Online retailers looking to increase sales need to focus on both acquisition and retention; maximising repeat purchase and customer lifetime value are hallmarks of sustained business success. To achieve these goals, getting the right eCommerce and marketing automation platforms, ensuring the product is aligned with customer needs, development of value exchange and value proposition, along with strong messaging, efficient procurement and product development are all key ingredients to scaling an ‘etail’ business profitably.
The more prosaic, often overlooked growth drivers are operational; working with the right third-party logistics (3PL) company can mean higher conversion rates, faster order processing, and lower overheads, empowering retail leaders to focus on their own core competencies, such as sales, marketing, new product development, strategy and vision.
What is eCommerce Order Fulfilment?
It’s the process of outsourcing a specialist that is a separate business entity, to orchestrate the goods intake, warehousing and storage, picking, packing and distribution of finished goods, on behalf of a retailer, wholesaler, or brand.
In recent years, 3PLs have diversified their offerings, introducing complementary services to take care of a broader range of the supply chain spectrum; emerging value-added services include returns management, customs clearance, outsourced customer service, strategic consultancy, procurement, outsourced manufacturing and inventory analysis.
The Diversity of 3PLs
Ecommerce logistics firms don’t just differ in terms of their service pillars, they also often work with specific product verticals, such as sporting goods, luxury homewares, or health and wellness supplements. They may work exclusively with one, or a handful of eCommerce platforms, such as Shopify, Magento or WooCommerce.
Thankfully, the average 3PL is pretty flexible and works with multichannel merchants who sell across multiple sales channels, including marketplaces such as eBay and Amazon. Another differential is pricing, which can be hideously complex; determined by storage volume, shipping and returns fees, picking and packing charges, onboarding, integration and software implementation costs.
When looking to work with an eCommerce 3PL service, it’s sensible to check for any hidden fees, and establish KPIs and OKRs based on metrics including order processing speed, on-time delivery performance, repeat purchase rate and customer lifetime value.
This is so that both parties are aligned in their expectations. It’s also prudent to reach out to their publicly visible clients (from case studies), and partners such as eCommerce agencies who may have worked with the 3PL before. Finally, checking third-party reviews of the fulfilment centre, along with employee feedback on Glassdoor; happy employees tends to lead to better performance.
The Third-party Logistics Process
Once you’ve onboarded with your chosen 3PL, the first step is technological and workforce alignment. Integrating your order management system (OMS), or disparate sales channels, with the 3PL’s warehouse management system (WMS), ensure order data can flow in both directions, to maintain measurement of stock levels, and gather the required data for order processing, such as product dimensions and weight, customer address, and key contact details to pass onto the courier.
Establishing roles, responsibilities, and lines of communication between retailer and fulfilment house, 3PL to manufacturers and suppliers, means stock can be shipped into the warehouse ready for storage in allocated picking locations.
Now that first and third parties are integrated, and products are in the fulfilment warehouse, orders can begin flowing in. Once an order arrives, a picking and packing note is generated, and the warehouse operations team collects specific items to process the order, from different picking zones. The picking methods utilised vary widely, and often follow algorithms or a simple set of rules.
Once the items are picked, they are taken to the packing bench, ready for packaging and application of the shipping label, which is generated after packing, because this is sometimes the first opportunity to measure dimensions and weight, or volumetrics.
For many firms though, dimensions and weight are consistent across stock keeping units (SKUs), so they won’t always need to be weighed. When the shipping label is generated, customers will receive a tracking notification, and depending on carrier service selection, a range of in-flight delivery options to enhance their user experience and maintain trust throughout the customer journey. Parcels, packets and mail are then grouped by carrier, (such as DHL, DPD, or Royal Mail), on pallets, in containers or inside bags, ready for collection, which with some providers can be late into the evening.
The Power of Data-driven Fulfilment
Some 3PLs offer inventory analysis software that monitors order frequency, revenue, and stock replenishment metrics. This can help predict when or when not to order new stock, to minimise understocking (and missing out on sales), and overstocking (which means capital unnecessarily tied up in inventory, that could otherwise be put to better use elsewhere, such as digital marketing spend.
3PL is not suitable for every online store, with providers demanding a minimum of 10 to 30, and in some instances 300 orders per day on average. They may also require minimum contract terms, and incur hefty onboarding fees. For those who are shipping these order volumes, outsourcing fulfillment can lead to cost savings, improved delivery times, and enhanced customer satisfaction, ultimately driving growth and enabling retailers to adapt more quickly to changing market demands.
The Future of eCommerce 3PL
Ecommerce fulfilment is predicted to nearly triple I size over the next six years. This is great for retailers and 3PLs alike, because it means online commerce is fertile ground. It also means intensified competition amongst an expanding battlefield. Consumers are becoming comfortable with things like same-day delivery, seamless order returns and seemingly limitless product customisation, and demand fast, free and environmentally-friendly shipping.
This places enormous pressure on 3PLs, but also presents an opportunity for 3PLs to become a retailer’s competitive advantage. For example, if a 3PL offers an ultra-late order cut-off time that’s 2 hours later than the retailer’s competitors’, for 2 hours of every day the 3PL outsourcer will have the market to themselves. An example of this efficiency gain is demonstrated in the below eCommerce fulfilment case study:
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BusinessAugust 29, 2024How eCommerce Fulfilment Works?