Today’s retailers compete on logistics as much as price. Those with the best strategies can ship products for less, which helps them lower costs and attract more customers. That’s just one way a better logistics strategy can improve your retail business. Partnering with a third-party provider could be the key to unlocking more.
This guide explores the advantages of 3PL retail services. Keep reading to learn what these are, how they can help your business, and our top tips for implementation. By the end, you’ll know whether 3PL fulfillment is a good fit for your retail business.
What Are Third-Party Logistics?
Third-party logistics providers, or 3PLs, are companies to which you can outsource parts of your supply chain. They help with warehousing, inventory management, picking and packing, transportation, order fulfillment, and related services.
If you’re interested in outsourcing to a 3PL, you can choose between generalized and specialized providers. Generalized 3PLs provide basic services to companies across many industries. Specialized providers have deeper expertise in a particular industry, such as retail.
This guide looks at the value that specialized retail 3PLs offer. But in general, you should know that specialized providers have deeper insights into the challenges and priorities of your industry. This expertise can make them a more valuable partner.
Core 3PL Services for Retail
You can outsource many different parts of your retail supply chain to a third-party provider. Some of the most common solutions include:
- Transportation management
- Warehousing
- Inventory control
- Packaging and kitting logistics solutions
- Compliance management
You can review Quickbox’s page on retail fulfillment for more details.
Benefits of Retail Third-Party Logistics
Now that you know what retail 3PLs do, let’s move on to the benefits they offer. There are three key areas worth considering as you decide whether 3PL is a good fit for your business.
Cost Efficiencies
First, 3PLs can make your retail business more cost-efficient in its supply chain. These companies focus on logistics exclusively, which allows them to reach economies of scale that the average small and medium business can’t.
The net result is that you can often get your shipping needs met at a lower price. Plus, you’ll have less operational overhead to worry about. This can free up room on your balance sheet to increase profitability or pursue growth.
Operational Advantages
In addition to reducing costs, retail 3PLs can create new operational advantages for your business. Some key examples include:
- Access to industry expertise and leading tools
- Enhanced flexibility, making it easier to scale up and down as business evolves
- Faster order fulfillment
- Improved inventory management
These services can open up new business opportunities. For instance, faster order fulfillment on a nationwide scale could prepare you to compete on Amazon. You may also be better situated to pursue seasonal sale opportunities with the enhanced scaling flexibility 3PLs offer.
Strategic Benefits
Finally, there are also strategic reasons to choose retail 3PLs over in-house solutions. One reason is having more time to focus on your core business activities. Instead of needing to compete internally on logistics, you’ll be free to spend your labor in other areas.
Retail 3PLs can also make it easier to increase your geographic reach. They typically have national shipping networks that you can plug into without having to commit a significant amount of capital upfront.
You may even improve your customer service by partnering with a 3PL. These companies have access to the best shipping technologies and can help you answer customer delivery questions more specifically.
Choosing a Retail 3PL Partner
Part two of this guide focuses on helping you find and implement an optimal retail 3PL solution. That process starts with choosing the right partner, which you can do by following these steps.
1. Determine Your Selection Criteria
First, figure out what you’re looking for in a 3PL partner. You’ll typically want a provider that specializes in the retail industry. That way, you get access to deep expertise and retail-optimized logistics networks.
You could also consider factors like:
- Technology capabilities: What kind of tech does each provider offer? Will it integrate into your existing systems?
- Geographic coverage: Can the 3PL ship to all of the territories you serve with timelines that fit your customers’ preferences?
- Operational capabilities: What kind of storage capacity does the 3PL have? Can they handle your peak demand season? Can they help you process returns?
- Pricing: How transparent are the quotes you receive? Can you get a discount for volume? Are there any hidden fees or surcharges that could increase costs?
- Scalability: How easy will it be to scale services up or down as your needs evolve?
- Communication: How easy is it to communicate with a provider? Do they respond quickly or leave you waiting for answers?
Each of these factors can impact how satisfied you are with a 3PL. The key is figuring out which of them matter most to your business. Then, you can filter potential partners based on those requirements.
For example, you may have more flexibility on technology than geographic coverage. Or maybe you’re entering a growth phase and need to prioritize scalability. You know what you need from a logistics partner better than anyone else.
2. Ask the Right Questions
Once you know your criteria, you can start evaluating potential partners. There are some key questions you’ll want to ask during this phase.
For example, you can ask each partner for their average order accuracy and on-time shipping rates. Each of these will have a direct impact on customer satisfaction.
You can also ask providers about their retail expertise. If your products fill a particular niche within retail, like food, you may want to ask about that, too. One way to explore topics like this is to ask for case studies and client testimonials from similar businesses.
Other good questions to ask include:
- How do you handle peak season volume spikes?
- Will your technology integrate with what we use internally?
- Will I be charged for anything that wasn’t in the quote I received?
- How do you deal with customer concerns and returns?
3. Watch Out for Red Flags
As you go through this process, it’s also important to keep your eyes open for red flags. These are signs that a partner isn’t a good fit for your brand and that you should look elsewhere.
For example, a potential 3PL may be reluctant to share hard data about the performance metrics that matter to you. You might also notice poor facility conditions during a visit or inconsistencies in pricing.
Another factor to consider is a potential partner’s financial status. Recent layoffs and closures can be a sign to stay away. You don’t want to choose a 3PL that shuts down in a year and forces you to go through this entire process again.
4. Sign the Right Contract
All that’s left to do now is sign a contract that works for your business. If you’re unhappy with the first set of terms you receive, don’t be afraid to ask for an adjustment. The right 3PL will work with you to find a deal structure that meets your needs.
Tips for Implementing a Retail 3PL Solution
Now that you’ve chosen a partner, it’s time to integrate their services into your supply chain. That can get complicated, depending on your existing setup and the size of your shipping network. Here are some tips to make it easier.
Initial Planning
It’s worth spending some time on planning upfront. This gets everyone on the same page, which can speed up integration and help you avoid costly errors.
You can begin the planning process by defining objectives and KPIs. Objectives are the high-level goals you hope to achieve through your new partnership. KPIs are the data you’ll track to see whether you’re moving towards an objective or away from it.
For example, your objective might be to deliver nationwide within three days of ordering. Tracking average delivery times for different regions would tell you how you’re progressing toward that goal.
You may also want to spend some initial planning sessions covering budget and timeline. But the key is getting on the same page with your 3PL about the factors that matter most to you.
Best Practices for Efficiency
There are also a few things you can do to improve the efficiency of your retail 3PL partnership. One is establishing clear communication channels. That way, both sides know where to go when communicating with one another instead of having to track messages across different platforms and people.
You can also set up a continuous performance monitoring system. But a good 3PL will already have one in place. This provides real-time logistics data so you can spot issues faster and make adjustments before customers are impacted.
Finally, consider implementing a system for regular audits and reviews. This will help you verify that the partnership continues contributing to your goals.
Optimizing with Technology
Finally, you can get more out of your relationship with a retail 3PL if you integrate tech stacks. You want both sides to have real-time data on the others' operations. This makes it easier to spot problems and adjust.
For example, you might integrate your Shopify Plus data with your new 3PL partner’s inventory system. This would give you an automatic alert when supplies are running low so you can take appropriate action.
Common Challenges and Solutions
3PL retail solutions can be a great asset to your business. But they’re not without challenges. Here are some common examples and what to do about them.
Communication Gaps
Avoiding communication gaps is essential, given the speed at which modern logistics occur. You can do that by establishing a clear communication platform and protocol from day one.
Sharing real-time data with your partner can also reduce the need for manual communication between the parties. This can also decrease the likelihood of communication gaps.
Seasonal Demand Spikes
You might also sell products that see seasonal spikes in demand. If so, it’s important to be upfront about these when evaluating 3PL retail services. You don’t want your partner to be caught off guard by sudden demand swings.
Compliance Issues
Some retail products are subject to strict regulations that can impact the logistics process. If you sell goods like this, try to choose a partner that has experience in the kind of regulatory compliance you need.
For instance, you might ship medication that needs to be temperature-controlled. If so, choosing a partner with a nationwide network of refrigerated warehouses would be important.
This is another reason why specialized 3PLs are often better than generalist alternatives. You’re much less likely to have compliance issues when your partner already has deep expertise in your industry.
Future Trends in Retail Third-Party Logistics
One last factor to consider is how future trends could impact 3PL retail benefits. These may influence which solutions are best for your business.
For example, artificial intelligence is improving rapidly. It’s helping 3PLs optimize warehouse movement, predict demand, and prioritize order fulfillment. You may want to look for 3PL partners that use it to get as much value out of these services as possible.
Another trend is the growing importance of sustainability. Researchers say 85% of consumers have become “greener” with their buying habits. You may need to choose a 3PL that emphasizes sustainability to position your business correctly for the future.
The Right Partner Makes All the Difference
Third-party logistics services have the potential to revolutionize your company’s operations. They can boost your shipping efficiency, help you with compliance, and free up room in your budget for other goals. This can help your business find its edge in an increasingly competitive retail industry.
QuickBox can help you do it. We specialize in helping retail businesses improve their logistics operations. With our competitive pricing, robust tech integrations, and 99%+ order accuracy, you can count on us to help your business take the next step.
But don’t take our word for it. Visit our retail fulfillment page to learn more about how our 3PL services can help your company thrive. Or request a quote today for more personalized information.