What is a fulfilment company?

eCommerce businesses come with the perks of being able to access a global network of customers while working from anywhere with an internet connection. However, at some point the digital inevitably has to become physical, as your products need to make their way to your customers. It is the physical logistics that so often causes a pain point for eCommerce sellers; with high costs, late deliveries, incorrect items and the complexity of returns.

Having the right fulfilment solution that reliably gets your products to the customer is essential for creating a positive experience that instills trust in your brand. Not to mention the importance of fast and affordable delivery options that help to minimise cart abandonment in the first place.

Good eCommerce logistics and fulfilment deals with everything that happens after your products are manufactured, until they are in the hands of a satisfied customer. This includes receiving and storing your stock, processing your orders, picking, packaging and shipping each order, and if necessary dealing with any returns.

Types of logistics solutions

Self fulfilment

Self fulfilment is how many eCommerce businesses start out, typically this involves very manual processes with no real infrastructure. Once an order is received you package the corresponding product, apply a shipping label and then take it to a post office or parcel drop off point to be dispatched. You will then need to update the stock levels across all of your sales channels.

Pros

• You’re in full control over your stock and dispatches
• It's easy to react in case of complaint or return request
• Custom packaging and personalisation is easy to implement

Cons

• It’s very time consuming
• Manual processes can often result in errors such as the wrong product being sent to customers or incorrect stock levels on your website
• Parcel delivery rates can be expensive
• Limited data analysis and stock management
• If you receive a spike in orders or start growing quickly it can become impossible to get orders out on time

Third Party Logistics (3PL)

Outsourcing order fulfilment to a 3PL is a popular choice for growing businesses. 3PL providers can be a single small warehouse or a chain of centres, and vary hugely in the services they provide. The 3PL will store and manage your stock, and when an order is placed, pick, package and dispatch the product with a parcel carrier on your behalf.

Pros

• Saves you time to focus on the other areas of your business
• Can offer better delivery rates, benefiting from strong ties to shipping carriers.
• You don’t need to hire additional staff to help fulfil your orders
• Offer simple data analysis and stock management using off the shelf software
• Mistakes are minimised using barcode scanning and other technology
  

Cons

• You have less control over your stock.
• There are fees for storage & fulfilling orders
• Some 3PL’s charge integration fees and account fees
• Not all 3PL’s have a good returns service
• It takes longer to handle customer complaints
• Most 3PL’s have no (or limited) opportunity for custom packaging
• Limited locations, with most 3PL’s only having a single warehouse

4PL

A 4PL is a relatively new way of outsourcing order fulfilment, these businesses link together 3PL’s and other logistics services to provide a compounded solution. Utilizing custom technology and the aggregation of orders from multiple clients, 4PL’s can improve on the offering of a 3PL, giving sellers access to better services at affordable rates.

4PL’s tend to focus on the end to end of your logistics rather than just what happens in the warehouse, helping to make your life easier at every stage and maximise your customers experience with fast, tracked deliveries and easy returns.

Pros

• Saves you time to focus on the other areas of your business
• Can offer competitive delivery rates.
• You benefit from a team of logistics experts who manage the warehouses and your stock, giving you better customer service and leaving you agile.
• Advanced data analysis and stock management including automatic stock level syncing across your sales channels
• Advanced tracking and performance analysis so that you know about any problems before your customer and can react proactively
• Stock can be split between multiple warehouses (including multiple countries) to optimise your delivery performance by getting closer to your customers. Managed from a single account
  

Cons

• You have less control over your stock compared to self fulfilment.
• There are fees for storage & fulfilling orders
• Can cost slightly more than a 3PL but often leads to faster growth

Which option suits your business?

Very few orders

If you have less than 10 orders per week and you are not expecting sudden growth you may be better off fulfilling orders yourself. With small order volumes, outsourced fulfilment storage and other fees can start to exceed the savings you experience from the cheaper delivery rates and you will see a less significant benefit from time saving.

Fulfillment centres are designed to turn inventory over quickly so storage rates can be expensive if you use them to hold a lot of products that won’t sell for a while.

Simple requirements

3PL’s are excellent for sellers with simple fulfilment requirements and the majority of their customers in the same region. They take the stress away from your fulfilment allowing you to focus on your business.

When choosing a 3PL, it's essential to ensure they can offer all of the services you will need whether that's B2B fulfilment, Amazon FBA prep, custom packaging, eco-friendly or European delivery. Look for 3PL’s with tech driven processes and automation which will help to ensure an accurate, efficient and reliable service, go with 3PL’s that advertise a high ‘pick accuracy’. Options with real-time analytics will help you to make informed decisions about your inventory and business.

Complex requirements or fast growth

If you sell on multiple platforms and in multiple regions a 4PL can help to accelerate your growth with seamless integrations that support smooth logistics across all channels. 

4PL’s offer the flexibility to quickly scale your logistics, splitting your stock between multiple warehouses without you having to think about any additional integrations or management as this is all handled for you.

Advanced technology including machine learning can provide recommendations to save time and shipping costs as well as predictions on when you will need to restock.

The best 4PL’s have an array of partners that can help to support sellers with almost every aspect of eCommerce logistics, creating a truly end-to-end eCommerce solution.

Choosing a solution

There is no ‘best’ logistics solution. Your business has its own set of needs and circumstances so it is important to choose a solution that is the right fit for you. A good place to start is finding a logistics company that already works with businesses similar to yours. Don’t only focus on the price, make sure the solution can offer the services necessary to your business and consider the unseen cost savings and improved growth that higher quality solutions can provide.

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