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Third-Party Logistics: How the Man in the Middle Impacts Your Business

May 18, 2019 6:00:00 PM

Third-party logistics (3PL) companies come in many shapes and sizes, but they all have one thing in common – how well they perform directly impacts eCommerce retailers. Here’s all you need to know about 3PL pros and cons and what you can do to minimize the latter.

Like it or not, first-person logistics (1PL) just isn’t feasible for many businesses. A small eCommerce retailer on the way up may have room to store merchandise themselves (as well as make regular runs to the post office to handle shipping and returns), but a larger company usually can’t handle every step of the fulfilment process alone.

Enter 3PL – the third-party processes that handle storage, shipping, and delivery/distribution. Here are the advantages and disadvantages of 3PL.

The pros of 3PL

Third parties typically have a large and well-established infrastructure in place. Here are a few advantages eCommerce retailers can expect:

  • National and international shipping is easier – Being an eCommerce retailer basically makes you a worldwide business. Third parties can simplify the often-complex logistical aspects of shipping to different countries due to their experience with issues like customs matters and duties. There are also federal transportation regulations in the United States that parcel carriers like FedEx and UPS are fully informed on.

  • A global storage option – A warehouse of your own is a luxury for many eCommerce retailers. Third parties offer the solution of a pre-existing storage infrastructure, often an international one, that can get your goods to foreign customers more efficiently.

  • It saves money – Renting storage space and better-managing domestic/foreign shipping are just two expenses mitigated through 3PL. Retailers with warehouses must pay the staff who work there, and those going solo with 1PL must pay everything on their own. Third-party savings can also increase the bigger a business gets, since the more orders you have to handle, the higher the logistical costs will be.

There are also downsides to 3PL that can eat into any financial benefits the advantages offer.

The cons of 3PL

  • Their poor performance is YOUR problem – As far as customers are concerned, retailer and third party may as well be the same thing. If UPS or FedEx deliver late (or not at all), odds are the customer is going to leave a bad review for the retailer, not the parcel carrier.

  • Logistical control is lost – It’s hard to keep your eye on a package once the carrier takes over. Too often, it’s “hope for the best” and taking a carrier’s word on anything that goes wrong. Trust is the most important aspect of 3PL. Do you have anyone to fight in your corner 100 percent?

  • Short-term costs can sting – 3PL is a good long-term investment. However, getting it up and running in the early stages of an eCommerce business can be costly, with setup fees and, in some cases, receiving fees. Parcel carriers aren’t likely to voluntarily tell you if you’re due for a refund either.
  • Your company is too large/small - One of the big trade-offs with working with 3PLs is they look at you as another fish to catch. If your company becomes too large for them or even if it’s too small, service levels start to decline. When, not if, this happens, calls take longer to get returned, etc.

Like every factor in business, 3PL boils down to two metrics – is it cost-effective and are the customers happy? The way to protect those two factors is to monitor your third-party parcel carrier as closely as possible.

How 71lbs helps manage your eCommerce logistics

71lbs fights for customers by helping them hold parcel carriers accountable to get back any refunds they’re entitled to. We’re happy to handle all the paperwork necessary and we audit your invoices by analyzing more than 65 different surcharges to make sure you’re not paying more than you should. We fight in your corner to get refunds for lost, damaged, or late deliveries.

Did you know that if FedEx or UPS deliveries are even 60 seconds late, you’re entitled to a refund? That fact is often overlooked by eCommerce retailers, and so are plenty of other money-back opportunities.

That’s our job – to find every opportunity to minimize your expenses and maximize your returns, then pass that insight onto you through easy-to-understand, comprehensive shipping-data analysis.

When you give a third-party control over a vital part of your operations such as shipping, you need to know they’re treating that responsibility with respect. Over 5,000 clients have already partnered with us to be a third-party logistics watchdog they can count on.

Get in touch with us to make sure third-party parcel carriers meet your expectations.

At 71lbs, we clarify the shipping process for our clients, making it easier and faster for them to access refunds and optimize their expenses. Our human-operated platform gathers all your shipping information into one easy-to-use customs analytics dashboard.

Topics: Logistics, eCommerce

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