Warehouse Wednesday - eCommerce Part 3

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We began a new Warehouse Wednesday series back in June with Part 1 of a mini-series on eCommerce. In that segment we looked at the importance of ‘workflow’ when operating an eCommerce business, especially as it relates to fulfillment. We examined the most common workflow for small start-up eCommerce businesses, that being ‘Local-fulfillment workflow.’ As part of exploration of that workflow we considered both In-bound and Out-bound logistics, along with Material Resource Planning (shown below).

In Part 2 of the mini-series, a couple of weeks ago, we examined ‘Direct Fulfillment’ workflow in which an eCommerce business has their supplier or manufacturer of products send those products directly to the customer of the eCommerce business. We considered various benefits and problems common to Direct Fulfillment. The typical Direct Fulfillment workflow can be seen in the illustration below.

Third-party Logistics Provider Fulfillment (AKA: 3PLP Fulfillment)

In today’s Part 3 we want to take a look at fulfillment via third-party logistics providers, commonly abbreviated as 3PL Providers.  As part of the explosion of eCommerce businesses there has also been an explosion in 3PL providers to provide support for retailers without stores (and storage).

These logistics providers can manage your supply chain handling both the inbound inventory and warehousing of the products belonging to the eCommerce business until those products are ready to be used for order fulfillment to the various customers of the eCommerce business.

These logistic providers then perform the actual order fulfillment duties insuring that the various products reach each customer in a timely manner. Because all of your inventory is housed with a single 3PL these providers can typically offer an eCommerce business consolidation services in which they package small products into larger shipments so as to produce substantial freight cost savings.

Where a 3PL is providing inbound logistics, warehousing, order fulfillment and outbound logistics, the eCommerce Workflow will be similar to the one illustrated below.

Benefits of 3PL Provider-based Workflow:

  • Customization is a common service provided by 3PL providers allowing for all boxes, bags and internal packaging to carry the specific brand or other trade markings of the eCommerce business for whom the orders are being fulfilled.
  • Economical warehousing can be negotiated, and in fact can be adjusted (generally downward) from time-to-time as the volume of products increases by an eCommerce business. This typically yields a fare more attractive storage cost than renting or purchasing a warehouse for self-operations and allows for greater expansion/growth of business over time.
  • Volume of business generally means that ‘other services’ like order fulfillment and shipping consolidation are more economical than self-fulfillment or even direct-fulfillment from a supplier/manufacturer because 3PL providers are in the business of providing those services and are already staffed and facilitated for delivery of these critical functions.
  • Typically provides communications and order processing features not found in most supplier/manufacturer (Direct fulfillment) environments. This permits most 3PL providers to expedite orders even faster than other warehousing environments. It also means that many 3PL providers can provide all your sales channel requirements for both Business to Customer and Business to Business order situations.

Potential Issues associated with 3PL Provider-based Workflow:

  • It takes time to find a good 3PL, and you may not find the right 3PL the first time at bat.  It can be very demanding on a growing eCommerce business to take the step of turning over your warehousing, order fulfillment and customer support to someone other than your own personnel or primary suppliers.  You need to make certain that you have every detail set down in the contract you sign with a 3PL to ensure that everyone is clearly aware of the responsibilities for every contingency. It may be beneficial to secure an eCommerce consultant to assist you in this process.
  • Remember, as far as your customers are concerned, they are ‘your customer.’ They look to you for their orders being fulfilled in accordance with the commitment you made to them during their eCommerce ordering process.  A 3PL provider who fails to live up to your expectations, or who alienates your customers with late deliveries, or poor customer support in regard to logistics, damaged products, or return attempts, can cost you not only those customers but your company’s reputation, which is only one ‘bad social media post’ away by a disgruntled customer.

Order fulfillment workflows are a critical aspect of every eCommerce business. As the owner, manager or operator of an eCommerce business you need to take the steps necessary to provide order fulfillment in the most economical, but also most advantageous method to provide customer satisfaction. 

Third Party Logistics can be a critical resource for providing fulfillment workflow you just need to be certain that the 3PL provider you select is totally up to the task before you entrust them with your customers and business.

In Part 4 of this mini-series we will look at incorporating an eCommerce Marketplace into the workflow, and of course we will look at the world's largest marketplace 'Amazon' and their 'Fulfillment by Amazon' FBA offering.