3PL Warehousing and Fulfillment: Everything You Should Know

Submitted by skypostal on Mon, 05/13/2019 - 00:00
3PL (Third-Party Logistics)

Working with third-party logistics (3PL) providers is a great solution if you’re a small e-commerce business overwhelmed by the challenges of shipping internationally. Rather than handling all logistics in-house, e-commerce companies are turning to third parties to save money and reduce shipping times.

Let’s start by exploring the basics of third-party warehousing and fulfillment. Then we’ll share some insights to help you find the right third-party logistics partner for your international e-commerce business, especially if you’re shipping to Latin America.

 

What Is a 3PL Provider?

Logistics are a complicated mix of technology, transportation, and human resources. Third-party logistics providers fulfill crucial roles in the logistics process, from warehousing to shipping to inventory management. In the past, a company would handle all of these things internally, but as the supply chain and consumer bases went global, it became too strenuous and costly for companies to handle on their own.

 

3PL providers can handle the warehousing and packaging of shipments.
3PL providers can handle the warehousing and packaging of shipments. – image source

 

The global third-party logistics industry is enormous, and by 2025 it’s expected to grow to a staggering $1.5 trillion market. From the largest corporations to the smallest e-commerce retailers, 3PL providers are becoming standard operating procedure.

According to a survey by supply chain consulting firm Armstrong & Associates, 90% of U.S-based Fortune 500 companies used at least one 3PL provider. That measure is nearly double what it was in 2001, when only 46% of companies used third-party warehousing and fulfillment.

This explosive growth in the global third-party logistics market is largely thanks to the spread of international e-commerce into emerging markets like Latin America, coupled with the consumer expectation of fast shipping.

3PL providers range in the services they offer, which can include anything from basic logistics, including warehousing and transporting your products, to additional technological features like security and product tracking, as well as handling orders, customer service, and logistics operations -- and more. Small-to-medium-sized international e-commerce companies typically opt for basic logistics support as they continue to grow.

 

The Benefits of Third-Party Warehousing and Fulfillment

Given how popular third-party warehousing and fulfillment has become, it’s little surprise that there are some serious benefits to using a 3PL provider.

 

  1. Grow Your Business

Whether you have a domestic or international consumer base, working with a third-party logistics provider can give your company the chance to grow. Inefficient logistics, like incorrectly stocked warehouses and decentralized distribution, are huge growth killers. By adopting the resources of third-party logistics providers, your company essentially shares the costs associated with owning the warehouse and using the newest technology.

When it’s time to expand your company’s global footprint to new regions like Latin America, your company won’t be responsible for owning and running the warehouse in Panama to reduce shipping costs and time (for example). Third-party warehousing and fulfillment makes reaching new markets financially and logistically possible without the associated start-up costs.

 

  1. Handle Seasonal Variability

Inevitably, one of the biggest challenges of international e-commerce retail is forecasting and managing seasonal retail rushes. While everyone’s familiar with the big holiday rushes like Black Friday and Christmas, if you’re working in multiple regions you may have to accommodate for local holidays like Children’s Day or Three Kings Day (two popular gift-giving holidays in Latin America).

By outsourcing your logistics needs to professionals, your employees can focus on expanding the business without having to handle the seasonal influx of shipments (and returns).

 

  1. Reduce Overall Shipping Costs

The explosive growth of e-commerce can be a double-edged sword: increased sales have also meant increased shipping costs over the last few years. With more returns and more premium, fast-paced deliveries come higher costs, which get passed on to consumers. Among other things, third-party warehousing and fulfillment allows for the most efficient use of shipping containers and pallets to help reduce the overall cost of doing business.

 

With higher volume, 3PL providers can ship more efficiently.
With higher volume, 3PL providers can ship more efficiently. – image source

 

  1. Stay on Top of Cutting-Edge Technology

Every industry is abuzz with the latest advances in artificial intelligence and blockchain technology, but few sectors stand to be impacted as much as logistics. In fact, many consider the adoption of these technologies to represent a tectonic shift in the industry that may have huge ramifications. For the small-to-medium-sized e-commerce retailer, that may not be a good thing; these technologies may be out of reach because of their costs.

However, 3PL providers are looking to find competitive advantages in an industry with thin margins, and will likely be adapting these technologies sooner rather than later. By partnering with 3PL providers, your company can benefit from these technologies early without having to shoulder the steep costs yourself.

 

  1. Provide the Best Customer Experience

Most people think of customer experience as the interaction between the customer and the business, whether in-store, online, or on the phone. According to recent research, though, shipping is increasingly becoming a customer experience benchmark. A global survey found that 54% of consumers said that delivery convenience defines who they always shop with.

By reducing shipping times and costs, you’ll be more equipped to meet the expectations of consumers in today’s era of instant (two-day) gratification.

 

The Challenges of Third-Party Warehousing and Fulfillment

The growth of international e-commerce wouldn’t have happened without the parallel emergence of third-party warehousing and fulfillment. Certainly with the unique regional challenges of shipping to Latin America, as well as other emerging markets, a good 3PL is key to reaching customers and adapting to country-to-country shipping requirements. For e-commerce retailers of all sizes, due diligence is important to overcome the challenges of outsourcing a critical part of the business.

 

Finding the Right Partner

Finding the right 3PL provider takes a lot of initial research on the part of the retailer. There are hundreds of logistics providers out there, and narrowing down the search requires asking the right questions. Consider the following:

 

  • What capabilities does the 3PL provider offer? From warehousing to final-mile delivery, does the provider offer everything your company needs—and might need—to be successful over the next three to five years? Before choosing a provider, learn more about their warehouse locations, technology, and final-mile solutions. A whopping 71% of 3PLs agree that even customers recognize the need for capable final-mile logistics services—so be sure to ask how your potential partner handles this crucial step.

 

Make sure your 3PL provider can track your packages at every stage.
Make sure your 3PL provider can track your packages at every stage. – image source

 

  • Does the 3PL provider specialize in your region? Shipping from the United States to Europe is much different than shipping from the United States to Latin America or Asia. It’s up to your partner to navigate the intricacies of each country’s customs procedures and regulations, so choose a partner with demonstrated expertise shipping to customers in your region.

  • Does the 3PL provider have experience with your product? Different products have different shipping challenges, from the way they’re packaged to getting through customs. Ensure your chosen provider knows how to handle your goods correctly.

  • How flexible is the 3PL provider? If you’re expecting to grow your business or you have seasonal variability, you need to know whether your chosen partner can adapt. For instance, the right provider has the storage space and capability to handle fluctuating inventory levels, and the technology to help you accurately predict changes.

 

Figuring Out How Much to Outsource

As we’ve discussed, your company can outsource as much or as little of the logistics process as you want. Before choosing your provider, you must first identify the extent of your company’s logistics capability and what parts of order fulfillment are too costly or complicated to handle in-house.

For international e-commerce, it often makes sense to partner with a 3PL provider. Your partner can warehouse, pack, and ship the package from a much closer location than your headquarters—reducing overall costs and shipping time.

 

Third-Party Warehousing and Fulfillment in Latin America

If you’re like many other e-commerce retailers and have jumped into (or are considering) the Latin American market, third-party warehousing and fulfillment is probably at the top of your to-do list. Latin America is the fastest-growing e-commerce region in the world, and it’s currently underserved by international e-commerce retailers.

This diverse region has its own set of logistics considerations to navigate. Before entering into the market with a third-party logistics provider, here are some questions to ask of your partner.

 

Panama makes a great fulfillment location for shipping to Latin America.
Panama makes a great fulfillment location for shipping to Latin America. – image source

 

Questions to Ask Your LatAm 3PL Partner

 

  • How do you handle end-to-end supply chain visibility? Much of Latin America ranks poorly for logistical capabilities, thanks to tough road conditions and inconsistent standards for addresses. It takes specialized, local knowledge to flourish in each country, especially when it comes to the final mile. Ensure your partner offers technology that brings visibility into logistics, including shipment tracking and returns.

  • What resources do you have in each LatAm country? While most people think of Latin America as a single region, the vast differences between each country make having local resources and partners critical to success. On top of that, localized customer service agents who speak the local dialect can give your company an advantage over larger multinational corporations. Localization can also make you competitive with local brick-and-mortars.

  • Where are your fulfillment centers? Latin America is enormous, with over 7.1 million square miles of land. Having fulfillment centers near your target customers greatly reduces your costs and delivery times.

 

Partner with SkyPostal for your LatAm 3PL Needs

With decades of experience shipping in Latin America and convenient fulfillment centers in many parts of the world, SkyPostal has everything your business needs to excel in the region. Contact us today to learn how we leverage 3PL providers to help you expand your business into Latin America.