At first glance, most 3PL warehouses may look the same: a large, cavernous building filled with pallets, bins, and boxes, a receiving dock, and a conveyor belt. The reality, however, is that no two warehouses are alike.
Once you’re confident you’d like to outsource your fulfillment, whether you choose to partner with a 3PL or a 4PL, vetting your warehousing options is a crucial next step. But the 3PL warehouse—or warehouses—you use could vary widely in their capabilities, offerings, expertise, and pricing structure.
In this blog, we’ll explore what you should consider when evaluating a 3PL warehouse for your business.
All 3PL warehouses perform the same basic duties of receiving shipments, storing inventory, and preparing orders to be shipped to their destination. What differs is how the warehouse performs these functions, where it’s located, and whether it can meet your unique business needs. The biggest factors to consider when choosing a 3PL warehouse are:
Now that you know how different warehouses can be, we’ll explore the five questions you should ask to determine if a warehouse is a good fit for your business.
The location of the warehouse you’re considering is perhaps the most important piece of the puzzle, and it’s all because of shipping zones.
Shipping zones are what determine the cost of shipping a package. They’re determined by the distance traveled from the package’s origin (the warehouse) to its final destination (likely your customer). Shipping zones are unique to each carrier, but in general, anywhere in the continental United States will fall into Zones 1-8, with Zone 8 being the most expensive.
Essentially, the further the package must travel, the more expensive it is to ship. That’s where the location of your warehouse comes into play: a centrally-located warehouse means you’ll be able to reduce the frequency with which you’ll have to ship to the regions that fall into the higher zone categories. Alternatively, if you had only an East Coast warehouse, shipping anywhere on the West Coast would fall into Zone 8 pricing. You can imagine how costly this would be when multiplied by thousands of orders.
Now, if you have multiple warehouses at your disposal, you can save even more. Both established and growth brands typically use two to three warehouses strategically located across the country. Under this model, tech-enabled fulfillment providers will automatically route your orders to the warehouse closest to the customer’s address for fulfillment. By using three warehouses located on the West Coast, East Coast, and somewhere central like Texas or Illinois, many brands are able to keep nearly every address in the continental United States in Zone 5 or lower.
If you’re hoping to expand your business to international markets, you’ll also need to consider the expense of shipping abroad. To send individual orders overseas can be prohibitively expensive for most brands; but some 3PLs and 4PLs have warehouses around the world. Even having inventory in just one strategic location, like the United Kingdom, can drastically reduce the cost of shipping to any European country. This eliminates the complexity of duties and customs for each order, and cuts the cost of shipping to a fraction of what it would be to ship across continents.
When evaluating the warehouses available through a fulfillment partner, be sure to consider their locations, both domestic and abroad. It could mean the difference between successfully scaling your business or drowning in shipping expenses.
Depending on your product, you may have specific storage requirements. When considering a warehouse, be sure to ask about the type of storage available. There are generally four:
Not all warehouses offer each type of storage, so be sure that the one you choose is able to accommodate your inventory.
You’ll also want to be sure the warehouse can accommodate the amount of inventory you have to store. Many warehouses set order minimums to take on new business, but as your brand grows, you could face the opposite problem if the warehouse can’t hold all of your inventory. Be sure to ask how your potential fulfillment partner would help accommodate you as you grow.
The day-to-day function of your fulfillment partner will primarily be to receive orders, then pick and pack the inventory, and prepare the order for shipment; but occasionally, you’ll probably have a project that you’ll need your warehouse’s help with.
Projects could be:
You’ll want to ask the 3PL warehouse you’re considering how they charge for special projects (hourly rate, per project fee) and what kind of protocols they have in place, as well as all of the projects they’re willing to accommodate. Keep in mind that the cost of special projects depends not just on the rate you’re charged, but how efficient the warehouse is.
Projects are a good stopgap to fill in for manufacturer deficiencies, often common when companies are just starting out or changing their inventory often. Most companies with fully optimized fulfillment will actually have few to no projects, if they can help it.
Some warehouses carry a wide variety of products, while others specialize in a specific kind of inventory. Similarly, some warehouses can fulfill all kinds of orders, while others ship only direct-to-consumer (DTC) orders, or only wholesale orders also known as business-to-business (B2B).
Make sure the warehouse you work with has experience handling a product similar to yours. For example, if you sell beverages, you probably won’t want to partner with a warehouse that to date has only stored and shipped electronics. The type of inventory determines how it needs to be stored, handled, and packed, so working with a warehouse with experience in your product category will make for more efficient operations.
You’ll also want to be sure they can accommodate your various fulfillment needs. Some DTC brands opt to sell wholesale as well, marketing their products in retail stores or through online retailers like Amazon. These are two very different shipping experiences, and you’ll want to be confident the warehouse can handle both.
Don’t forget that warehouses often close on weekends and holidays. You’ll need to be prepared to plan your deliveries around the warehouse’s operating hours and to anticipate that orders placed on Friday afternoons probably won’t ship until Monday. Otherwise, you’ll need to find a warehouse that operates 24/7.
Also be sure to ask about the service-level agreements (SLAs) that the fulfillment partner will hold the warehouse to. Ask when orders will go out (the same day the order is placed, the next day, or later) and when the cutoff is—in other words, at what time same-day fulfilled orders would change to next-day fulfilled orders. Check those SLAs against reviews and other sources to ensure the fulfillment partner can honor them.
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