Does Your Small Business Need a 3PL?
February 26, 2018
It may be cliché, but it’s true: growth brings more responsibilities. This is especially true for small businesses.
As your operations widen and you gain new customers (hurray, by the way), new challenges arise as well. Where to store all those new products? How to fulfill new orders on time? How to ship internationally?
When you’re handling more than 15-20 orders a day, you have a hard time storing your products, or you’re about to offer a series of flash sales, it’s time to think about partnering up with a third-party logistics provider (3PL).
This is especially important if you have a growing number of international customers. Read on to find out how Veem can help you.
What are 3PLs?
Third-party logistics providers are companies that take on other businesses’ outsourced distribution and supply chain management tasks.
Based on the amount and depth of business tasks they accept, there are three main categories of 3PLs: transportation, warehousing, and logistics integrator companies.
Transportation is a basic service of all 3PLs. It involves shipping products between various locations, i.e. your factory and warehouse, or your warehouse and your customer’s address.
If you’re handling smaller volumes of transactions, and warehousing is not an issue for you, opting for a basic 3PL may be a good choice for you
If you’re handling smaller volumes of transactions, and warehousing is not an issue for you, opting for a basic 3PL may be a good choice for you. But price isn’t the only factor.
When choosing your partner, there are several factors you need to bear in mind. Is your 3PL close enough to your business AND your customers? What kind of shipping methods do they use? Are they able to fulfill same day, next day, or two-day deliveries? Do they offer cross-border shipping?
Companies like FedEx, DHL, UPS, and many others offer transportation services. But, don’t automatically go for the big boys. Ask around to see which 3PLs are active in your area. You may find a local company that’s perfect for your small business.
If you’re having trouble with storage as well as fulfillment, you may be ready for the next step of 3PL integration: warehousing.
Picking the right 3PL partner is more difficult in this case, as there are many more factors you need to consider.
First of all, take a look at the inventory management software they use. Because they handle shipping to your customers, they need to be up-to-date on the inventory to let you know immediately if they need to re-stock. This means that you need to install the same software and integrate your inventory management with your 3PL’s.
Other questions to ask before committing yourself are: how big is their warehouse network and where are the warehouses located? The closer to your customers, the better, especially if you’re shipping overseas as well.
This is the most commonly used type of 3PL service, and it usually includes storing your products as well as transporting them to wherever they need to be.
What is their cutoff time for orders? This is important for delivery times. What happens to unfulfilled orders? What kind of insurance do they have for storage and delivery?
And, let’s not forget about their price, including the costs of returned shipments, or possible demolition of expired products.
There are several large companies offering warehousing services, including Shipfusion and Shipwire. Again, ask around and see if there are any local 3PLs businesses in your area.
Alternatively, you may want to look in the region your overseas customers reside in. Picking a company close to them may be your best option. If you need advice on choosing an international warehouse, read our article 5 Tips for Selecting an International Warehouse for help.
Businesses with an eight or nine-figure revenue usually opt for 3PLs that offer even more integration. This means that your 3PL gains insight into your entire supply chain, helping to optimize your network and manage the process.
This requires complete trust because you’re sharing vulnerable information (including your finances) with your partner, not to mention the responsibility of ensuring your customers’ satisfaction.
How to Choose?
If you’ve decided which type of 3PL suits your business best, it’s time to pick your partner. Here’s a checklist that can help you make up your mind.
- Are they located in a convenient spot for your business?
- Do they offer a non-disclosure agreement?
- What is their track record?
- How frequent shipments do you need?
- What is the volume of your shipments?
- What softwares do they use?
- What is their pricing?
Paying Your International 3PL
Often, choosing an international 3PL is the best option. Don’t let complicated international transfers deter you from using an overseas 3PL. Instead, pay your logistics partner through Veem.
This means there are no middlemen, no hidden costs, and no unexpected delays. In addition, Veem charges no wire fees and offers competitive foreign exchange rates.
Sign up for a free Veem account and say hello to international payments of the future.