Third-Party Logistics (3PL) Ecommerce Fulfillment and Solutions Guide

3pl-ecommerce-fulfillment

Order fulfillment is one of the most integral aspects of any online storefront. As an ecommerce business manager, setting up an efficient and cost-effective fulfillment strategy is essential to scale your business and satisfy your customers. 

However, some ecommerce businesses must rely on additional shipping support from outside their internal resources to improve operations and improve ROI. One of the most prevalent solutions for enterprise businesses is to utilize third-party logistics (3PL). Let’s discuss how third-party logistics works and some of our top ecommerce fulfillment solutions. 

What is 3PL Fulfillment?

3PL (third-party logistics) fulfillment is when an ecommerce business uses an outsourced entity to handle retail operations, including receiving orders, inventory management, packing, shipping, and storing products. Some organizations leverage 4PL to free up additional bandwidth from their organization. 4PL allows enterprise ecommerce businesses to have another party handle coordinating with their outsourced shipping and end-to-end supply chain management. 

Why 3PL is Important?

3PL is important for many growing businesses because it helps alleviate time-consuming internal operations so companies can spend more time growing their business. The most appealing advantage of 3PL is that it not only frees up time but that it’s the most cost-effective solution to coordinate, store, and ship inventory to customers. 

How Do 3PL Companies Work? The Stages of Ecommerce 3PL Fulfillment

Every 3PL partnership is different, but third-party logistics primarily includes storage, shipping, packing, and fulfillment. A 3PL partner can consist of several different entities, including warehousing companies, distribution centers, or fulfillment services. 3PL partners can help lower shipping costs, improve shipping times, optimize logistics, manage returns, and provide better customer service. 

3PL partners are essential for many growing businesses to scale their business. Handling inventory management, storage, and shipping can drain a lot of a company’s internal resources, so an outside partner can free up significant bandwidth to save an organization’s time and money. Let’s break down the entire 3PL process from start to finish. 

Storage

A business first must coordinate sending their inventory to their 3PL provider so that they can have their products at their disposal. Typically, a company will fill out a Warehouse Receiving Order (WRO) to document the quantity and product names they plan to send. Once a business records its inventory and transmits it to 3PL partners, they will store the items at their fulfillment centers either on shelves, pallets, or bins. They will categorize and label inventory accordingly to have it ready for when customers place orders. 

Orders

When a customer places an order online, the 3PL will begin the fulfillment process. The most efficient 3PL ordering processes integrate the online store with the fulfillment center. As soon as a customer places an order on the company’s website, the 3PL party is notified and sent the necessary information to complete the order. A warehouse packing team member will collect the order from storage and send it to the packing and shipping division. 

Packing and Shipping

The warehouse team will begin to package the item. Businesses can specify how to package their products based on costs and weight. They can also customize the packaging material to highlight the brand. The 3PL will place a shipping label on the product and have their daily inventory ready for carrier pickup. 3PL partners will send an order and shipping confirmation to their partners, and the 3PL can handle any possible returns. (PS: You can help reduce ecommerce return rates with our helpful guide.) 

6 Best Ecommerce Fulfillment Solutions

There are many reasons why businesses choose to leverage a 3PL partner. Whether it’s handling the fulfillment, storage, or supply chain management, a 3PL can be the MVP for your ecommerce business. Here are some reasons why you and your business could benefit from third-party logistics:

1. Time

You probably didn’t get into fashion retailing to spend hours packing orders. Working with a 3PL gives you the time you need to focus on your big-picture business strategies. There are countless tiny details involved in order fulfillment. Contracts with transportation drivers, tracking lost orders, figuring out how a storm on the East Coast may affect deliveries to the region—these are the kinds of small but important details you no longer have to worry about with a 3PL in place.

2. Money

When an outsourced provider handles your order fulfillment process, that can cut down on expenses. For instance, a 3PL with a warehouse means you don’t have to spend money on your own storage facility for excess inventory. You also don’t have to hire and pay extra staff members to handle fulfillment on your end. Plus, if you work with a 3PL with multiple other clients, it can often translate to lower shipping rates for everyone because the 3PL is shipping at high volume.

3. Convenience

Using 3PL is a terrific e-commerce business solution because it can handle every aspect of order fulfillment. Your vendors can ship merchandise directly to the 3PL warehouse, where it can be synced to your in-store inventory to keep everything organized for you. When orders come in, the 3PL handles all of the packing, labeling, and shipping. If an order is returned, the 3PL takes care of restocking. An experienced company that professionally and reliably administers all these logistics can be a game-changer for your business.

4. Customization

A 3PL can cover every aspect of order fulfillment for you. But 3PLs can also offer customized solutions tailored to your specific needs. Are you focused on adding next-day or same-day shipping to your e-commerce site? Find a 3PL with those capabilities and the warehouse network to support that. Do you want to provide gift-wrapping services or need temperature-controlled packaging? There are 3PLs out there that can handle every kind of fulfillment issue. The best firms will listen to your needs and develop a comprehensive plan to optimize your order fulfillment.

5. Flexibility

A 3PL boosts your company’s responsiveness to e-commerce demands. Suppose you’re planning a huge holiday sale, for instance. In that case, your 3PL company can adjust accordingly and make sure it has enough transportation solutions and fulfillment staffers in place to meet that higher order volume. Conversely, you don’t have to let go of your workers if there is a lull in orders; the 3PL can quickly ramp down, depending on your needs. 

This scalability is especially valuable if you are at a crucial stage of growing your e-commerce business. There are few things worse than not being able to meet increased customer demand—it can tarnish your brand’s reputation. Plus, taking advantage of a 3PL’s warehouse means you may be able to carry a higher volume of inventory, so you can save money by buying merchandise in bulk and serve more customers with more orders, which can benefit your bottom line.

6. Quality Assurance

By doing your homework and partnering with a trusted 3PL company, you are leaving order fulfillment in the professionals’ hands. These intricate, heavily detailed logistics are their bread and butter, and you can be assured that your fulfillment process is in the best possible position to benefit your e-commerce business. A well-oiled fulfillment process reflects well on your business and enhances customer satisfaction and your brand’s reputation.

Let Us Take Care of Your Coordinating Your 3PL Operations

The decision to work with a 3PL can be a wise one, but only if you use a company focused on meeting your ecommerce needs and can provide you with quality service and practical solutions. We’ll help you improve your entire business operations so you can not only meet but exceed your ecommerce KPI goals. 

Connect with us and learn more about our global logistics solutions to optimize all of your ecommerce operational needs. Schedule a quick time to chat with us below, and we can discuss the best solutions for your business. 

In the meantime, learn more about how to improve your ecommerce business using our informative guides:

What is Dropshipping? A Practical Solution to Maintain Profitability and Grow Your Ecommerce Business

dropsipping ecommerce guide

Dropshipping might not sound like the flashiest segment of the high-tech world of fashion ecommerce, but it’s a strategically crucial component of expanding product line visibility and increasing revenues.

“As many retailers continue to see downward pressure on their sales, they are looking for innovative ways to sell their products,” explains Howard West, Nogin’s Chief Product Strategist. “While most retailers continue to see overall sales shrink year over year, large and small retailers alike are seeing significant growth opportunities in the ecommerce space. Dropship services for retailers are a significant part of any brand owner’s ecommerce growth strategy.”

Learn more about dropshipping, how it works, the advantages and disadvantages, and how Nogin has the most innovative solution for enterprise ecommerce merchants to leverage 3pl fulfillment while maintaining MAXIMUM ROI.

What is Dropshipping?

Dropshipping is when another party—other than the brand owner—is marketing and selling products, but when an order is placed, the products are shipped directly from the brand owner to the consumer. This process allows large retailers to expand their product selection via an app or online store without having to stock inventory for that product.

Dropshipping is one of the biggest ecommerce trends. Brands can integrate their dropshipping provider in many common ecommerce business platforms, including Shopify and BigCommerce. However, many do not feature 3pl EDI integration which is the FUTURE of dropshipping.

Advantages of Dropshipping

There are numerous advantages and benefits of dropshipping that ecommerce merchants can leverage, including:

1. Storage, Shipping, and Fulfillment

Since you don’t have to worry about storing your products in a physical location, it’s simple to get your ecommerce business started. Your dropshipping partner will coordinate managing your warehouse supply, packing, managing and shipping inventory, and handling returns. 

Coordinating fast and efficient ecommerce return rate solutions is imperative to any ecommerce business since poor customer experiences can lead to poor reviews and tarnish your reputation. A professional dropshipping partner will ensure your ecommerce operations run smoothly. 

2. Minimal Capital Investment

A dropshipping model requires minimal capital investment, and ecommerce merchants do not have to commit to a high upfront purchase order. Although buying products in bulk brings down the cost of each product, ecommerce businesses are forced to store, manage, and sell their inventory. If the products don’t sell, they are stuck with a high investment without suitable ROI. 

However, for merchants using a dropshipping supplier, products are only made when there is a verified purchase to fulfill. Merchants no longer have to commit to a hefty upfront payment to get started, so there is less risk. Dropshipping merchants must also factor in paying a premium to produce each product based on a confirmed purchase, so you must have an effective conversion funnel and customer retention strategy to make a sufficient return on your investment. 

3. Scable and Testable With a Variety of Products to Sell

Merchants using a dropshipping supplier can offer a variety of products on their websites. You can test trending products and use your marketing analytics to analyze your best-selling items. Testing various items and selling the products that work without a significant upfront investment in inventory is a massive advantage for emerging ecommerce merchants. It also helps to have marketing automation software to ensure your marketing dollars are maximized. 

If you do experience a boost in sales, you will have the facilities to support larger orders without the additional headaches of scaling your business. It’s also important to use traditional marketing strategies, including product listing strategies and retail markdown 

strategies to ensure consistent purchase orders and growth.  

Does DropShipping Work? Dropshipping Challenges

Dropshipping will reach a predicted market valuation of $557.9 billion by 2025, and around 27% of online ecommerce merchants use dropshipping. Although it is a frequently talked about ecommerce myth that dropshipping is “dead,” that is clearly not the case. However, there are clear challenges many enterprise-level merchants will face using a dropshipping model, including:

1. Meeting Customer Expectations

High-end retailers like Nordstrom and Macy’s, have high expectations of the customer experience. Brands must keep an accurate inventory reading so that retailers aren’t selling products that can’t be fulfilled and negatively impacting this experience. You can harm your brand by opening yourself up to a dropship scenario if you don’t have the infrastructure in place to support these expectations.

2. Managing Logistics

Being able to meet SLAs (Service Level Agreements) consistently is another challenge for brand owners. For example, a department store might expect that when they send an order to a brand by noon, that order needs to be picked, packed, and shipped the same day. If you’re not meeting the agreed-upon expectations, they may no longer carry your products.

3. Processing Returns

Many retailers handle the return process themselves under their previously established returns process. However, there are some situations when the order comes back to the dropship brand owner—for instance when a product is undeliverable or refused upon delivery. Combining these returns quickly and communicating with the retailer is imperative to a healthy consumer relationship.

Complying with packaging requirements: Packaging must be appropriate for the product being shipped. Retailers may require custom packaging and inserts as well as branded packing slips and shipping labels. Being able to manage multiple shipping accounts across multiple retailers can introduce challenges. Many nuances go into building a successful dropship program—and brands need to have effective and accurate systems and processes to ensure success.

4. Operational Infrastructure

For many brand owners, dropshipping a single order to a customer can be a significant challenge. Often, fulfillment systems and processes in place are designed for bulk sales, so a single product order in many cases can result in manual intervention and introduce room for error.

For example, for some brand owners, picking a single item order might look something like this: a worker grabs a lift truck, pulls down a pallet, opens a box, then opens up a master case, opens another box, finds the right size, re-boxes that item, and then ships it. Automating and managing inventory to provide an excellent shopper experience is where Nogin can help provide technology and services that help manage these types of scenarios.

Is Dropshipping Profitable? Is It Worth It?

The short answer is it can be, but for most ecommerce business businesses, dropshipping is not the most profitable approach. Most ecommerce businesses using a dropshipping model have their product margins eaten away by the expensive costs of dropshipping fulfillment. It’s a convenient way to run an ecommerce business, but it costs a pretty penny to get it done. Not to mention, companies also have to generate traffic to their shops using Google or social media ads, further dipping into profit margins. 

Worst of all, big retailers have the resources and infrastructure to squeeze you. Most growing ecommerce businesses fail to scale and maintain their profitability. They have to offer colossal sale prices to stay competitive and simply cannot bring their operating costs down enough to stand a chance against Amazon, Walmart, and other retailers. Big retailers can also invest in their own knock-off products that you may try to sell in your store. Although they may be popular items, Amazon or Walmart will be able to offer a more inexpensive alternative with free shipping and better fulfillment infrastructure. 

The only way to compete is by using Nogin. We have the power of big retail to fight big retailers. You’ll never be able to match the free shipping, fulfillment, and marketing solutions needed to compete with big retailers. Fortunately, we have a different approach. We can migrate your storefront on our proprietary intelligent ecommerce platform. You’ll never have to worry about replatforming again and save thousands on internal development costs and essential internal resources. We also have our own fulfillment centers and intelligent shipping solutions to help you save on all your ecommerce expenses. 

Dropshipping can be profitable if you use your Nogin.dropshipping-solutions  

How is Dropship Evolving?

Retailers are embracing innovative, omnichannel marketing strategies as they continue to combat the ecommerce revolution. This requires brand owners to keep up with technology and infrastructure investments to meet the demands of their most successful retailers.

Making products, wherever they are, readily available to the customer is just part of the overall picture. To create seamless experiences, it is necessary to access accurate inventories—which may be in a store or a warehouse or transit—and to be able to communicate the right product information consistently and deliver on customer expectations.

The key is not to focus on keeping up with Amazon or Walmart but on differentiating your brand experience from the rest. Having the right partner to provide consistent operational expertise and infrastructure so that brand owners can innovate and differentiate their products is the only way to compete. 

Picture this: a customer visits a retailer with a personal shopper. As the personal shopper finds products and styles for this customer, they might use technology like augmented reality to show how styles that the retailer does not hold in stock might look on the customer. The shopper can make the purchase right there and have the products delivered directly to the home, or the shopper can pick them up and try them on the next day at the retailer.

For a brand owner, this means making certain they have provided the retailer with the right mix of photography and product content, making sure that inventory and sizes are 100% accurate, and having the infrastructure to dropship that order immediately following the decision of the customer either to the shopper or to the retailer. As a brand owner, being able to support these retailer innovations is a must to succeed.

Imagine going into a high-end boutique, standing in front of a mirror, and being able to interact with digitally, drag and drop, and try on clothes virtually thru technology, then trying on shoes or accessories via the mirror, placing an order with your phone via a mobile payment app, and having all of these products delivered from multiple brands directly to your home via dropship. This is happening today, and as a brand owner, you must be looking ahead to make sure you can support these types of sales processes.

Dropshipping FAQs

We are sure you have other questions about dropshipping and if it is right for your business. Check out the answers to some of the most frequently asked questions about dropshipping. 

How Much Do I Need to Invest to Start Dropshipping?

The minimum amount needed to start a dropshipping business is around 150 dollars. New merchants simply need to purchase a domain name, a hosting website, CMS, and dropshipping software to fulfill orders. 

Do I Need GST for Dropshipping?

If your business operates out of Canada, you will have to fill, apply, and collect Goods and Services Tax (GST) instead of sales tax which is a flat-rate percentage based on the individual transaction value. 

How Do Dropshippers Make Money?

The profit margins are slim, and competition is fierce. Suppose you want to make money with your dropshipping business. In that case, we recommend learning more about what our enterprise ecommerce solutions can help increase profitability, lower internal operating costs, and scale your business. 

Is Dropshipping Legal?

Dropshipping businesses can run into legal troubles if they work with a shady supplier. Some suppliers provide illegally trademarked logos or products that use a company’s intellectual property. If you sell their illegal products, then you are liable and complicit. Make sure to choose your supplier carefully and sign a solid Dropshipping Agreement Contract. 

How to Find Dropshipping Suppliers?

There are many dropshipping suppliers to choose from but some of the most popular include:

How to Make Dropshipping Work? Use Your Nogin!

The reality is that ecommerce operations and logistics are not what many ecommerce leaders want to worry about. Managing inventory, infrastructure, marketing, development, and the endless other components of running an ecommerce business is not only challenging but draining. 

Nogin provides comprehensive ecommerce support for our partners. Nogin believes in a partnership model to ensure that we can serve your business to the best of our abilities. Typically, ecommerce giants must rely on outsourcing their marketing, development, website maintenance, fulfillment, and more. It is expensive but requires significant oversight to ensure they are working in tandem with your business’s goals to meet your website KPIs

Nogin invests in your business upfront and migrates your business on our proprietary headless ecommerce platform. We have a team of Nogin Nerds to ensure your ecommerce business maximizes efforts front to back. More importantly, our technology features marketing automation and continuous research and development to deploy the most effective tactics for all our partners. You also NEVER have to replatform again, which can cost ecommerce businesses tens of thousands of dollars. You won’t have to worry about updating your website with every Google algorithm or iOS update. dropshipping-savings

Our partners save on every facet of their business to become scalable, profitable, and nimble. You’ll finally have the tools, resources, and support to fight big retail while maintaining complete control over your brand. Get in touch with us to see if you qualify for a FREE site audit. You could be wasting thousands of dollars each day, so don’t let your opportunity slip by. Use your Nogin!