Have you tried outsourcing your eCommerce fulfillment operations? Because in a survey conducted by Deloitte, 40% of eCommerce businesses agreed to have achieved organizational flexibility due to outsourcing their fulfillment during the pandemic. When you outsource your operations to a fulfillment center, you outsource your worries as well while receiving quality management with timely completion of all the tasks. However, before you outsource, you must be well-versed with the costs of partnering with a 3PL company. So, how to know that?
Well, here’s the solution: a blog with numerous fulfillment costs associated with working with third-party logistics for your eCommerce operations and the factors that affect them.
Nitty Gritty of 3PL Fulfillment Costs
In the digitized era, eCommerce businesses are getting a lot of traction because of the latest technologies and innovative new trends. Furthermore, the recent pandemic has pushed the consumers to shop more online. Therefore, if you are an online seller, it is the time to get on board with latest technologies of the industry.
Integrating your business with latest technologies help you stay ahead from your competitors and act as a catalyst in success of your eCommerce business. To get started, you should make yourself familiar with latest technologies, emerging trends, industry jargons, and cost. Then, depending on your needs and availability, you can choose to opt for in-house or 3PL fulfillment for your business.
3PL Costs VS In-House Costs
There are numerous tasks to do in an eCommerce business, from receiving the order to safely delivering it to the customers. When you manage everything in-house, you are responsible for everything from storing inventory to packaging, shipping, security, insurance, and handling returns. This results in less time to focus on growth and other business areas. Hence, outsourcing your worries of fulfilling an order to a 3PL is always a better idea.
There are many benefits of opting for a 3PL company: secure storage, timely delivery, proper management, and automated operations. Moreover, you save on a lot of initial investment costs for infrastructure, staff, security, software, automation, and more. Therefore, when you opt for third-party logistics, you sign up for growth. Remember, the fulfillment center you partner with dictates the quality of services. Hence, choose wisely.
Different Costs Associated With a 3PL
A fulfillment center’s costs for your business depend entirely on the type of services you choose. It also depends on what your preferred 3PL company is offering. However, there are some common fulfillment costs that are applicable everywhere. Let’s have a look at them.
It is generally one-time charges. Setup costs typically include training, integrating software, creating infrastructure, and sessions to understand how to utilize the resources provided by a 3PL company. The charges vary depending on the 3PL.
Inbound Shipping and Receiving
Inbound shipping and receiving include the cost incurred in receiving goods from the suppliers and unloading them to the warehouse. It is generally hour-based, varying based on the services a 3PL company offers.
The storage fee is charged according to the warehouse space your goods consume. A 3PL company charges you based on the number of pallets your products are using or the space your products needs in the warehouse. Hence, it is charged per square foot, square meter, or pallet. When it comes to storage, Fulfillment Hub USA has the largest, secured, and well-monitored fulfillment center in South Florida. They are known to provide numerous services at an affordable rate.
Inventory management includes multiple tasks; confirming that records match the physical count, temperature control for specific products, security, keeping an updated log, inventory tracking, and more. The charges for inventory management depend on the multiple services you opt for and the 3PL company you choose.
Picking and Packing
When the warehouse staff receives an order, they pick and pack your product and make it ready to ship to your customers. It is generally hourly or per-item basis and often rolled into box/packaging fees.
Kitting refers to the packaging of similar or partially similar goods together. It is done to lower the shipping costs and streamline shipment. Kitting charges depend on the number of kits, pallets, or space your products are using.
In the sorting process, different SKUs are arranged appropriately for shipping. Sorting systems consolidate the random flow of products into discrete order to process them for shipping. When it comes to charging for this service, some 3PL companies charge separately while some include it in the package.
Shipping charges depend on the mode of transport and the type of shipping you choose (air, land, or sea). It incorporates charges for loading and checking the goods for transport.
If you opt for customized packaging according to your brand, label printing is for you. The charges for label printing depend on the print material, the number of prints, and the size of labels.
A customer can return an order for various reasons. When this happens, the fulfillment center manages it on your behalf. They charge you for processing the order and return shipping rate. Returns management fees usually depend on the shipping carrier and restocking.
Account management charges are usually hidden in the package. Hence, make sure you check with your 3PL provider before you opt for 3PL services. Account management fee varies according to the 3PL partner.
Generally, every 3PL has software that they use to manage inventory, integrate stores and carriers, and update you about the order-fulfillment process. The third-party logistics companies have their own software cost depending on the features.
Tip: Before you opt for software, check out all its features and sign for the ones you need for your business.
If the fulfillment center team is doing tasks that are not part of your package, they incur an extra charge based on the services. These charges are called work orders. Usually, they are charged on hour basis.
Factors Affecting the Cost of 3PL Services
The cost of fulfillment for your business depends upon the services you opt for and the 3PL company you partner with. However, there are many general factors that affect the 3PL costs for your business. Let’s list out some of the factors that affect your 3PL costs.
- Number of orders processed annually
- Hazardous material considerations
- Inventory value estimation
- Stock rotation considerations
- Specialized handling and other labor needs
- Warehouse space needed
- Average order size
- Temperature requirements for products
- Special transport requirements
- Customized packaging
- Number of shipments per year
- Warehousing insurance
- Method of shipment
- And much more!
All the factors mentioned above depend on the types of services you opt for. Therefore, first, analyze what your business needs are. Then, research thoroughly for the fulfillment services and centers available. It would be best to opt for the one that fulfills your needs with quality while maintaining your budget. When hiring a fulfillment center, one thing to ensure is how flexible they are with the industry trends and how empathetic their support is in case of understanding and solving your problems.
To Sum It All Up
3PL costs are crucial in finalizing your overall order-fulfillment costs. On that account, it is essential for you, as a seller, to know about them and your potential fulfillment partner. It is easy to get into the trap of a more promising and less delivering 3PL company. Hence, before you partner with any fulfillment center, check their experience and expertise, and ask them all the essential questions. Furthermore, make sure they are budget-friendly and provide the services that you need for your business.
Anjali Chourasiya is an engineer turned content writer. Her passion for creativity has driven her ship to the lands of writing. She writes blogs, social media content, brochures, and much more for B2B and B2C businesses. Apart from writing, she spends her time in reading, learning, and traveling.