3 Ways a 3PL Delivers Better Inventory Storage & eCommerce Fulfillment
As more businesses see their ecommerce sales numbers grow, many face a dilemma. Should they continue to manage their warehouse and ecommerce fulfillment operations in-house, or should they outsource to a third-party logistics company? One of the biggest deciding factors often has to do with their inventory storage capacity.
The Rise of eCommerce & the Growing Challenge of Inventory Storage
It’s not surprising that inventory storage for ecommerce transactions has become a big challenge for businesses not only in the U.S. but all around the globe. Just look at some of the most recent industry numbers re: ecommerce growth:
- Consumers spent $517.36 billion online with U.S. merchants in 2018. That’s a 15.0% increase from 2017.
- eCommerce represented a growing portion of the 2018 retail market – taking a 14.3% share of total retail sales in 2018. That’s up from 12.9% in 2017 and 11.6% in 2016.
- Globally, new studies project that ecommerce businesses should anticipate a 265% growth rate in the coming years – from $1.3 trillion in 2014 to $4.9 trillion in 2021.
Growth like this is driving more businesses to solicit third-party help for their inventory storage and ecommerce operations. Besides the businesses that hire a third-party expert, one of the other big winners in the outsourcing movement are 3PL’s.
Current estimates show that 2018 gross revenue for the U.S. 3PL market increased nearly 16%. This was the strongest growth since 2010 when the market grew significantly after it bounced back from big losses during the Great Recession. Globally, the 3PL market is estimated to reach $1,513 billion by 2025 – a CAGR of 7.1% from 2018-2025.
The Advantages of Outsourcing Inventory Storage & Fulfillment to a 3PL
So what advantages does a business gain from tapping into a 3PL for their warehouse and ecommerce fulfillment operations? Here are three:
Using a 3PL can deliver speed in different ways. First, a business that’s outgrown their warehouse space and manages their own inventory storage would need to find more space without disrupting order fulfillment. This could mean leasing more warehouse space or potentially building a new facility. Both tasks can be a challenge and still present capacity limitations as the business continues to grow.
Businesses that choose to outsource to a 3PL won’t need to invest their own time and resources in securing new warehouse space, reconfiguring their inventory, purchasing more equipment, and hiring more staff.
Also, orders can get to your customers faster when using a 3PL – because of their network of shipping partners, high volume or order shipments and frequent carrier pickups.
Cost savings can be another advantage of outsourcing to a 3PL. Each fulfillment center has different ways of charging their services. It’s important for a business to do their homework and select a 3PL that will offer a reliable, cost-effective and flexible inventory storage solution.
When deciding which 3PL to partner with, find out if there are conditions in which you could be charged extra fees (example: if you have slow-moving inventory). Also ask about their receiving compliance guidelines. They should have clear requirements for proper receipt, picking and fulfillment of orders. If the guidelines aren’t clear, beware. You could end up with additional expenses from the 3PL if they need to re-work any of your product prior to receipt and storage.
Outsourcing to a 3PL also gives a business more flexibility. Warehouse storage space can easily be scaled up or down to accommodate inventory fluctuations based on the time of the year. And beyond the warehouse, a 3PL’s other service offerings like logistics & transportation, technology integration, shipping, returns, value-added services, and quality assurance are customizable, scalable and adaptable to circumstances that could arise in your business operations. Flexibility in all aspects of fulfillment operations is key.
About Promotions Fulfillment Center
At PFC, our clients’ success is our #1 priority. Since 1974, our team has delivered outstanding quantifiable results, with turnkey solutions in ecommerce & web fulfillment, promotions and contact center services – all backed by leading technology. Retailers and ecommerce brands that partner with PFC have historically achieved considerable cost savings in excess of 35% and have significantly improved their program ROI.