Online shopping is a force to be reckoned with. Between 2019 and 2022, worldwide e-commerce grew from 15% to an estimated 22% of all retail sales. With e-commerce potentially exceeding $1 trillion by the end of 2022, online retailers are wondering how to stake their claim, make themselves truly competitive and continue to grow into new markets.
The answer may lie with third-party logistics (3PL) providers. E-commerce 3PL is a growing trend among online retailers looking to scale, keep themselves competitive, and insulate themselves against the current risks and upheavals in retail and logistics.
What Is E-Commerce 3PL?
Not every company has the same logistics needs, and consequently, not every 3PL offers the same service packages. The potential workflows and specializations brands might outsource to an e-commerce 3PL company include:
- Order picking and fulfillment
- Distribution and general logistics
- Stowing, storage and warehousing (including cold-chain storage)
- Transportation (including last-mile delivery)
- Reverse logistics (for customer returns, warranty claims, etc.)
Companies should find a reliable partner to carry out some or all of these functions. Here are some other ways modern e-retail brands could dramatically improve their competitiveness, earnings and rate of innovation by turning to e-commerce 3PL providers.
1. It Promotes Innovation
Adopting 3PL services is increasingly a matter of competitiveness. One study showed that 89% of brands improved their operations’ effectiveness after signing on with a 3PL partner. In the same survey, 73% of adoptees said these services introduced innovations into their logistics processes.
3PL companies live, breathe and dream logistics. It stands to reason that these service providers have ideas and technologies to commit to logistics operations that brands don’t have since it’s not their core focus.
These partners provide value-adding innovations to logistics, but they also support innovation in other ways. Losing the burden of planning, building and supporting logistics infrastructure lets brands thrive thanks to a renewed focus on core objectives.
2. The Digital Economy Is Always On
There may be a learning curve for brands that transition from a solely brick-and-mortar existence to the world of e-commerce. Gone are customers filing in neatly during business hours. People can now shop anytime from any place and expect service that matches their timezone and lifestyle.
Third-party logistics often doesn’t sleep, either. A 3PL company can do the work brands can’t do during hours when teams are working on expanding and innovating or after regular business hours.
If the digital economy never sleeps, logistics infrastructure can’t afford to blink, either.
3. Brands Need an Omnichannel Approach
One of the reasons for having this conversation at all is the sheer diversification of the e-commerce world. Manufacturers and retailers could get by with one-size-fits-all logistics systems in the years of shopping exclusively in brick-and-mortar shops. They could afford to be rigid in their approach because there was a limited number of points of sale and minimal potential touchpoints with consumers.
The internet has rendered this model archaic. The consumer experience is now omnichannel, meaning e-commerce brands need logistics support that meets customers wherever they are, no matter the channel they use to do their shopping.
3PL companies can provide the required technologies and segmented approach, including support for diversification in service levels — like various shipping speeds or subscription-based models.
4. Ensure the Ability to Scale and Pivot
One of the reasons why 3PL is a perfect fit for e-commerce is because retail is diverse, dynamic and sometimes unpredictable. Retailers and online brands may find their audience, inventory or geographic markets changing rapidly and often. What better way to insulate one’s brand against these paroxysms than to outsource the processes most likely to be affected by them — fulfillment and logistics?
The transportation, logistics and warehousing systems used by 3PL companies are created from the bottom up for diverse clientele. They are designed to be flexible and meet various and ever-changing needs.
Diversifying and strategizing the placement of available inventory is another closely related benefit of e-commerce 3PLs. Brands can rapidly expand their footprint — and potential clientele — by leveraging existing warehouse execution systems, strategic locations, data centers and support facilities, and other infrastructure elements.
5. Minimize Financial Outlays for New Technology
The worldwide e-commerce fulfillment services and technologies market was worth $18.6 billion in 2020 and is expected to grow by almost 10% per year between 2022 and 2030. One of the reasons for the rapid expansion in this sector is the equally rapid proliferation of new fulfillment technologies.
Newer e-commerce brands that want to credibly do business with more mature companies must leverage emerging technologies. This includes automated order picking, collaborative robots, advanced software for organizing and prioritizing customer orders, and perhaps fleet-tracking technology for monitoring freight and managing dock traffic.
All these technologies require e-commerce brands to invest time and money. Hiring an e-commerce 3PL company with access to cutting-edge fulfillment technologies could be a savvy move that saves finances and effort over time.
Is E-Commerce 3PL the Right Choice?
There may be many other reasons to choose 3PL solutions that might be more relevant to a company’s brand, products and business model. For example, someone considering offering refrigerated or frozen products for home delivery may want to build their own cold-chain storage infrastructure or purchase access to mature, scalable infrastructure instead.
Companies must put themselves in consumers’ shoes, too. The biggest names in retail and e-commerce have set high expectations for order fulfillment. Some customers expect certain purchases to arrive in two days or less as an industry standard. Businesses should ensure they’re materially prepared to answer the call of the market but they don’t necessarily have to own the materials that make that possible.
Companies must create and ship the best products in the industry. It’s not necessarily in their knowledge base to deliver lightning-fast delivery, on top of all their other responsibilities. Brands that commit to building and maintaining their own warehousing, logistics and fulfillment systems are diluting their efforts and taking focus from their core offerings.
However, those are exactly the sorts of things 3PL partners can add to a value chain, leaving companies to focus their innovative energies where they’re needed.
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