Mike Lollar: Duoplane Team Highlight
Meet Mike Lollar, Chief Technology Officer and Lead Developer, at Duoplane.
3PL, also known as, third party logistics, fulfillment services provider, fulfillment house, fulfillment company, shipping logistics, shipping logistic services, logistic services, outsourced warehouse, FBA (fulfillment by amazon) alternative, warehousing, is an an organization’s use of third-party businesses to outsource elements of its distribution, warehousing, and fulfillment service.
As a company expands to selling more products and serving new markets, many business owners and operations managers have found themselves asking: Should I outsource warehousing and shipping? Even more professionals have turned to 3PLs (third party logistics) to handle just that.
By outsourcing shipping and fulfillment operations, business owners and operations managers alike have been able to cut costs, reduce risk, and put their time back to where it matters most: growing their business.
If you’re interested in learning about the ins and outs of 3PLs – from the benefits to automation and integration – keep reading Duoplane’s complete guide.
One of the main reasons why businesses choose to use a 3PL is the long and short-term savings. You do not have to deal with warehouse space, warehouse employees, transportation, or additional tech. From an employee standpoint, 3PLs essentially eliminate paperwork, audits, insurance, worker’s comp, and employee training. Similarly, you do not have to personally invest in warehouse software, robots, converter belts, or security systems. Overall, 3PLs keep fixed costs to a minimum. Most costs are marginal or monthly.
Equally, in the long term, using a 3PL is far more suitable than attempting to do everything in-house. Having warehouses in different locations allows you to increase or decrease your inventory as you see fit while selling a wider variety of products without the financial risk. By having inventory spread across different locations, you lower shipping costs and shipping times. Click here to learn more about the benefits of distributed warehousing.
Importantly, leveraging 3PLs allows you to strategically allocate your time and effort.. You are not a logistics expert; you just receive their expertise.
Now, you’re probably wondering: how do 3PLs make money?
There is typically a one time setup fee that can be $1000 or more. From there, there are other associated costs for shipping, receiving, and packaging. In terms of shipping and receiving, an hourly rate is charged based on the number of employees needed to help unload and store your products. This rate can range from $25-$50 per hour. 3PLs typically charge $0.25 to $2 per package depending on size and customization.
Alternatively, some 3PLs charge a flat rate that is based on a variety of factors. For instance, per item, per square foot, per order, or per pallet. Ensure you do your research and have conversations with warehouses to get an understanding of their associated costs.
There are a variety of reasons why a business may choose to start looking for a 3PL. Here are some of the most common:
Growing businesses tend to bring rising logistics costs and infrastructure restraints. Inevitably, as your customer service capacities decrease, these additional costs and burdens will lead to customer dissatisfaction.
Another reason many business owners opt to 3PLs is in order to focus on their own business’s growth. For example, they are seeking to expand into a new region and are unable to commit to a new facility. Alternatively, sometimes increased training or investments in skilled labor is not possible, so businesses are forced to consider other avenues to foster growth.
It is no surprise that warehouses have high associated insurance, shrinkage, and employee liability costs. When businesses opt to use a 3PL, they reduce their upfront costs and overall risk.
The underlying question, however, is: at what point does it become cost effective to use a 3PL? Of course, this varies business to business, but if all of your existing costs (monetary and otherwise) exceed the costs associated with a 3PL, it may be a strategic solution to consider.
Communication is especially important for any third-party contract. From the beginning, ensure that you have a properly written RFP (request for proposal) complete with baseline and benchmark costs. Compiling and communicating accurate information is essential to create a mutually-beneficial partnership.
Similarly, communicating your expectations, goals, and KPIs with your 3PL is very important to ensure that you are a good match. Examples of KPIs are on-time percentages, maximum return rates, and inbound receiving time. Including these evaluation metrics in your service level agreements can incentivize partners to strive for maximum performance. Equally, should these standards be met (or exceeded) your customer satisfaction rate will thrive.
Finding and maintaining a balance between a hands-off and micromanagement approach can prove difficult. While you have entrusted a third party, regular oversight into business operations is still essential for efficiency and profitability.
Establishing a regular reporting schedule ensures that all parties are on track to success and any kinks get worked out as soon as possible. For instance, should a KPI drop or a return slips through the cracks, troubleshooting a plan via regular check-ins can prevent or remedy small issues before they culminate.
We suggest you designate a single point-of-contact to check in with an account or production manager in order to avoid redundancy and establish a solid working relationship. This person will be responsible for completing regular check-ins and informing the 3PL of any company changes.
Ideally, a mutual understanding of one another’s strengths and weaknesses, goals, and nitches should come out of transparent communication with your 3PL. These discussions – whether they be about differentiators or competitive markets – should ultimately foster better collaboration and a stronger partnership fit to serve a mutual customer.
Decades ago, companies were able to manually complete transfer information and keep 3PLs informed via email. Today, however, business and customer expectations have changed. With industry leaders like Amazon fulfilling orders overnight, customers have new demands of other retailers. For example, a seamless purchasing experience and real-time tracking information.
In short, fully automating your 3PL management processes to be more aligned with real-time data is essential for success. In fact, 98% of 3PLs said that developing the quickest means to communicate the most up-to-date information with their customers has become even more essential since 2018.
With that said, let’s dive into which parts of the 3PL process can be automated. Things like order fulfillment and product updates can be fully automated in the right automation software. This includes things like inbound shipment requests, purchase orders, and customer orders.
Similarly, 3PL integrations software can sync your return merchandise authorization (RMA) with your 3PLs and align your ERP with the warehouses between your business and your 3PLs.
If you’re interested in learning more about how the right automation software can help you streamline your 3PL management, check out our article all about automating your e-commerce storefront.
In order to fully automate your 3PL management and business processes, it is essential to integrate various systems and applications. Some areas that should be in sync with your 3PLs include:
1) Your return merchandise authorization (RMA)
2) Inbound shipment requests, purchase order (PO) imports and exports, and shipment receipts
3) Your catalog and up-to-date SKUs
4) ERP software
5) All steps of the order fulfillment process
There are 4 major flows to integrate:
Meet Mike Lollar, Chief Technology Officer and Lead Developer, at Duoplane.
Meet Miranda Pakozdi, Customer Success Manager, at Duoplane.
Meet Ben Prager, Client Advisor, at Duoplane.