchase warehouse space, but leasing is usually the most cost-effective option for small and mid-sized retailers. For small businesses, renting a storage unit is sometimes the best option.
A fulfillment center performs some of the same roles as a warehouse but with additional services. In addition to storing inventory, a fulfillment center will fulfill customer orders. When an order is placed through an eCommerce store, the order is forwarded to the fulfillment center, where the inventory is picked and boxed up, then labeled for shipment and sent to the customer.
Using a fulfillment company means outsourcing order processing which takes the burden off your shoulders and lets you focus on other areas of your business.
How Does a Fulfillment Center Compare to a Warehouse?
Despite their surface similarities, fulfillment centers and warehouses offer different services. Here’s a look at three elements that set fulfillment centers apart from warehouses.
Long-term vs. Short-term Storage
Warehouses are designed for long-term storage, where your items are kept for months or even years. Meanwhile, eCommerce fulfillment centers are more common for short-term storage because your inventory frequently changes as orders come in and out.
In fact, your inventory shouldn’t stay in fulfillment centers for a long time because storage fees can get expensive. At the same time, you should keep sending inventory to fulfillment centers to avoid running out of stock.
Facility Operations
Warehousing operations are generally very simple. Items come in when you send them and come out when you need them. There’s not a lot of processing involved aside from moving items around.
Meanwhile, fulfillment centers have more complex operations because they handle order processing. Here are some key operations of a fulfillment center:
- Receiving items from factories or manufacturers
- Picking products to fulfill customer orders
- Assembling items, if required
- Packing items and labeling shipments
- Shipping items through carriers
- Accepting and managing returns
Frequency of Pickups by Freight Companies
Warehouses don’t see a lot of shipping company pickups because you can get items shipped in bulk instead of individually. That’s why we typically see scheduled truck pickups at warehouses, with items being stacked together in big batches with pallets.
Fulfillment centers often see daily shipping company pickups or even several times a day if you run an especially prolific eCommerce business. eCommerce fulfillment centers get multiple shipper pickups daily because they need to fulfill customer orders that come in even after business hours.
Fulfillment Centers vs Warehouses: A Summary
Here is a quick summary of the differences between a warehouse and a fulfillment center:
- The primary function of a warehouse is to store inventory, while a fulfillment center’s goal is to turn inventory over quickly and ship orders.
- Fulfillment centers handle all stages of the order fulfillment process, including negotiating rates with shipping carriers.
- Operations at a warehouse are relatively static, whereas operations at a fulfillment center are much more complex and in constant motion. Some of the services provided by a fulfillment center include the following:
- Receiving inventory from merchants
- Picking products for individual orders
- Gathering inventory and packaging orders
- Labeling shipments for delivery
- Turning over orders to the shipping carrier
- Managing customer returns and exchanges
- Warehouses typically have scheduled less-frequent pickups, whereas fulfillment centers typically have daily pickups from shipping carriers.
- Fulfillment centers can guarantee same-day or next-day shipping.
Every 3PL provider is different regarding their services and the size and type of businesses they cater to.
Later in this article, we’ll talk about how to choose the right fulfillment center for your business, but for now, let’s take a closer look at the benefits fulfillment centers provide.
What Are the Benefits of Using Fulfillment Centers?
Simply put, the benefit of using a fulfillment center instead of directly managing your inventory is that you don’t have to deal with the inventory management’s ins and outs (e.g., storing, shipping and returns). It may sound simple, but you will never go back once you make the switch. The supply chain for eCommerce companies is complicated, and fulfillment centers make the supply chain easier to manage.
After using a fulfillment center to manage your inventory, you’ll find that the order fulfillment process not only goes much smoother, but you’ll be able to free up time on your end which can be dedicated to growing the business (rather than managing it).
Here are some of the top benefits of using a fulfillment center:
Extra Storage Space
Working with a fulfillment center means you don’t have to find extra space for your inventory on your premises. This is especially useful if you run a small business at home or in a small office.
Managed Order Fulfillment And Shipping Services
Fulfillment centers handle everything from product picking to shipping, so you don’t have to do it yourself.
Affordable Carrier Rates
Many fulfillment centers work with shipping carriers to give you delivery cost savings. Lower shipping rates mean you save money with each sale, growing your profit.
Enable 2-Day And Overnight Shipping
Working with fulfillment centers allows you to offer 2-day or overnight shipping options to your customers.
Professional Inventory Management
Fulfillment center workers know what they’re doing, so you can trust your items will be properly organized and stored. You also get live updates to see which items are in and out of stock.
Returns Processing Assistance
Your fulfillment center assists with returns and exchanges, saving you a lot of time and effort.
Helps You Focus On Your Business
Fulfillment centers and 3PLs handle inventory and order fulfillment, so you don’t have to. This means you can focus on other tasks for your company, like marketing, customer service and product development.
By now you should have a thorough understanding of what a fulfillment center is and how it can benefit your business. If you’re ready to make the switch, you’ll be glad to know that there are 3PL providers all over the country waiting to handle your inventory. Keep reading to learn how to find them.
Things to Consider When Choosing a Fulfillment Center
A fulfillment center may seem like the perfect solution if you’ve been struggling to keep up with orders and manage your own inventory. While 3PL providers can take the burden of order fulfillment off your shoulders, there are some things you need to consider before you commit.
First and foremost, you need to determine whether it’s a cost-effective solution to start using a fulfillment center. Prices vary from provider to provider but will include costs for things like warehouse space, equipment, warehouse management, staff salaries, worker’s compensation and liability insurance, packaging supplies, postage and more. Some 3PL providers offer a flat rate while others add individual fees per task, such as picking and packing.
In many cases, outsourcing your order fulfillment services costs more than doing the work yourself, but what you’ll be saving is time. If managing your inventory and fulfilling orders is holding you back from doing the work you need to grow your business, outsourcing may be worth the extra cost.
Not only do you need to consider the cost of using a fulfillment center, but you need to make sure that the center you choose is compatible with your eCommerce platform. The type of software you use determines whether the 3PL provider will be able to receive, process and track orders. The easiest option is to choose a provider that can integrate with your existing software rather than changing your entire eCommerce platform to match the provider.
With these factors in mind, here is a simple process to follow when choosing a 3PL provider:
Review Your Existing Shipping Process
Sit down and take a closer look at your inventory as well as your shipping process. Take the time to identify existing problems and consider whether a 3PL provider could resolve them.
Do Some Research to See What Options Are Available
You may be able to find a 3PL provider in your region, or you could choose one closer to your largest customer base.
Compare and Contrast Services Provided
Each 3PL provider is different, so you’ll need to know your business’s needs before finding a company to match.
Narrow Down Your List to No More Than Three
Once you’ve created a list of options, narrow it down to the top three choices – these are the companies you’ll evaluate on a deeper level to make your decision. Any more than three will simply be too much to handle.
Dig a Little Deeper Into the Company You’re Considering
You’ll be relying on your chosen 3PL provider to fulfill your customer’s orders and handle returns efficiently. Choosing a company with similar culture and values to your own is important for maintaining a consistent and satisfactory customer experience.
Think About Technological Compatibility
Even if your business is still fairly new, you already have some kind of management software in place – save yourself the hassle of switching by choosing a 3PL provider that is compatible with your existing management software.
Plan Ahead for Scalability
Ideally, outsourcing your order fulfillment process will give you more time to focus on what it takes to grow your business. Choose a 3PL provider that can scale its operations to accommodate your changing business needs.
Choose a Provider That Uses Distributed Fulfillment
Depending on what your business sells, you’re likely to have customers from all over the country. You want to choose a 3PL provider with multiple distribution center locations to keep costs down and optimize your efficiency.
Consider Experience and Customer Satisfaction
Though the satisfaction of your own customers is paramount, you also want to be satisfied with your 3PL experience. Look for a company with a proven track record that you can trust to handle your business’s day-to-day order fulfillment operations. Financial stability is also an important consideration, and you should look for a provider with plenty of industry references – and don’t hesitate to check them!
Negotiate the Pricing
Each 3PL provider prices their services differently, some according to the size of your business and others by individual services. You’ll need to sit down with your chosen provider to determine the exact pricing and what specific services are included.
Once you’ve chosen a 3PL provider, you need to sit with them and discuss the details. Many small businesses who switch to using a fulfillment center skip this step and end up frustrated when there is no clear process.
Before you sign a contract, sit down and go over the details of exactly what you expect from the company and how they will fulfill those expectations. You’ll need to determine which responsibilities the 3PL will handle and which you will retain in-house. It’s also a good idea to establish a schedule for regular meetings between members of your team and representatives from the 3PL. This is where you’ll evaluate the 3PL’s performance and discuss any changes that need to be made.
Examples of Fulfillment Companies
Looking for a great fulfillment center provider for your eCommerce business? Here are three example fulfillment companies to consider:
Fulfillment by Amazon
Fulfillment by Amazon (FBA) boasts over 170 fulfillment centers and 150 million square feet of storage space. Additionally, FBA users can offer free two-day delivery to their Amazon Prime shoppers – a great way to draw customers in and improve sales.
In addition to Amazon itself, FBA also supports numerous eCommerce platforms like Shopify and WooCommerce.
FedEx Fulfillment
Shipping carrier FedEx offers a full-service fulfillment center and third-party logistic service that includes packaging, warehousing and order fulfillment. In addition to its complete suite of services, FedEx Fulfillment also assigns small business owners a professional assistant to teach them about fulfilling orders.
Rakuten Super Logistics
Rakuten Super Logistics boasts 100% order accuracy and guarantees order turnaround by the next business day. Rakuten Super Logistics users can also offer customers two-day ground shipping to 98% of the United States.
However, Rakuten Super Logistics requires a minimum volume of 250 orders per month, so it may not be the best option if you can’t pass the threshold consistently.
How ShipHero Makes Fulfillment Easy
Boasting over 4,000 eCommerce partners, ShipHero is one of the leading 3PL companies for online merchants. Here are some key benefits of working with us as your third-party logistics provider:
2-Day and Overnight Delivery
You may have lost sales because your store doesn’t offer 2-day delivery like Amazon. Customers expect 2-day shipping everywhere they shop, but building a fulfillment network that can do that is a lot of work for a business – especially a small one.
If you work with ShipHero, you can offer 2-day and overnight delivery to compete with Amazon and other eCommerce giants. Moreover, we offer shipping discounts so your customers can enjoy cheaper 2-day deliveries.
Nationwide Fulfillment Center Network
Storing your entire inventory in one fulfillment center usually leads to longer delivery times, excess inventory and higher shipping costs. For instance, if your fulfillment center is in Florida, delivering orders to California will be much more expensive than shipping to New York, due to distance and many other factors.
ShipHero’s distributed fulfillment network boasts eight warehouse facilities in the United States and Canada, with locations in Florida, Texas, Vancouver and more. We split your inventory across these fulfillment centers, so customer orders will be sent out from the closest location. By reducing the shipping distance, you save money and your customers get faster deliveries.
Integrations With Your eCommerce Platform
We support many popular eCommerce platforms like BigCommerce, WooCommerce, Shopify, Shopify Plus and Amazon. Our eCommerce platform integrations are very simple to activate and especially useful if you’re selling on multiple sites. In addition to handling all orders, we offer real-time updates from your multiple eCommerce platforms, so you don’t have to fumble through multiple sites to see everything.
Transparent Fulfillment Fees
Unlike other fulfillment providers that have unexpected hidden fees, ShipHero offers a simple and transparent pricing model. Our single flat rate covers the entire order fulfillment process for the lower 48 states. We don’t lock you into lengthy contracts like other companies, either.
The Final Word
Customer satisfaction is essential to the success of your online business. If customers like your products and experience a smooth order fulfillment process, they’re much more likely to recommend your business to others and become regulars themselves.
As an online business owner, you’re responsible for selling high-quality products that cater to your customer base’s needs. However, you can’t focus on that if you still have to process orders yourself. Outsourcing the order fulfillment process to a third-party logistics provider means you don’t have to spend hours a day dealing with customer orders and have more time to develop your business instead.
Fulfillment Center FAQs
What is a fulfillment warehouse?
A fulfillment center or a fulfillment warehouse is a place where your third-party logistics provider stores your inventory and processes customer orders. Whenever an order comes in, the fulfillment center team picks, packs and ships the product to the customer’s door.
Do fulfillment centers handle inventory management?
Fulfillment centers handle inventory management as part of their order fulfillment services.
How does order processing work?
Here’s how your fulfillment center staff processes orders:
- They receive inventory from your manufacturer or distributor.
- They store and organize stock on the warehouse shelves.
- They pick items from shelves according to the order.
- They prepare the items for shipping.
- They send the items to carriers for delivery.
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About ShipHero: We make it simple for you to deliver your eCommerce. Our software helps you run your warehouse, and our outsourced shipping solutions eliminate the hassle of getting your products to your customers. With over 5,000 brands and 3PLs relying on us daily, we’re here to help with all your logistics needs.
Let us know how we can help you today by scheduling a call HERE.
Apr 21, 2021 | newsroom
ShipHero hopes to ride the e-comm wave to close its first-ever funding round, with a $50 million goal, Rubin told Retail Brew. They plan to use the funding to increase staff, acquire more warehouse space, and expand into last mile delivery.
Apr 21, 2021 | newsroom
US eCommerce grew 32% in 2020, fueling demand for digital shopping know-how and logistics expertise. ShipHero is one of a number of companies trying to meet that demand by outsourcing eComm fulfillment and warehouse management for brands.
ShipHero’s cofounder and CEO Aaron Rubin told Retail Brew that revenue more than quadrupled YoY to $22 million in 2020, up from $5 million in 2019. The company also shipped $5 billion in orders last year, up from $1.7 billion the year before. Rubin said most of this came from growth among existing customers, not new ones.
The company offers two primary services to brands: 1) cloud-based software that helps brands run warehouse operations and 2) a fulfillment service that ships eCommerce orders around the country from its warehouses.
ShipHero hopes to ride the e-comm wave to close its first-ever funding round, with a $50 million goal, Rubin told Retail Brew.
Read more at MorningBrew
Apr 21, 2021 | Best Practices, Blog, Fulfillment, Warehouse Management Software
Between finding the best deals, navigating carrier requirements and managing inventory, order fulfillment is challenging and time-consuming. Fortunately, you can outsource order fulfillment to third parties to focus on other business tasks.
Amazon offers two fulfillment methods for its sellers: Fulfillment by Amazon (FBA) and Fulfillment by Merchant (FBM). What are the differences, and which one should you choose? Read on to find out!
What are Amazon FBM and FBA?
FBA is a fulfillment option where Amazon handles all order fulfillment tasks for sellers. If you register for FBA, your inventory is stored in a designated Amazon warehouse so the fulfillment crew can pack and ship your items.
Meanwhile, FBM involves a company selling its product on Amazon sales channels while handling storage, shipping and customer support on its own.
Of all current Amazon sellers:
- 57% use FBA only
- 34% use a combination of FBA and FBM
- 9% use FBM only
Amazon Prime Shipping
FBA and FBM sellers can ship products via Prime, Amazon’s reward program that offers one or free two-day shipping. Amazon reports that sellers with Prime memberships are more popular than non-member sellers – customers are more likely to purchase products from you if the Amazon Prime badge shows up on your listings because customers want fast deliveries.
Prime is automatically available for all FBA sellers. If you’re an FBM seller, you need to earn a Prime membership by joining Seller Fulfilled Prime (SFP). To be eligible for and retain a Prime membership, you need to ship all of your orders on time and have a low cancellation rate – otherwise, you’ll lose it.
Seller Fulfilled Prime is currently not accepting new registrations, but you can sign up for the waitlist.
How Fulfillment by Amazon Works
Fulfillment by Amazon sends your products from an Amazon warehouse directly to customers. Here’s a simple guide to explain how FBA works:
- Amazon receives your products at a designated FBA warehouse.
- Amazon stores your items.
- Amazon handles all customer transactions.
- Amazon prepares your product for shipping.
- Amazon ships your products out to customers.
- Amazon deposits profits to your bank account every two weeks.
FBA vs. FBM – Choosing the right option for your business
Considering your specific business and the products you sell, you may be better off with FBA, FBM, or a hybrid of the two. Each option is evaluated below on the cost & fees, autonomy & control and ease of use.
Is FBA better than FBM?
FBM is the better option for your company if:
- You sell heavy, bulky, or oversized products
- Your products sell slowly and inventory turnover is low
- You already have logistics in place and can fulfill your products
- You have existing customer service practices and want to control your customer experience end-to-end
- You want higher margins
- You don’t want to be at the mercy of Amazon’s fees
- You sell products that aren’t in the approved categories for FBA
FBA is better for your company if:
- You sell small and lightweight products
- Your products sell quickly and have a high volume of inventory turnover
- You do not have logistics in place and expenses would be higher than fulfilling on your own
- Your products are large-margin products that can offset Amazon’s additional fees
- You do not have a customer service department
- You are okay relinquishing control of your customers’ experience to Amazon
Shipping Items to Amazon FBA
One of the best perks of being an Amazon FBA member is that Amazon handles your entire inventory process. All you need to do is ship your products to an Amazon FBA warehouse, and the team there will do the rest.
How to Ship to Amazon FBA
Recently, Amazon introduced a “Send to Amazon” inventory replenishment method that’s very simple and saves you a lot of time. Here’s how to send items to an Amazon FBA warehouse:
1. Choose Items to Send
First, choose what items you plan to send to an FBA warehouse from your product listing and enter how many units you’re sending.
2. Enter Your Shipping Address and Choose a Carrier
Input your destination Amazon FBA warehouse, then choose between an Amazon-partnered carrier or your preferred carrier company.
3. Print Shipping Labels
Depending on your choice in the previous step, you can print shipping labels directly from the Amazon Shipping Services page or your chosen carrier’s company website.
4. Attach Labels
Once you have printed labels, attach them to your product boxes. Note that Amazon has strict packaging requirements, so make sure you use the right boxes.
5. Send Your Items
With the labels attached, you can schedule a courier pickup or visit the nearest office. From there, the carrier will ship your items to an Amazon FBA warehouse, where an inventory team will handle the rest.
Amazon FBA Cost Factors
You’ll be charged costs and fees if you participate in Amazon FBA. Here are some factors that influence your Amazon FBA usage costs:
Item Size/Weight
You can use Amazon’s FBA Calculator to predict fees and expenses, given your item sizes and weight. Overall, the fee structure for FBA sellers dramatically increases with the size and weight of a product; therefore, FBA sellers with small, lightweight products incur fewer fees.
Inventory Turnover
Inventory turnover is the speed at which a company sells and restocks inventory. Amazon tracks sellers’ inventory turnover and assesses fees based on the duration; in other words, sellers with products that sit in Amazon fulfillment centers for longer (i.e., have slow turnover rates) must pay higher FBA fees. Additionally, if a product sits in an Amazon fulfillment center longer than 365 days, they are charged long-term storage fees.
FBA Fulfillment Fees
All FBA sellers must pay FMA fees to cover the shipping and handling costs involved with fulfilling their company’s orders. These most likely cover the labor hours, packaging and overhead that Amazon incurs to provide this service.
FBA vs FBM: A Comparison
FBA and FBM have their pros and cons. To help you choose, we’ve laid out some key differences between the two fulfillment methods below:
Autonomy & Control Over Inventory
How much control do you hope to retain over your company? FBM has the most power and autonomy regarding fulfillment because there are many ways to fulfill your product, like dropshipping, outsourcing to a 3PL, leasing and operating your warehouse, or even using a spare bedroom in your apartment for storage.
Meanwhile, FBA sellers have little to no autonomy over handling their products. Once you ship products to the FBA warehouse, Amazon will handle the entire order fulfillment process.
Customer Experience
Most FBA members pass customer service responsibilities off to Amazon, so they don’t usually speak directly to customers. Outsourcing customer service means saving money and effort because you don’t have to pay or train customer service specialists. However, you’re also passing up a chance to communicate directly with customers and foster brand loyalty.
Meanwhile, Amazon FBM sellers are 100% responsible for customer service. Because the customer service ball is in your court, you must spend time and money to ensure a positive customer experience. However, this is an opportunity to connect with customers and reinforce your brand.
Seller Rating
FBA sellers have little concern over their seller feedback and rating because Amazon handles most of the process. In fact, FBA sellers can request Amazon to remove negative feedback if Amazon was the one who handled the fulfillment.
FBM sellers have almost complete control over their sales, so you might be easier targets for bad feedback. Since you can’t request Amazon to remove negative feedback, you must constantly deliver the best service and respond to negative reviews on your own.
Ease of Use
The whole process of order fulfillment, picking, packing and shipping is laborious and time-consuming.
For companies and brands with no sales channels or fulfillment methods, Amazon FBA allows instantaneous access to a gigantic logistics network for a price. But this also saves you time to focus on the aspects of your business that need your attention most.
Companies and brands that already have fulfillment channels and are considering adding Amazon should consider whether the additional FBA logistics channel is worth the costs, especially those that sell big, heavy products.
If you already have logistics channels and partners, FBM is likely the better option because you don’t have to pay the extra FBA fulfillment costs.
Amazon FBA vs FBM: Which is Best?
Which one is “best” between FBA and FBM depends on what you want out of your business. There’s no doubt Amazon will remain the #1 eCommerce site for a long time, so both options are relatively stable.
Generally, FBM is better if you want more control over your sales process and build more brand loyalty through direct customer interactions. FBA is better if you want a hands-off approach to order fulfillment and are fine with Amazon running your customer service.
Best Amazon FBA Freight Forwarder
Even if you’re an FBA member, shipping items to Amazon warehouses takes time and effort. Fortunately, you can go to freight forwarders to help send products out to Amazon FBA without hassle. Here are some of the best Amazon FBA freight forwarders operating today:
Unicargo
Unicargo is an Amazon freight forwarder that inspects your products upon picking them up, so you don’t accidentally ship damaged goods to the FBA warehouse. Unicargo also offers short-term storage warehouses if something happens with your FBA membership.
Flexport
Flexport offers freight forwarding services with real-time tracking in over 80 countries. If you run an environmentally-aware business, Flexport is a good choice because one of its mission to attain 100% carbon neutrality.
Freightos
Freightos helps you compare freight quotes from dozens of providers so you can find the best deals easily. It also offers on-demand freight tracking and issue resolution assistance if things go wrong mid-shipment.
Let ShipHero Handle Amazon Fulfillment
Need help with fulfillment for your Amazon orders? Here’s how ShipHero’s third-party logistics software can help you offer Amazon-like delivery speeds without breaking the bank.
2-Day and Overnight Delivery
ShipHero has fulfillment centers across the country that deliver to customers within one to two business days. We can help you deliver as fast as Amazon – without the FBA fees.
Multiple Sales Channel Fulfillment
ShipHero doesn’t just handle Amazon order fulfillment. We offer third-party order fulfillment for numerous major eCommerce platforms like eBay, Shopify, Walmart and BigCommerce.
Affordable Shipping Costs
Thanks to ShipHero’s partnerships with multiple shipping carriers, Amazon sellers working with us get lower delivery costs for each order. Moreover, our fulfillment network makes last-mile delivery faster and more affordable.
Conclusion
So, is FBA or FBM right for your business? Stay tuned to our Shipping Methods Explained series as we dive deep into the specifics of fulfillment.
Learn more about ShipHero’s industry-leading warehouse management software.
Amazon FBA vs FBM FAQs
Can you use both FBA and FBM?
You can use both FBA and FBM. In fact, about 34% of Amazon sellers use both fulfillment methods. You can use FBM to sell large products that don’t sell too well and FBA to sell smaller, high-selling products. This combination method saves you more money because you can avoid large item fulfillment and long-term storage costs.
Does Amazon charge for FBM?
Amazon doesn’t charge subscription fees if you’re an individual FBM seller, but you’ll be charged $0.99 for every product sold. However, you can get a Pro FBM subscription at $39.99/month to avoid paying $0.99 for every item you sell.
How much does Amazon take from FBA?
Amazon takes a variable FBA fee, depending on the product’s size and dimensions, that starts at $2.92 for every item sold. You also need to pay monthly storage fees based on how much merchandise you have in FBA warehouses.
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About ShipHero: We make it simple for you to deliver your eCommerce. Our software helps you run your warehouse, and our outsourced shipping solutions eliminate the hassle of getting your products to your customers. With over 5,000 brands and 3PLs relying on us daily, we’re here to help with all your logistics needs.
Apr 23, 2021 | newsroom
“From memory, it would take about four of my staff about 4-5 hours to completely fulfill 200 orders. The week we went live with Shiphero we did the same amount in about 2 hours – as of right now, even less.” Jordi Anger, CoFounder of E-Commerce Xpress.
Apr 23, 2021 | Blog, The Packet
Beauty is in the i…Phone
The Beauty industry, as well as the fashion & apparel industry, were amongst the hardest hit sectors during the pandemic. Due to the fact that these industries rely on in-person brick-and-mortar shopping to browse their high number of SKUs, find the right fit, and test product quality, the beauty industry has struggled to adjust to the digital shopping experience. Until now.
Estée Lauder Co. Goes Digital in a Big Way
While traditionally relying on in-person samples and consultations, Estée Lauder Co. (ELC) has begun to rethink digital shopping. This week, Clinique (an ELC brand) quietly launched a new site in the UK, which features video chat consultations, product demos using augmented reality, the ability to shop based on product preferences, skin types and recommendations based on user data. Soon, they will roll out a feature for friends to shop together online from various locations, customize their own storefronts and control their digital shopping journey from end-to-end.
Nicky De Simone, enterprise marketing and transformation at Estée Lauder Companies, says “One of the things shoppers love about going to the store is that social connectivity. As much as we have pivoted digitally, we were still losing the customer along the way. [We] will leverage data to route a consumer’s consultation through to the right consultant for them and who will be able to make smarter recommendations.”
Tech FTW
Personalization has been a major e-commerce trend for many industries (think: supplements), due to the widespread ability to collect personal information and deliver services and recommendations based on consumer preferences. Beyond big data, other emerging technologies like augmented reality, virtual reality, chatbots and personal assistants are creating new avenues for brands to engage with their customers at scale. Companies like L’Oreal have made big investments when it comes to digitizing their shopping experience.
But is There More to Life Than Being Really, Really, Ridiculously Good-Looking?
No.
Blackstone Bets On India E-Commerce
Already the largest owner of office buildings in India, Blackstone Group Inc., has now publicized plans to become the country’s largest owner of warehouses, as well. While e-commerce continues to rise in India, the investment firm plans to spend $720 million to purchase 3.5 million square feet of industrial warehouses, as well as 18 million square feet of development sites that could be used for fulfillment and logistics properties.
Captain Planet At It Again
Before hosting the upcoming global climate summit (which falls on Earth Day) with world leaders from China, India, and more, President Joe Biden pledges to reduce U.S. greenhouse gas emissions by at least 50% by 2030, more than doubling the previous agreement under the 2015 Paris Climate Accord. in the latest push by the administration to aggressively combat climate change. This pledge comes after more than 300 businesses called on President Joe Biden earlier this month to readjust their gas emission targets.
ShipHero News
You’ve Got a BariatricPal in Me
Gym bros, swoll-mates, keto cadets, dieteers ‘til you die … no matter what you call it, weight loss and fitness is a lot more fun and successful when you have a trusted companion. That’s exactly how this eCommerce CEO’s voyage started — while embarking on his own health journey, Alex Brecher, CEO of BariatricPal, recognized the need for support, connection, and community, and launched the BariatricPal store to provide the bariatric community with high-quality food, snacks, vitamins and health accessories. Learn more about Alex’s journey in our latest case study.
Amazon FBA v. FBM
What is Fulfillment-by-Amazon (FBA) & Fulfillment-by-Merchant (FBM)? What are the pros/cons of each? How do they compare/contrast and which one right for my business, if any? Let’s dive in.
Apr 27, 2021 | newsroom
When a transaction goes well, gig companies can provide a level of service the parcel giants can’t, according to Aaron Rubin, CEO of e-commerce fulfillment startup ShipHero. He points to the difference in experience. Beyond same-day service, gig startups often offer live tracking and text updates for each order. The delivery workers knock on the door and (pre-COVID) hand orders to customers‚ creating contrast with opaque and sometimes theft-prone deliveries offered by traditional carriers.
“You’re starting to see more Amazon packages show up at your door, more Grubhub, Doordash … where it’s this fantastic experience. And that opens your eyes to, well, this is the way the world could be. Why is it not like that?” Rubin said.
Read more at Business Insider
Read more at Markets Insider
Apr 28, 2021 | Blog
With online shopping becoming increasingly popular, providing customers with fast shipping options has become more crucial than ever. Leading eCommerce brands spend a great deal of time getting the specifics right for their shipments. With evolving technology and greater consumer expectations, overnight delivery has become an important service. While overnight delivery options are great for your customers, the idea of delivering orders in one day can be daunting for small eCommerce merchants.
So, how does overnight shipping work, and what’s the easiest way to provide your customers with overnight deliveries? Let’s get to it.
What is Overnight Shipping?
Overnight shipping is the second quickest way of delivering products (after same-day delivery) where shippers guarantee that customers will receive their package on the next business day. One-day shipping, next morning, and next-day delivery can also refer to this process. Many popular carriers and shipping labels provide overnight shipping services; let’s take a look at them.
How USPS Handles Overnight Shipping
The United States Postal Service (USPS) is among the most popular delivery service providers in the U.S. The USPS Priority Mail Express Flat Rate is their fastest domestic mail service. It provides overnight to 2-day shipping with flat-rate pricing.
USPS overnight shipping options come with tracking and insurance for most shipments. The price includes the proof of delivery signature record if the receipt is requested at the time of purchase. USPS is among the cheapest options because it operates through an extensive network of post office locations in the US. However, shipments to rural areas and Hawaii might be slightly delayed.
How FedEx Handles Overnight Shipping
FedEx is a popular carrier in the United States, and it offers many overnight services and next-day delivery options. The delivery options depend on the service you choose. FedEx offers FedEx First Overnight Freight, FedEx Standard Overnight, and FedEx Priority Overnight shipping options.
FedEx overnight costs are determined by the delivery time for the next day, the delivery address at the destination, the packaging size, and weight, etc.
How UPS Handles Overnight Shipping
UPS is another famous shipping label in the US. UPS offers three overnight shipping options within the US. These options are the UPS Next Day Air Early that is the fastest, UPS Next Day Air, and the UPS Next Day Air Saver that delivers the package by the next day evening. All of these options are trackable online, and you can visit the Tracking tab to do so.
How DHL Handles Overnight Shipping
DHL is among the most popular international shipping service providers worldwide. For emergency shipments, DHL offers the DHL SameDay Jetline option and the DHL SameDay Sprintline option. Despite being an exceptionally reliable option, DHL overnight international delivery is often expensive. There are daily cutoff times for this service for the next-day delivery options.
Why is Overnight Shipping Becoming so Popular?
2-day delivery is already the standard for customer expectations due to the market dominance of Amazon Prime. Overnight shipping is becoming the name of the game and for the right reasons. As Amazon ramps up its investment in overnight and same-day delivery, customers are going to expect the brands they shop from start offering the same service.
Rising Customer Demand
In major markets across the spectrum, customers are demanding faster transit times and shipping speeds. When customers get speedier delivery options from platforms like Amazon, they expect the same from other brands.
Compete with Amazon
Amazon Prime has taken the lead to set the example with its 2-day delivery options and even overnight shipping options. For customers, this has become the standard, and companies who want to compete with Amazon must offer the same to stand a chance. Otherwise, you’re likely to lose sales to Amazon and other major brands.
More Customers Shopping Online Due to Current Trends and COVID
Because of the ongoing pandemic, shopping at brick-and-mortar stores has become an unsafe practice, and there are restrictions on in-person shopping. As such, more people are turning towards online shopping. As customers become more accustomed to online shopping, they’ll expect in-store pickup or fast delivery speeds for their orders.
How Much Does it Cost to Overnight a Package?
Overnight shipping costs differ for different carriers with different shipping fees. They are usually determined by several factors, as listed below.
Package Dimensions
The package dimensions are used to calculate the dimensional weight of the package. This is done by multiplying the length, width or girth, and the height of the box. It is then divided by a DIM divisor to calculate the dimensional weight of the packaging.
Package Weight
In case the actual weight exceeds the dimensional weight, the former is used as the weight of the packaging to calculate the shipping costs. Carriers usually have a given rate for each lb. or Kg of the package weight.
Shipping Zone
Shipping zones operate on the distance between the point of origin, which is often the warehouse and the shoppers’ residences. Carriers define their shipping rates according to different shipping zones. Depending on where your warehouse is and where the package is headed, there might be some additional charges because of restrictions, resulting in an additional fee for shipping.
Shipping Agreements with Carriers
There is a way to lower shipping costs if you have made agreements with the shipping couriers. Most shipping carriers offer discounted rates for high shipping volumes.
How to Offer Overnight Shipping to Your Customers
While daunting, overnight shipping is indeed possible to pull off. You’ll have to research the most economical options for your business so that you don’t suffer a loss while offering overnight shipping. Here’s how you can do it.
Negotiate Discounted Shipping Rates
Take a call with your carrier options and negotiate discounted shipping rates with them. You could base your argument that the more attractive your offer is for your customers, the more orders, and you will use more of the carrier’s services.
Ship from Multiple Warehouses
Realistic overnight delivery options can be pulled off by having your products stored in multiple warehouses near the areas where the bulk of your customer base lies (aka distributed fulfillment centers). This way, transit times can be reduced, and you can offer overnight shipping.
Require an Order Minimum for Overnight Delivery
It’s costly to offer overnight shipping for small items and you can end up losing money on the sale. To tackle this situation, place a minimum order limit for your customers so that you can realistically cover overnight shipping costs. Customers can choose to get faster delivery speeds for an additional charge. You can also offer an Amazon Prime-like membership option where customers can get free or discounted shipping if they pay a monthly fee.
Can You Realistically Support Overnight Delivery?
It can be difficult to guarantee overnight delivery and fulfillment, especially for small businesses. While big businesses such as Amazon store their products in multiple fulfillment centers, small businesses don’t have the luxury to store products in multiple warehouses across the world. Additionally, storing your products in warehouses can often be expensive and you might have to handle the fulfillment yourself.
In case you are handling the fulfillment yourself through carriers, you might not be able to ship to rural and remote areas as handling these zones can be expensive. Furthermore, if your customer places the order on the weekend, like Friday, you might not be able to realistically deliver the shipment until the next working day, Monday.
This brings a gap of two delivery days, Saturday and Sunday, and it might displease your customers. Realistically, overnight shipping can be expensive and time-consuming for small businesses to manage on their own. Luckily, eCommerce businesses can work with 3PLs that can help them provide faster shipping options.
Offer Overnight Delivery with ShipHero
By now, you understand the importance of overnight delivery options and how they can positively impact your business and sales. If you’re wondering how you can manage overnight shipping for your company, look no further for ShipHero has the solution to all your overnight shipping problems.
Discounted Shipping Rates
At ShipHero, there are no hidden fees. With ShipHero, you can look for the cheapest options to minimize your total fee. Our single shipping rate and discounts make overnight shipping manageable for businesses of all sizes.
Distributed Fulfillment
ShipHero handles your order fulfillment by distributing the products across the nationwide network of fulfillment warehouses. This way, transit delays are minimized, and your customers get their orders on their doorstep faster. This is the reason ShipHero lets you offer overnight and 2-day shipping to your customers without any worry or hassle.
eCommerce Integrations
ShipHero integrates seamlessly to your existing online shops on Shopify, Etsy, WooCommerce, Amazon, Quickly, and more, to provide you with the best experience possible. You can efficiently manage your products and customer orders from a single dashboard with ShipHero.
Conclusion
Overnight shipping is an excellent service to offer customers, but you need to make sure that your brand can offer it without wrecking your profits. If overnight delivery is something you’re prepared to offer, then you need the right automation and tools to help you seamlessly manage your operations. ShipHero handles your fulfillment effortlessly and keeps your customers coming back for more.
Get started with ShipHero today.
May 3, 2021 | Blog, The Packet
Front and Center
SHIPPERS VS. CARRIERS
When maritime consultant Drewry interviewed large shippers to gauge the health of the logistics industry, several shippers were very open to the fact that the relationship between shippers and carriers has been severely strained, and in one case, “at an all time low”.
What’s the difference again?
The shipper is the company who owns the goods that are shipped (also called the consignor). The carrier is the company that transports goods on behalf of the shipper, and is responsible for the goods during transit.
Got it. And what’s the beef?
According to shippers, carriers are taking a “short-sighted” approach by taking advantage of the recent spike in demand, and in so doing tarnishing long-standing relationships.
“Relationships with carriers count for nothing these days,” said one large European shipper. “The carriers are very opportunistic and take high-rate spot shipments rather than contract shipments – it is all about money.”
They sound bitter.
They have reason to. There have been cases where carriers do not honor their contractual MQCs (minimum quantity commitments), in an effort to secure spot shipments for additional profits — spot shippers transport goods “on the spot”, not through a contract, and therefore can charge an extra premium for the service. Additionally, carriers have recently chosen to cancel trips altogether in the U.S. to find greater profits elsewhere, leaving shippers scrambling to find spot shipments or NVOCC (Non-Vessel-Operating Common Carrier) which always charge a higher price.
Someone should help them work it out.
Well, the European Shippers’ Council has voiced their concerns to the European Commission, asking for an investigation into the carriers’ allegedly predatory behaviors. We hope they’ll hug it out soon.
Back of the Packet
Evolution: From Mailchimp to …
Websitechimp. The widely-used newsletter platform turned marketing company, MailChimp, has announced new services to further service their growing base of e-commerce companies and rival the likes of Shopify. Mailchimp’s new “Websites & Commerce” plans lets small and medium businesses launch online stores, as well as a new appointment booking service.
Buy a Teeth Clean, Get a Vaccine
In Japan, dentists can now deliver the vaccine. That’s right, due to a lack of manpower for properly administering the vaccine to Japan’s population, there are 14 million unused doses of COVID-19 vaccines. As imports ramp up, the Japanese government faces increasing pressure to find ways of inoculating the general public. Up next, chiropractors?
????GME GOES TO THE… Venture Capitalists ????
This week, GameStop raised $551 million through an equity offering, sending its shares 15% higher in extended trading on Monday. This comes as Ryan Cohen, majority GME shareholder and owner of RC Ventuers, leads Gamestop through an e-commerce transformation to compete with other retailers in the video game space, like Walmart, Microsoft and Sony.
????AMZN DOESN’T GO TO THE MOON ????
On Monday, Jeff Bezos’s rocket company Blue Origin filed a 50-page protest challenging a $2.9 billion NASA contract to SpaceX, to build a lander for American astronauts to return to the moon. In response to the protest, Musk’s tweet points to Bezos’s possible dysfunction.
ShipHero News
Overnight Shipping
Today’s customers prefer companies that offer overnight shipping and fast delivery times. Learn how to supercharge your supply chain and offer overnight shipping to your customers, in our blog post: How To Offer Overnight Shipping + Tips For Success.
3PL vs. 4PL
What’s the difference between a 3PL and 4PL? If you don’t know, you could be missing some important information on your supply chain. Find out more about 3PLs, 4PLs, and e-commerce logistics in our recent post.
May 3, 2021 | 3PL Warehouse Management, Blog
The success of any business rests in the hands of the customer. If your customers aren’t happy, they won’t purchase your products or recommend your company. This leads to a reduction in sales that can ultimately drive your business into the ground.
There are many factors that come into play when dealing with customer satisfaction, but one of the biggest is the order fulfillment process. The speed and accuracy with which orders are fulfilled is one of the biggest determining factors in customer satisfaction, but it is also one of the most challenging aspects of running a business. To simplify and streamline this process for reduced costs and improved customer satisfaction, many businesses turn to 3PL providers and 4PL providers to improve their logistics strategy and expand their fulfillment capabilities.
In order to truly understand the difference between third and fourth-party logistics, you first need to understand the basics of how outsourced logistics works. Keep reading to find simple definitions of 1PL, 2PL, 3PL, and 4PL, followed by an in-depth look at the difference between third-party and fourth-party logistics.
A Review of Logistics Terminology
An online retailer has a wide variety of options when it comes to fulfilling orders. Choosing the right logistics provider is the key to optimizing your supply chain and maximizing both profit and customer satisfaction. If you make the wrong choice, it could end up costing your company thousands, even millions, of dollars, not to mention end up hurting your customer satisfaction rating as well.
Before getting into the specifics of third-party versus fourth-party logistics, here’s a quick review of logistics terminology to put things in context:
- First-Party Logistics (1PL) – A model in which the retailer sends products from one location to another. For example, a farmer delivering eggs directly to a grocery store for sale.
- Second-Party Logistics (2PL) – A provider that owns assets to transport products from one location to another. For example, a farmer might hire a courier (2PL) to transport eggs from the farm to the grocery store for sale.
- Third-Party Logistics (3PL) – A provider that retains oversight of the management process but outsources transportation and logistics to an outside provider. The company may also subcontract some or all of the execution of the supply chain and may provide additional services such as packaging to add value. For example, a farmer might hire a 3PL to pack the eggs in cartons and to transport them from the farm to the grocery store for sale.
- Fourth-Party Logistics (4PL) – A provider that outsources the management of logistics activities in addition to the execution of the supply chain. These providers usually offer greater strategic insight and management. For example, a 4PL might manage communication with a farmer to increase egg production as the grocery store’s inventory declines.
- Fifth-Party Logistics (5PL) – A provider that develops an optimal supply chain network with innovative and customized logistics solutions. These providers use technology such as robotics, automation, and RFID devices to improve efficiency and value along the entire supply chain.
In the above overview, the egg and farmer business is a hypothetical example that could be applied to any eCommerce business.
Every business has its own unique needs for supply chain logistics. For medium to large-sized businesses, however, it usually comes down to choosing between third-party and fourth-party logistics providers. Keep reading to learn the basics of both and to receive some tips for making the best choice for your company.
Understanding the Basics of Third-Party Logistics
Simply put, a third-party logistics provider is a model that involves three separate parties. The first is the business itself, the second the logistics provider, and the third is the carrier. In this supply chain model, the business turns over logistics operations for inventory storage, packaging, and managing inventory as well as turning it over to the carrier for shipment. Another way to think of it is that a 3PL becomes the middleman between the business and the shipping carrier, taking care of the tedious aspects of shipping.
This supply chain model has been around since the 1970s, and the first 3PL providers were intermodal marketing companies that received packaged loads from shippers and transferred them to railroads. Today, the role of a 3PL provider has expanded to include services such as managing the movement of parts and materials from suppliers to manufacturers. It also includes transferring finished products from the manufacturer to the distributor or retailer.
In most cases, third-party logistics providers offer bundled supply chain services which may include some or all of the following:
- Warehousing & storage
- Transportation
- Cross-docking
- Inventory management & inventory planning
- Crating and packaging
- Picking & packing orders
- Freight forwarding
- Shipment tracing/tracking
- Reverse logistics (returns)
These services can be scaled and customized according to the business’s needs. Generally speaking, businesses hire 3PLs when their supply chain becomes too complicated for internal management. For example, if a small business significantly expands their inventory as sales increase or grows through a merger or acquisition by another company.
Pros of 3PL:
- They offer innovative strategies customized to your business to optimize your supply chain, making it more efficient and cost-effective.
- In most cases, 3PLs are able to reduce transportation costs by 5% to 25% compared to a manufacturer running their own shipping operation.
- They handle all regulations, both domestic and international, which makes it easier for a manufacturer to test and enter a foreign market – they also manage customs brokerage.
- A 3PL generally has the warehouse capacity to execute fulfillment from multiple locations around the country or around the world.
- It is generally cheaper to hire a 3PL provider than to purchase or lease warehouse space in markets you want to test or expand into.
- Most 3PLs offer monthly pricing instead of locking you into a long-term contract
Cons of 3PL:
- Hiring a 3PL necessitates a loss of control over your shipping functions – one of the functions that has the greatest impact on your customer satisfaction.
- Not all 3PLs offer both domestic and international logistics services – some have failed to grow and change with the industry.
- There is always a risk that a business’s relationship with a 3PL provider will become untenable which can lead to a significant loss of relevant market knowledge, making it more difficult to resume in-house management of shipping functions, if necessary.
- The cost to hire a 3PL is not always clear or up-front – it may be cheaper initially but could become more expensive than in-house management if operations expand sufficiently to allow it.
If you’re still not sure whether a third-party logistics provider is right for your business, here are some examples of industries that can benefit from hiring 3PL providers:
- Medical Devices – Medical device companies need to not only ship their products from the distribution hub to individual locations, but those shipments must be expedited and tracked through every step of the process with a chain of custody that can be easily verified. This requires complex technology which is a skill 3PL providers are able to provide.
- Field Services – Service and repair businesses can benefit from 3PL services because these services use integrated technology to create a database of commonly ordered items to ensure that inventory meets demand. Businesses can pick up parts directly from the hub or place an order for expedited delivery to the specific job site.
- Retailers – Retail businesses are now expected to offer expedited delivery to their customers due to the “Amazon effect.” A 3PL provider makes it possible to provide same-day and next-day deliveries while managing the retailer’s costs.
Hiring third-party logistics companies could help you expedite your order fulfillment while also reducing costs and improving customer satisfaction. Before you commit, however, there is another option to consider – fourth-party logistics. Keep reading to learn more.
Understanding the Basics of 4PLs
In a fourth-party logistics partnership, a business is basically outsourcing the entirety of their supply chain management to a logistics service provider. The 4PL oversees all of the different pieces of their client’s supply chain including warehouses, transportation companies, and agents. The goal is for the 4PL to be the single interface for the business between all aspects of the supply chain.
You can think of 4PLs as a supply chain integrator. It’s the most comprehensive supply chain solution available for a business. A 4PL is often a joint venture for enterprises that want business planning and project management to be handled by a separate entity. For example, companies like Deloitte and Accenture offer 4PL services to their clients.
In most cases, the 4PL does not actually own warehouse or transportation assets. Rather, it coordinates these services with vendors – it may also coordinate the activities of 3PL providers that are handling various aspects of the company’s supply chain. The difference is that 3PL providers are focused on day-to-day operations while 4PL providers focus on integration and optimization. A 4PL provider may also be known as a Lead Logistics Provider (LLP).
The primary benefit of hiring a 4PL organization is that the 4PL focuses on simplifying and streamlining logistics for the highest level of services for the best value. The 4PL becomes your single point of contact for the entire supply chain which is ideal for large businesses that have complex order fulfillment operations.
Here is a quick summary of some of the benefits a 4PL provides:
- Simplicity: The 4PL acts as your single point of contact for the entire supply chain.
- Neutrality: The 4PL has no assets to protect, so they act on behalf of the client.
- Transparency: Most 4PLs have an open-book management style with no margins on transportation; costs are controlled.
- Optimization: Integrated technology and management systems ensures optimal flow of inventory and shipping processes.
- Savings: A combination of logistics sourcing and reduced transportation spending leads to substantial savings across the board.
- Productivity: Taking the weight of logistics off your shoulders expands your ability to grow the company as you see fit.
Now that you know a little more about what a 4PL does take a minute to review the potential pros and cons for hiring a 4PL provider.
Pros of 4PLs:
- A 4PL becomes the “control tower” for the entire supply chain process, managing everything from inventory to shipment.
- Most 4PLs are non-asset based which means that their entire focus is on simplifying and streamlining to logistics functions to improve value and reduce costs.
- Hiring a 4PL takes the burden of logistics entirely out of your hands with minimal oversight required, freeing you to do the things it takes to grow and expand your business.
- A 4PL can manage complex supply chain models which include domestic and international distribution, as well as managing multiple warehouse locations.
- Hiring a 4PL provider could enable your business to provide same-day or next-day shipping options for improved customer satisfaction.
Cons of 4PL:
- Hiring a 4PL provider means you are giving up control over the logistics process as well as the specific functions – you’ll be relying very heavily on an outside provider for one of the biggest functions of your business in terms of customer satisfaction.
- There is potential that the 4PL could form biases with certain suppliers instead of seeking out the most efficient or cost-effective option.
- Transitioning from a 4PL provider model back to in-house management of supply chain services could be very difficult for a large business.
If you’re still not sure whether a fourth-party logistics provider is right for your business, here are some examples of industries that can benefit from hiring 4PL providers:
Medical Devices
In the industry of medical devices, surgeons often make last-minute orders and order multiple sizes of devices since they don’t know exactly what they’ll need. A 4PL provider is better equipped to manage complex chain-of-custody requirements and tight delivery schedules while reducing inventory costs.
Field Services
Integrative technology enables a 4PL to optimize all aspects of the supply chain including determining the ideal parts, quantities, and locations based on anticipated demand. Field techs no longer have to double as warehouse operators and parts can be delivered in 30 minutes or less, improving efficiency and maximizing customer satisfaction.
Retail/eCommerce
By managing the entire supply chain network, 4PLs can allocate inventory to meet customer demand and to reduce missed opportunities. They also enable companies to provide same-day delivery regardless of location as well as same-day replenishment.
Now that you know the basics about third-party and fourth-party logistics, you may already have a sense for which one might be best for your company. Before making your choice, however, you should take a closer look at the unique differences between 3PL vs 4PL providers.
3PL vs. 4PL – What’s the Difference?
A 3PL is focused on the day-to-day operations of your supply chain logistics – it is more transaction-focused than a 4PL. That being said, a 4PL takes it a step further by optimizing your entire supply chain, including any 3PL providers your business might have hired. They take over the entire operation and become your single point of contact which leaves you free to pursue other things that might help grow and expand your business.
When an organization already has an effective, high-performance supply chain strategy in place, a 3PL provider can provide the extra support needed to execute that strategy efficiently. This type of relationship usually requires a significant degree of internal management to ensure that the 3PL’s performance meets business standards. While the day-to-day functions may be out of your hands, you still need to retain a certain degree of oversight. You should also keep in mind that because 3PLs are asset-based, some companies may be more concerned with utilizing their own assets than with providing competitive rates or more valuable services.
A fourth-party logistics provider is non-asset based which means that their focus is on finding the ideal combination of service and value. These providers utilize integrated technology to ensure a high level of visibility across the entire supply chain for both strategic and tactical analysis. Your business will still need to utilize some internal resources to oversee and manage 4PL performance, but it takes most of the weight off your shoulders when it comes to optimizing services and minimizing costs.
There are a lot of factors to consider when it comes to choosing between a 3PL and a 4PL, so be sure to do your research before you decide. Keep reading to receive some simple tips to employ as you start making your decision.
What’s Best for Your Company?
Know that you understand a little more about third-party and fourth-party logistics and how they differ, which option is best for your company? Unfortunately, there may not be a clear-cut answer. You’ll need to take a deeper look at your business operations to see where you are struggling and whether hiring a 3PL or 4PL provider might help.
Here are some of the signs that your company could benefit from hiring a 3PL provider:
- Your business is a startup manufacturer or B2C company in the range of $1 to $5 million.
- Your business’s ability to produce and sell good is outpacing your ability to store and ship them.
- You are spending too much time fulfilling orders when you could be focusing on factors that influence the growth of your business (e.g. marketing).
- Your customer satisfaction levels are falling due to poor shipping and return practices.
For many businesses, hiring a 3PL provider is the first step as the business grows and expands. Over time, however, it might make more sense to move to a fourth-party logistics model. If your business has outgrown your in-house capacity for managing supply chain services and you want to optimize the entire process for efficiency and controlled costs, you may do best with a combination of 3PL and 4PL providers. The benefit of hiring a 4PL is, of course, that you can also gain the benefit of 3PL services without having to manage them yourself.
Whether you are hiring a 3PL or a 4PL provider, you need to do your research to ensure that you choose the company that is the best fit for your business. Take the time to delve deep into each company’s set of skills as well as their experience and reputation in the industry. You’ll be turning over a significant portion of your business’s essential operations, so you need to choose a provider you can trust 100%.
Choose ShipHero as your 3PL
ShipHero is a leading 3PL service for ecommerce merchants. We handle logistics and fulfillment for over 4,000 online stores.
Reduced shipping costs
Due to our partnerships with major carriers, merchants working with ShipHero get reduced shipping costs for each order. Even better, our use of distributed fulfillment centers means you save even more money on transit costs and can get orders delivered faster.
2-day delivery and overnight delivery
With ShipHero’s distributed fulfillment network, orders can be delivered to most locations with 1 to 2 days. This allows you to offer the same delivery speeds that Amazon does, without having to let Amazon’s FBA fees reduce your profits.
Fulfillment for all your sales channels
We don’t just handle fulfillment for your Amazon orders. In addition to Amazon, ShipHero handles multi-channel fulfillment for Walmart, eBay, Shopify, BigCommerce, and most other eCommerce sales channels.
Conclusion
Every business is unique in terms of the services it provides, but all businesses have the same basic needs. Optimizing your supply chain process for reduced costs and improved customer satisfaction should always be a priority and hiring a 3PL or 4PL provider could be your next step to doing so.
Need a warehouse management system (WMS) for your 3PL? ShipHero’s 3PL services will help your eCommerce store run at full potential.
