The global ecommerce market is booming and expected to grow from $3.9 trillion in 2024 to $7 trillion by 2029.
Is your ecommerce business positioned to capitalize on this growth? To set yourself up for success, you must be able to keep your customers happy by offering them a first-class online shopping experience across all your sales channels, while keeping your costs down by optimizing the efficiency of your operations. Ecommerce fulfillment is where it’s critical, but challenging, to maintain customer satisfaction and operational efficiency. With customer expectations for fast, reliable deliveries rising and the complexity and costs of logistics increasing, companies often struggle to effectively handle their order fulfillment.
That’s why many ecommerce businesses opt to outsource the ecommerce fulfillment tasks of storage, picking, packing, and shipping their orders to third-party logistics (3PL) providers like Amazon Supply Chain Services (ASCS). ASCS offers individual and end-to-end supply chain solutions to businesses worldwide. One of these services is Multichannel Fulfillment (MCF).
Working with a 3PL can provide numerous business benefits, empowering you to boost the efficiency of your order fulfillment process while cutting operating costs. According to a recent survey, 66% of companies that use 3PLs say that doing so has reduced their ecommerce fulfillment costs.
But how exactly can a 3PL help you reduce your ecommerce fulfillment costs? In this blog, we highlight the four main ways.
#1: Improve inventory management to lower ecommerce fulfillment costs
Inventory is one of the main drivers of higher costs for ecommerce businesses. Inventory management involves numerous different expenses, including purchasing, storage, and distribution costs, that can add up and take a tremendous toll on your bottom line.
To keep these costs down while meeting customer demand, you must be able to maintain the right products in the right fulfillment center locations at the right time. A 3PL can help you do this by optimizing all aspects of your inventory management, including:
- Warehouse operations: A 3PL will strive to ensure that your inventory management process (from inbounding, to picking, packing, and shipping) runs efficiently. Some 3PLs, like ASCS, utilize state-of-the-art robotics solutions to dramatically decrease the time and manual effort it takes to manage your inventory.
- Inventory distribution: A 3PL with a wide global network can help you distribute your inventory so it’s as close as possible to your customers, thereby minimizing shipping times and costs. MCF is part of ASCS’s world-class logistics network, which includes over 200 fulfillment centers, allowing you to position your stock close to your customer base—and to expand into new markets with ease as you scale.
- Inventory consolidation: By consolidating your inventory with a 3PL provider, you can expose your pool of inventory to multiple sales channels, increase the likelihood that it will be sold, and decrease storage costs.
Inventory accuracy: By leveraging the latest warehouse management systems and automation technologies, a 3PL can give you an accurate, real-time view of inventory levels. How does 3PL services software help reduce logistics costs? MCF, for example, has access to Amazon’s state-of-the-art, automated inventory management system, which uses sophisticated inventory forecasting models to accurately estimate demand, so you can be prepared for peaks and surges while reducing excess inventory and stockouts. By streamlining the way you manage and utilize your inventory, a 3PL can help you save on storage, shipping, and other ecommerce fulfillment costs.
#2: Optimized ecommerce fulfillment order operations
Many ecommerce businesses start off by handling their order fulfillment processes in-house, but as their business expands to serve more customers across different sales channels, they need a 3PL to help them deliver products more rapidly and reliably and decrease their costs.
By engaging a 3PL to handle your pick, pack, ship, and returns operations, you can cut storage, shipping, and other operating costs by optimizing the efficiency of your end-to-end fulfillment operations. For example, online footwear retailer JMFA Ltd. reduced its order fulfillment costs by 80% after engaging MCF for order fulfillment.
Speaking about why JMFA Ltd. selected Amazon’s MCF service, the company’s founder Michal Aleksandrowicz said, “As my business grew, I started looking for a 3PL that could manage my operations effectively and use their existing systems to identify opportunities to improve value within our supply chain. Since we sell on a number of different channels and across a number of different countries, it’s important that we have a 3PL provider that can handle our order fulfillment at a low cost.”
A best-in-class 3PL like ASCS can help you unlock opportunities to drive greater efficiency and reduced costs across your end-to-end logistics operations.
#3: Better ecommerce fulfillment pricing
Another way that a 3PL can help you cut fulfillment costs is by offering you better pricing for storage, picking, packing, and shipping services.
The cost of fulfilling online orders is on the rise. When calculating in-house fulfillment costs, many businesses notice that a 3PL can help drive down fulfillment costs through access to more attractive pricing for fulfillment services. Two common methods of doing this are:
- Offering discounts for high-volume orders. MCF, for example, offers discounts of up to 50% on multi-unit orders.
- Negotiating better shipping rates with carriers. Shipping is by far the biggest fulfillment cost, and working with a 3PL can help you reduce the amount you are paying to ship your orders. Some 3PLs, like ASCS, are carriers themselves and can provide shipping services at lower rates. If you engage ASCS as your 3PL, you can add or drop carrier services as needed. Other 3PLs have close relationships with carriers and can help you negotiate discounted shipping rates with them.
Through these and other methods, a 3PL can help you decrease the price you’re paying for ecommerce fulfillment services.
It’s imperative that you take the time to review and understand your 3PL’s pricing structure and rate card, and estimate your costs on a fulfillment cost calculator if possible. Some 3PL services, like MCF, offer simple, predictable pricing with no contracts or hidden fees, making it easy for you to gain a good grasp of how much you’ll pay for ecommerce fulfillment services.
#4: Reduce ecommerce fulfillment overhead costs
If you handle your fulfillment operations in-house, you will have to shoulder a significant amount of overhead costs—including costs for labor, warehouse facilities, specialized equipment, and software systems—to make your logistics operations run. Plus, you’ll have to devote valuable time, energy, and mental resources to overseeing your logistics operation.
By outsourcing your ecommerce fulfillment to a 3PL, you can decrease your overhead expenses by eliminating the necessity of hiring in-house staff and investing in logistics infrastructure, equipment, and technologies. For example, if you engage ASCS, your stock will be stored strategically across its global fulfillment network, positioned as close as possible to your customer base—or markets you hope to expand into. Plus, you’ll automatically benefit from Amazon’s best-in-class technological innovations as soon as they’re implemented. Since 2020, Amazon has invested more than $30 billion in its network and plans, and is continuously innovating to ensure its logistics network is the fastest, easiest option for ecommerce fulfillment.
For example, Wyze, a smart home device retailer, was able to decrease the number of full-time employees dedicated to fulfillment operations by 50% (and realize a whole host of other business benefits) by using MCF along with order management system Pipe17.
Wyze’s Principal Technical Program Manager Eric Morris said, “With MCF and Pipe17, we’ve been able to automate our order fulfillment process, cut our delivery times in half, and leverage Amazon’s fulfillment network to provide a Prime-like experience for customers—while, at the same time, reducing overhead in terms of full-time employees needed to manage our order fulfillment operations.”
Lowering ecommerce fulfillment costs with a 3PL
By improving your inventory management, optimizing your order fulfillment operations, accessing more attractive pricing for fulfillment services, and minimizing overhead expenses for logistics, a 3PL can help you boost your bottom line.
If you work with a 3PL, you can decrease your ecommerce fulfillment costs while driving—and put your business on a path to long-term profitability.
