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When Should eCommerce Brands Outsource Order Fulfillment to a 3PL?

When Should eCommerce Brands Outsource Order Fulfillment to a 3PL?

January 26, 2023
Posted By
Austin Kreinz
Title asset to the "Summer Shipping" blog post from Atomix Logistics. A small green 3D truck with a small sun floating above it portrays the hot summer sun during order transport. KW: Ecommerce, 3PL, order fulfillment, fulfillment center, summer order fulfillment, new orders, new customer, temperature, protection, packaging, eco-friendly, sustainability

TLDR: Shipping 100+ orders per month is a rule of thumb to gauge when you’re ready to consider; that being said, brands can outsource day 1 with fulfillment partners like Atomix or scale in-house operations effectively. Understand the factors below to make the best decision for your brand.

Today, almost anyone with an internet connection can start an ecommerce business. What makes or breaks an online business is often one fundamental operation - the order fulfillment process.

It doesn’t matter how much R&D has gone into your product, Quality Control, Customer Acquisition Cost, or Conversion Rate Optimization (CRO) if your customers have to wait two weeks to receive it, right?

So, how does one determine when to start outsourcing their fulfillment to a 3PL? First, let’s define what a 3PL can do for your business (while avoiding other fulfillment myths.)

Third Party Logistics (3PL) providers act as an extension of business owners and take over the entire backend operations of storing, picking/packing, and shipping their product(s). It's important to note that some providers are better than others.

Many business owners typically handle all of the order fulfillment themselves…in the beginning. This process is called in-house order fulfillment.

Let’s explore the process in-depth!

Table of Contents

Understand What a 3PL is

Did you know that the location of your warehouse impacts 8-20% of overall margin? Not to mention the extra fees such as accessorial, fuel surcharges, residential fees that add 1-4%. Find the right location based on your brand’s data with a shipping analysis.

Simply put, a 3PL is a third-party partner that provides outsourced logistics services to eCommerce brands. 

This can include things like warehousing, inventory management, shipping and fulfillment, and even returns management. A 3PL takes care of all the behind-the-scenes operations that go into running and growing an ecommerce business, so you can focus on other aspects of your business.

After all, the delivery experience - how products arrive to customers - is a core growth driver that is methodically planned by the fastest growing direct-to-consumer eCommerce brands. 

When it comes to running an ecommerce business, order fulfillment is not only one of the most important aspects to consider, it’s paramount to increasing Customer LTV and managing profit margins.

That's why many eCommerce brands turn to reputable, high-touch fulfillment centers or third-party logistics (3PL) partners like Atomix

But when is the right time to start using a 3PL? 

Let's dive in.

The 4 Factors to Consider

So, when should an ecommerce brand start using a 3PL? 

The answer is that it depends on a number of factors. But generally speaking, there are a few signs that it might be time to start looking into 3PLs.

The process of needing and finding a 3PL can be triggered by a number of factors, some of the most integral including the following:

1. Your business is scaling much faster than anticipated

Say your first 3 months after launch, you sell ~300 units. That’s a great start! Month four, you sell 500+ units in 30 days and find yourself getting stretched thin trying to get all of your orders out on time. Insert; a 3PL! 

While it may be daunting to trust someone else with your precious goods, rest assured that your 3PL will be in touch with you for every step of the process. Simply ship them your stock, integrate your store into their app, and you’re off to the races.

2. You notice your competition outperforming your brand

The business world is filled with competition, and getting a leg up on your competitors is the name of the game in ecommerce. 

If you notice your opposition getting their orders out more efficiently and in a more timely manner, it might be a good time to consider a 3PL. More likely than not, they’ve already done the same! Switching to outsourced logistics allows you to focus on your front-end operations like branding, marketing, and advertising.

3. You want to expand to other global markets

As an ecommerce business grows, so does the range of their customer locations. That’s always a great step forward, but international shipping can get very expensive, very fast.

In these scenarios, finding a 3PL is always going to be easier than trying to figure out logistics yourself. 3PL’s have pre-negotiated rates with major carriers, meaning business owners end up saving between 20%-52% on their logistics spending. In addition, expanding to international markets means higher customer acquisition!

4. Your customer experience is beginning to suffer

As mentioned earlier, a growing brand can take off much faster than anticipated. 

A sudden influx of new customers can leave business owners stranded, attempting a balancing act between customer service and customer satisfaction. Why risk having to choose? Finding the right 3PL for your business will inevitably lead to a higher customer retention rate, because you won’t have to worry about backend operations. After all, the most successful ecommerce brands are all obsessed with their customers.

Final Thoughts

In conclusion, the decision to switch to outsourced fulfillment involves a good deal of reflection on your own business. Here’s a great resource to understand in-house operations vs outsourcing fulfillment and two free tools to analyze the best warehouse location and shipping costs.

Whether you need help with scaling, expanding, or you just need to spend less time on back end operations, it is worth taking the extra time to do your research for the right partner. 

It’s worth noting that not just any 3PL is going to be an “end-all, fix-all” for your business. Taking those extra few minutes to hop into a call and learn more about how they align with your business will make all the difference in the long run. Better yet; if one 3PL doesn’t work out, they are likely to have recommendations for someone THEY think will be a better fit for you! 

If you think your business is ready to take that next step, feel free to contact us here!

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