3PL Benefits vs. Costs: Is it Worth it?

Hey! Its Al… I’m here at the warehouse, and a potential customer asked me this morning, “Is it even worth it to hire a 3PL to fulfill my orders?” And I said, “Uhhhhhhh… YAH! Once you can no longer easily fill them yourself, it’s absolutely critical that you outsource this activity to a 3PL – it’s the ONLY way you can grow your company!! Let me state that there is absolutely NO WAY you can scale your company if you have to fill orders yourself. Whether you have staff doing it or you’re doing it, at some point, it no longer makes sense for you to become a 3PL Company. By outsourcing these tasks, you can grow your company quickly knowing that the back-end of your business is completely taken care of by your 3PL provider. 3PL benefits are many.

Here are some reasons why the pricing for a 3PL is fair and justified!

3PL Benefits – Services You’ll Receive

First, let me say that before you spend your hard-earned money on a 3PL, it is imperative that you know the exact services you’ll receive and that you are ready for a 3PL. At a minimum, a reputable third party logistics company should provide:

  • Inbound Receiving
  • Picking and Packing
  • Warehouse storage
  • Inventory receipts
  • Outbound Shipping

And, some companies, (like Alpacka), provide additional value-add services like: kitting and assembly, printing services, etc.

The actual rates for each of these services will vary depending on a variety of circumstances, including order volume, size and weight of the shipments being handled and any special services or requirements needed to fulfill the orders like fragile wrapping, cold storage, large items, etc.

What are Order Fulfillment Charges?

The primary service offered by most 3PLs is the order fulfillment. This is the cost of receiving your inventory, storing your products in the warehouse, and processing your orders using various shopping cart systems and warehouse management systems. Returns and packing can also be handled by the 3PL. Keep in mind that no two third party logistics providers are identical and their pricing can be very different so it’s important when you are evaluating to consider everything. For example, a 3PL may charge you more for receiving but save you tons of money on your shipping. So make sure you compare apples to apples… it can be confusing!

3PL Pricing Structure and overall 3PL Benefits

While 3PL pricing models vary, the four most common are price by kit, project basis, bin, and flat-rate pricing:

  • Third Party Logistics Price by Kit

This price structure is used for inventory which is stored within separate components but has to be merged once ordered by a customer. The logistics firm might charge separately for such a service, based on assembly complexity.

  • Flat Rate Pricing for 3PLs

This form of pricing will charge by month, order, or shipment. It may also incorporate services that are contracted, like kitting, returns, fulfillment, and storage.

  • 3PL Pricing by Bin

Many people think this is the most cost-effective form of inventory warehousing. You will be charged a cost depending on each bin or pallet on a monthly basis. Some providers will also let you to pay depending on cubic feet. People typically choose this pricing option when they want to keep small products in different spinners and have them ready for expedited delivery.

  • Third Party Logistics Project Based Pricing

Some 3PLs collaborate with institutions initiating crowdfunding campaigns that must contract their services depending on a certain project.

Are 3PL pricing reasonable? Yes, as long as you choose a reliable one like Alpacka, that delivers the services your firm requires. When selecting a 3PL, consider the size and location of their warehouse, the weight and size of your product, the kitting or assembly needs you have, and the normal order volume your firm expects to have. In general, you can expect pricing to be all over the map so make sure you consider everything when making your decision: receiving, put-away, storage, pick & pack fees, shipping costs and add-ons when comparing! Good luck in your search!

And, of course, if you need some support, give Alpacka a call! We’d love to help in any way that we can:)

Best,

Al

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