If you’re already working with a third-party logistics (3PL) provider, you’re probably familiar with the costs, processes, and operations involved in outsourcing ecommerce order fulfillment.
But are you sure that your fulfillment provider is the best fit for your business?
Not all 3PLs are created equal, and working with one that can’t meet your business’s needs can lead to stunted growth or even losing customers. Between contracts and logistical hassles, it may never seem like the right time to change providers — but taking a critical look at your current processes is vital to set yourself up for future success.
In this guide, we’ll cover how to figure out whether your business needs to change 3PLs, as well as how to choose a new ecommerce fulfillment company for your ecommerce store and make the switch.
The cost of not meeting customer expectations
Before we get into the details of when and how to switch 3PLs, it’s important to understand the impact that your 3PL can have on your business.
It’s no secret that today’s customers have high expectations, and the delivery experience is no exception:
- 38% of customers say they’ll never shop with a retailer again following a negative delivery experience.
- 73% of shoppers expect affordable, fast deliveries.
- 24% of customers cancel an order due to slow shipping.
If your 3PL isn’t helping you provide a best-in-class customer experience, you could be missing out on potential customers and revenue. If you can’t offer your customers the fast, affordable shipping they’ve come to expect, they’re likely to find brands that can — or just stick to Amazon Prime. Either way, it’s vital to your success as an ecommerce merchant that you partner with 3PL that can help you meet rising customer expectations.
Knowing when it’s time to switch 3PLs
Outsourcing fulfillment is a step above shipping orders from home, but it’s important to make sure your 3PL is a good fit. Here are some signs that your current 3PL might not be the best choice for your business — and lessons learned by other ecommerce brands who have been in the same situation.
Ecommerce is constantly evolving, and customer expectations are doing the same. Can your 3PL keep up with the constant shift? If your fulfillment provider hasn’t changed or expanded their technology, operations, or facilities since you started working with them, they aren’t thinking ahead — and they probably don’t have your customer’s expectations in mind. “Good enough” is the wrong mindset when it comes to ensuring your technology, processes, and orders are streamlined
“ShipBob is also not complacent — their software is always improving and the fulfillment services are always advancing, like expanding 2-day shipping coverage. The company has ambition for growth and they keep developing in very real ways.”
Noel Churchill, Owner and CEO of Rainbow OPTX
They might also not have the resources necessary to keep technology and processes up-to-date, meaning they don’t have the resources to help you continue to scale.
“Other fulfillment providers had a “This is how it’s done, so take it or leave it!” attitude. ShipBob’s dedication to continuously enhancing their offering by getting feedback from the customer community, as well as their customer service, is unparalleled to other 3PLs.”
Sarah Ribner, Co-Founder, PiperWai
You’ve outgrown them (or plan to)
If your shipping volume is growing exponentially as your business scales, there may come a time where your current 3PL can no longer support it. This is especially true if you’re currently working with a local mom-and-pop shop whose focus is mainly small businesses.
“We found a fulfillment center within a 5-mile radius of our manufacturing center, which seemed convenient at the time. Turns out [our former 3PL] couldn’t meet our needs, especially as we were growing both our online and wholesale channels. It was a very basic warehousing and shipping operation, where inventory tracking is all done manually.”
Sarah Ribner, Co-Founder, PiperWai
In addition to the ability to scale operations, different 3PLs have different storage capacities. It’s important to work with a 3PL that has more than enough warehouse space for your current inventory — as your product line and order volume grow, your 3PL storage should be able to scale with you.
“When we first launched, we briefly worked with a different 3PL, but the biggest issue was that they were too small. They only had two locations, so I knew they wouldn’t be able to accommodate the growth we anticipated.”
Founder, My Calm Blanket
If you’re trying to expand internationally, you might want to add additional 3PLs to your roster rather than fully switching to a global fulfillment company; for example, having one 3PL in the US, one in Europe, and one in Australia can help you scale more cost-effectively and leverage relationships with local carriers in major regions.
You need more support
If you have a problem with an order or need an update on inventory levels, do you know who to reach out to at your current 3PL? Is there dedicated phone support, or are you stuck trying to get through to chatbots?
“I can talk directly to my account manager [at ShipBob] who personally makes sure that everything is running smoothly and works with me to solve any issues. This level of support is something that no other 3PLs could match, especially at our volume and scale.”
Greg MacDonald, CEO, Bathorium
A good 3PL will offer customer support that goes above and beyond answering FAQs. Your 3PL should be a partner, not just a provider; they should be able to give you a transparent, holistic view into your business’s fulfillment operations, as well as help connect you to other partners in the ecommerce space that can help you grow your business.
Your technology isn’t compatible
First and foremost, a 3PL today must offer fulfillment software with order management capabilities. Full stop. If you don’t have insight into the status of every order that passes through the warehouse, it’s impossible to address customer concerns or assess the quality of the experience you’re offering customers.
“At the end of the day, we needed a more efficient, accurate, and technologically advanced 3PL partner with better customer service than our previous fulfillment center.”
Sarah Ribner, Co-Founder, PiperWai
Oftentimes, however, being able to track orders isn’t enough. If you have to manually upload orders to your fulfillment provider’s system, you’re losing a lot of time — and your customer’s orders likely aren’t going out as soon as they should be. You should be able to sync your order fulfillment software with your ecommerce platform to automatically push orders as soon as they’re placed.
If your current setup requires you to use several different systems to keep things running, you risk producing inconsistent data or duplicating SKUs or orders. Keeping things streamlined through just one or two platforms can reduce clutter and chaos.
Your 3PL should also automatically push tracking info back to your store as soon as the order ships. This two-way push of data helps ensure that orders are shipped quickly and that you and your customer are both kept in the loop.
“ShipBob aligns very well with Shopify and doesn’t have older, archaic technology like other 3PLs.”
Greg MacDonald, CEO, Bathorium
You’re not getting your money’s worth
The cheapest 3PL isn’t always the best one, but if you’re paying a premium for order fulfillment, the value to your business should be clear. The technology, warehouse management capabilities, customer support, customization options, and geographic footprint can all add value over a traditional 3PL.
There might be hidden logistics costs you’re not necessarily aware of, such as freight costs to move inventory from a port city to a rural location — just to ship orders back out to the coasts. The cost of these inefficiencies adds up over time.
“Other 3PLs pass fees onto the client for work they do related to manual processes because they lack the fulfillment technology needed to meet customer expectations.”
Carl Protsch, Co-Founder, FLEO
Many 3PLs are notorious for hidden costs and fees for every little movement. Fulfillment pricing and cost structures can be confusing.
“We realized we were paying so much more money than we did with ShipBob. The other fulfillment company made empty promises to us about costs and failed to mention all the other line items that factor into the total costs, unlike with ShipBob, where everything was bundled into a few line items. With pricing being way too high, we realized we were sold the “perfect” solution and moved back to ShipBob.”
Lindsay Louise, Fulfillment & Retail Manager at Synchro
When a 3PL is the right fit for your business, the cost should be more than worth it. Order fulfillment can even be a revenue driver for your business — giving customers a great variety of shipping options can help reduce cart abandonment while offering free or expedited shipping over a certain spend can increase average order value.
“By encouraging customers to meet a spend threshold for free 2-day shipping, we’ve seen great results without harming our margins. Offering this shipping option has increased our average order value in these zones from $75 to $148.”
Ryan Casas, COO of iloveplum
Your customers aren’t happy
At the end of the day, your customers get the final say on whether or not your order fulfillment is up to par. If it’s not, they’re sure to let you know, whether through bad reviews, critical social media posts, or simply a decline in sales. If your customers are consistently unhappy with the delivery experience, you’re using the wrong 3PL.
“As we’ve grown internationally and in our general order volume, we’ve seen satisfaction go up. ShipBob was a key player and significant partner in helping manage what became unmanageable when we were shipping orders out ourselves.”
Matt Dryfhout, Founder & CEO of BAKblade
3 questions to ask a potential 3PL
Thinking about making the switch? Here are five questions to ask a potential 3PL to gauge whether they’re the right fit for your business so you can be confident in your move.
1. How are you different from our current 3PL?
When outsourcing order fulfillment, it’s important to look for a scalable solution that goes beyond the traditional pick, pack, and ship model used by many legacy and mom-and-pop providers alike. This means that the 3PL coordinates with all aspects of the supply chain, rather than only taking care of one isolated part of the ecommerce logistics process.
Making sure every piece of your supply chain is aligned can give your customers a better overall experience by helping you make more informed decisions about inventory and operations.
2. How does your technology work with ours?
One of the most important elements of choosing a fulfillment solution is finding technology that works not just for you, but with you. There are two main technological elements to look for: how the 3PL’s software will connect to your online store, and how your 3PL’s software will help you understand how to improve your business.
These two elements make up what we call a tech-enabled 3PL. A tech-enabled 3PL is a technology and logistics company that helps with everything from order and inventory management to tracking ecommerce orders and managing ecommerce returns — while pushing data between all platforms involved.
“We use Shopify as our ecommerce platform. The seamless integration between the two systems has made it very easy to do everything from manage inventory to create prepaid orders.”
Greg MacDonald, CEO, Bathorium
3. How many fulfillment centers do you have and where are they located?
This two-part question helps you keep shipping costs low and is particularly important if you plan to offer your customers 2-day shipping or other expedited delivery options — without breaking the bank.
If you’re only shipping from one location, you’re limiting your business’s reach in key markets where your customers reside — and probably paying too much for shipping.
Working with a 3PL that has fulfillment centers in major US cities allows you to split your inventory across several locations. In turn, this puts your inventory closer to your shipping destinations, meaning packages travel across fewer shipping zones and therefore cost less for you and your customers.
You can also offer two-day shipping via ground for customers in areas surrounding the fulfillment centers, which can be much cheaper than expedited air shipping.
“Using five fulfillment centers across the country is great because our product is high-quality and heavy, so it helps us cut down shipping costs.”
Francesca Cavallo, Co-Author of Rebel Girls and Co-Founder of Timbuktu Labs
How to transition to a new 3PL
Making the switch to a new 3PL can be overwhelming if you don’t have a plan in place. Here are some important steps to take as part of the transition to a new fulfillment provider.
Review your supply chain
With a new 3PL comes at least one new fulfillment center. Unless your new fulfillment center is in the same city as your old one, you will have new transit times for inventory to be sent from your manufacturer to your fulfillment center(s). Make sure you keep this in mind when figuring out when to reorder inventory, especially if your new fulfillment center is farther away from your manufacturer than the old one.
Make sure to also share your new fulfillment center’s address with your manufacturer to ensure that inventory is routed to the right place.
Phase out the old fulfillment center
First and foremost, make sure the time is right to make the switch. If you still have a year left in your old contract, you probably want to avoid switching, but it’s never too early to start researching a new solution.
It might seem tempting to pull all of your inventory out of your old fulfillment center as soon as possible, but it’s important to keep stock there until you’ve fully transitioned. Keeping inventory in your old fulfillment center while shipping inventory to your new 3PL can help prevent stockouts and backorders while you get set up with the new provider.
Once you are fully onboarded and have ample stock levels in the new 3PL’s fulfillment center, consider running a sale to clear out the inventory in the old location — but make sure your backend technology is set up to route those orders to the old 3PL.
Keep your customers in the loop
No matter how well the transition between 3PLs goes, there’s always a chance that the unexpected will happen and your customers may experience delays in shipping. For this reason, let your customers know that you’re switching 3PLs to improve the shipping options and experience. Leverage email, social media, and banners on your website to give as much of a heads up as possible. Transparency is best practice in customer communications, and this shows that you’re working to improve the customer experience.
This can be especially effective if the switch is going to allow you to offer new shipping promotions, such as international shipping, same-day delivery, or free 2-day shipping. This can give customers something to look forward to while keeping them proactively in the know.
Switching to ShipBob
If you’re looking for a fulfillment provider that checks all of the boxes we’ve talked about in this article, consider switching to ShipBob. Our software seamlessly integrates with popular ecommerce platforms, making it possible for you to link your store with the click of a button, and then import your products and orders. The backend work is already done for you, so it’s easy to start automatically fulfilling orders. For setting up more complex aspects, like bundles and merged products, you can access dedicated support from our implementation team and account managers.
Once an order has shipped, ShipBob’s technology can push tracking information back to your ecommerce store, so your customers stay in the loop throughout the delivery process without compromising your brand experience.
“We were impressed with the transparency of pricing and services provided by ShipBob, as well as the easy onboarding and tech integration with our Shopify store.”
Nicole Humphreys, Founder, August Effects
We also enable clients to distribute inventory across our network of five fulfillment centers in major US cities. Our software automatically routes the order to the fulfillment center that can ship the order to your customer using the lowest shipping zone. This helps ecommerce businesses reduce shipping costs and transit times exponentially over time.
If ShipBob sounds like it might be a good fit for your business, and you’re looking to switch 3PLs, we’d love to connect. Fill out the form linked below and someone from our team will be in touch to discuss your business’s specific needs and share more information.