- The Definitive Guide to Starting an Online Business
- How to Find Online Business Ideas and Source Products to Sell
- The Paperwork: How to Make a Business Plan and Register as an E-commerce Company
- How to Set Up a Website for E-commerce
- How to Set Up Online Payment Methods to Accept That First Purchase
- Pick Packaging That Saves You Money
- How to Ship Products for an Online Business
- Successful Marketing Strategies for Small Businesses
- Small Business Customer Service Strategies Explained
- How to Handle Customer Returns
- Fulfilling Orders at Scale with a 3PL or Management Software
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About the Handbook
We’re diving deep into every facet of creating an online business to make it easy for you to get started and scale quickly. Hear from top e-commerce SaaS providers and online retailers for the best advice to achieving success — from choosing a product and building a website to creating shipping labels and processing returns.
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Even if you’re just starting out, you may dream about a day when you can no longer fulfill your orders by yourself because the sheer volume is more than a small team can support. This chapter covers what to do when you reach that stage. It may be years or decades down the road—hopefully sooner than later—so tuck this chapter away for you to reread when the time is right.
We all know there’s never enough time in a day, but as a business owner, there may soon be a day where there really is not enough time to get all of your orders out the door. That’s where 3PLs and management software come in.
We’ll cover the telltale signs that you’re ready for these platforms, how they help streamline your fulfillment strategy, and the things to look for as you choose a partner.
Fulfilling Orders at Scale Checklist
- What is 3PL or Management Software?
- Signs You’re Ready for 3PL or Management Software
- Choose Your 3PL or Management Software
- Review Your Contract
- Integrate With Your 3PL or Management Software
Third-party logistics (or 3PL) companies help e-commerce businesses outsource their logistics processes, including inventory management, warehousing, and fulfillment.
Management software (also known as xMS) helps businesses oversee their own fulfillment process. These types of tools include Warehouse Management Software (WMS), Inventory Management Software (IMS), etc.
There are many different types of management and 3PL partners, so be sure to find the right fit for your business. Here are some of the most popular.
Third-party Logistics (3PL) Providers
3PLs receive inventory from your manufacturers then ship it to your customers. They can also handle retail distribution and returns. They cover all of your fulfillment, so you don’t have to. 3PLs are useful if you want to provide a seamless customer experience, store inventory overseas, and scale your inventory around your busy season(s), among other benefits.
Fourth-party Logistics (4PL) Providers
4PLs usually handle all of the responsibilities of a 3PL, plus they manage relationships with manufacturers, logistics, etc. They are a complete supply chain solution. If you want to tap experts in your field and take a hands-off approach to your supply chain, 4PLs are a great option. However, they typically come with a hefty price tag to accomodate all of the services.
Warehouse Management Software
If you’re looking for more control over the fulfillment process, warehouse management software (WMS) is an automated system, designed to manage the day-to-day operations of a warehouse or distribution center. A WMS is critical if you’re planning to lease and manage your own warehouse for your business, and can help streamline and organize your receiving, picking, and packing processes.
Inventory Management Software
Inventory Management Software (IMS) can help you stay on top of the process of assembling and distributing your products. Anything involved in producing the inventory is included under the IMS umbrella, including the finished products, the raw materials to make them, the machinery used to produce them, and even the building in which the products are made.
On-demand Warehouse Marketplaces
You might benefit from on-demand warehousing solutions since they will give you access to a network of warehouses, so you can keep inventory in areas close to your customers and scale the volume of your inventory to meet the seasonality of your business.
How do you know when your business is ready for a 3PL? Most businesses are able to manage their shipping and inventory in-house for many of the early stages; however, every company has different fulfillment needs at different times.
Generally speaking, here are a few indicators it might be time to bring in the big guns.
Your Operations Team is Overwhelmed
Running a booming business can sometimes feel like you’re bouncing from one fire to the next. As soon as you start to get the hang of your current challenges, new ones crop up. By the time you decide to outsource your fulfillment, you should be familiar with what type of issues are manageable and which ones need professional help.
If your operations team has started to look like this GIF of Toad, it might be time to consider 3PL or management software.
All jokes aside, here are a few other signs to look for.
Fulfillment Errors Have Increased
Sure, we all make mistakes now and again, but packaging and order fulfillment errors can be costly, potentially damaging your relationship with customers. What’s great about management software is it helps to automate much of the process, leaving less room for human mistakes.
You’re Getting an Influx of CS Tickets for Fulfillment
If you’ve hired employees to help with picking, packing, and shipping, you may not notice when one-off errors start to pile up. One way to monitor the process is by looking at the number of customer support tickets. Your team can add a tag to fulfillment-related tickets, so you can sort for relevant issues and notice trends.
It’s Taking Too Long to Get Orders Out the Door
Consumers want their items fast. Even if you properly communicate shipping times on your website, customers are still surprised and delighted when orders arrive quicker than expected. If your product is not custom and/or made to order, it typically takes 1-2 business days to fulfill an order and input it into the mailstream. Once it starts taking longer, you’ll want to reconsider your fulfillment process.
You’re Spending Too Much Time Fulfilling Orders
Every minute you spend packing orders is a minute you could have spent growing your business. It’s reasonable to spend upwards of an hour or two on fulfillment per day, but when it starts to take away from other aspects of your business, you should weigh other options.
The Holiday Season Terrifies Your Team
Most retailers see a spike in orders during the holiday season. It’s important to prepare weeks, if not months, in advance for this busy season. If you don’t think your operations process can handle the strain of the upcoming holiday season, you need to address those concerns now before it’s too late.
A Cost Savings Analysis Favors Management Software
Finally, there comes a time when it makes more financial sense to leverage management tools instead of creating your own infrastructure and logistics. As you run a cost analysis, make sure to consider the following costs.
Once you’ve decided you’re ready for a 3PL, the next step is to figure out which 3PL provider is the right fit for your business. There are many different solutions available, and each has its own unique value proposition for retailers. Of course, you’ll want to view these considerations through the lens of your business to make sure these qualities are relevant to your needs.
Here are some of the most-popular 3PLs for your further research (in alphabetical order):
- Shiphero (3PL and management software)
- Soapbox (3PL and management software)
- TruePill (for medical prescription fulfillment)
And, here are some of the top management software options (also in alphabetical order):
How do you pick the fulfillment partner that’s right for your business? Keep in mind the following questions and considerations.
The Company’s History
You want to understand if the 3PL has done this before and if they’re capable of supporting your needs. Questions include:
- How long have they been in business and/or are they financially stable?
- Do they have any customers that will be a reference for them (especially one that is a similar size and/or industry to your business)?
- Do they have an industry or business size that they specialize in?
- What type of expertise do they have on staff?
- How has the company grown or changed over time?
The Company’s Warehouse Roster
It’s also important to know the details about their network of warehouses and what is available to your business. Example questions include:
- How many warehouses do they have?
- Are their warehouses in hot spots where your target customers are?
- What is their maximum capacity?
- What space do they have available for your business?
- Will they ever revoke your allocated space for high priority customers?
- How many square feet in total do they support for all of their customers?
The Company’s Approach to Special Circumstances
Special situations will absolutely arise during your tenure as a business owner. Make sure you understand how your fulfillment partner will handle those times. Be sure to ask:
- How do they handle peak season? Do they have any added fees during that time?
- What do they do if they experience a sudden spike in orders?
- What do they do when there are delays?
- How were they impacted by the delays associated with COVID-19?
- Do they support gift messages and wrapping? Will they fulfill gift cards? Any other value-added services they support?
- Can they support custom packing slips?
- Do they ship internationally?
The Company’s Specializations
As you start to research potential 3PL and management solutions, you’ll notice that some services specialize in a specific niche. For example, you may notice that some 3PLs exclusively support businesses in a given industry. Especially if your industry comes with unique shipping challenges—think healthcare, food and beverage, etc.—you’ll want to consider options that cater to your niche.
The Company’s Integrations
Above all else, you want your fulfillment software integrated with your other platforms, like your e-commerce platform of choice. Most 3PLs will already have integration offerings available. If not, you can also consider hiring a developer to create a connection between the two services. Otherwise, you might want to expand your search to include partners that already seamlessly integrate. Consider asking:
- Which platforms do you integrate with?
- Is your platform able to automatically mark the order as fulfilled within the dashboard of my e-commerce platform?
- Does your company send email communications to customers (like shipping notifications with tracking numbers)?
The Company’s Reporting and Dashboards
Although you are handing over the reigns to your picking and packing process, you still want visibility into your fulfillment times, delivery performance, etc. During your discovery process, make sure you ask about their reporting and dashboard offerings. You likely want at least a quick snapshot of the 3PL or management software’s performance. If you have greater needs, be sure to ask.
The Company’s Customer Support
If you have a question or issue that needs resolving, you want to make sure you can quickly get in touch with their support team. Some partners offer levels of support, so take the time to understand the options available to you.
The Process of Choosing a 3PL or Management Software
When you’re ready to reach out to a 3PL or management software, here are the steps you’ll want to take to get to that signed contract.
- Reach out to the company via their website.
- A sales rep will follow up.
- Schedule an introductory call with the rep.
Once you have selected a fulfillment partner, you’ll then agree on a contract. It’s always exhilarating to sign on the dotted line, but don’t let that sweep you away from reading the fine print to make sure you’re happy with the terms.
Here are a few things to look for in your contract.
A Signed NDA
You want to make sure your warehouse workers are not divulging any secrets to press or competitors. Request a signed non-disclosure agreement (NDA) to protect you and your company’s happenings. This may seem extra cautious, but it does happen.
We’ve all seen Apple factory workers share company secrets about new products that they’re working on. Of course, Apple has an NDA with every partner in their supply chain, but they might be hard pressed to take any legal action since it would cause extra publicity and substantiate what was previously just a rumor.
An NDA will help prevent the airing of company secrets and provide your company with legal protection in the event something were to happen. Whether you choose to pursue legal action or not, you at least have a safety net.
The Contract Length
As you’re looking at the contract length, consider the following questions.
- Is the contract for a year? 3 years?
- What happens when the contract has expired? Does it auto-renew?
- Is there a formal process for ending the contract and/or renewing?
- Are you able to provide 30-day notice and opt out at will?
- Is the contract length negotiable?
Make sure you’re comfortable with the answers to these questions. Typically, some terms of the contract length are negotiable.
Many 3PLs will include a volume requirement in their contract. That means the 3PL must process at least that many orders on behalf of your business otherwise you risk a penalty. The 3PL does this so that they are better able to forecast their needs and aggregate volume.
At this stage in your business, you likely already have historic data on order volume that you can use to predict what your needs will be in the coming months. Your 3PL partner is also a great resource to help you forecast your needs.
It’s common for fulfillment partners to have surcharges for special circumstances, including holiday shipping, gift cards, and special wrapping. Make sure you understand what those extra fees are and how they will be billed. Sometimes companies send those invoices separately, so you want to prepare your finance team accordingly.
Once that contract is signed, you are ready to integrate your 3PL or management software with the rest of your tech stack. There are a few different ways you can integrate your other business tools with your management software.
- Leverage the 3PL or management software’s existing integrations for a quick and easy transition.
- Use your own team’s technical resources to develop the information sharing you need.
- Hire outside resources that specialize in these types of integrations.
Of course, the labor costs and time required vary based on the option you choose. Chat with your account manager at your 3PL or management software to decide the best choice for you.
Choosing a 3PL or management software can feel both exciting and monumental. With the above tips and tricks, you’ll be able to find a solution that has your company’s best interests in mind so you both can grow and succeed together.
You Can Do This!
Now that you’ve done your research and learned the ropes of e-commerce businesses, it’s time to roll up your sleeves and get to work.
The road to managing a booming online store is not without obstacles, but the promise of financial and creative freedom is worth it.
When the going gets tough, know that we’re in your corner. If you have any questions, don’t hesitate to reach out to firstname.lastname@example.org.
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