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5 questions you should ask when evaluating a 3PL warehouse

Jul 6, 2022

6.7.2022

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9:00

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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.

How do 3PL warehouses vary? 

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: 

  • Location: The location of the warehouse or warehouses you use has a huge impact on both inbound freight shipping and outbound order shipping costs. 
  • Storage capabilities: Depending on your product, you may have specific storage requirements, like refrigeration, or you may need a significant amount of space if you’re moving a high volume of orders or have large products.
  • Experience: Warehouses often specialize in certain types of inventory or fulfillment. You’ll want to be sure that the warehouse you’re working with has experience working with your type of product and shipping preferences. 
  • Operations: Not all warehouses operate on the same schedule. It’s important that you are satisfied with order cutoff times—when an order must be received for the warehouse to ship it the same day, the next day, or within three business days.
  • Projects: Sometimes, you’ll need your warehouse to perform non-routine tasks, whether it’s kitting, assembly, inventory recount, or repackaging. Be sure the warehouse is willing to work with you to work around any limitations of your manufacturer and control costs. 

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.

Where is the 3PL warehouse located?

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.

A map of the United States displaying shipping zones used by the USPS for a 3PL warehouse on the East Coast
When shipping though USPS from only the East Coast, the West Coast falls into the most expensive shipping zone—Zone 8.
A map of the United States displaying shipping zones used by the USPS for 3PL warehouses on the East Coast and West Coast
When shipping through USPS with warehouses on both the East and West coasts, the entire continental US falls into Zone 6 or lower.

What are the 3PL warehouse's inventory storage capabilities?

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: 

  • Ambient: Ambient storage means that the inventory is stored at room temperature. Depending on where the warehouse is, temperatures can reach some extremes in both directions. Ambient storage is best for items that are not affected by heat or cold. 
  • Cool: Cool storage means the space is air conditioned. It’s not for items that must be kept cold, but rather for anything that could be damaged by heat. 
  • Refrigerated: As the name implies, refrigerated or cold storage refers to warehouses that can keep inventory cold—typically food. 
  • Frozen: Perishable items may need to be kept frozen. Facilities that offer cool, refrigerated, and frozen storage are typically more expensive, as they are scarce and require more oversight and maintenance. 

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. 

What value added services (projects) does the 3PL warehouse offer?

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: 

  • Kitting: Items that are sold as a single SKU, but require multiple finished goods to be put together after they’ve arrived at the warehouse, must be kitted and barcoded before they’re shipped, reducing the cost of picking orders and enhancing order consistency. 
  • Assembly: Assembling pieces of a product before it arrives at the warehouse is not always cost-effective or even offered by all manufacturers. Your fulfillment partner should be willing and able to prepare your products for customers if your manufacturer cannot. For example: placing sticker labels on a bottle, or filling that bottle with sunscreen.
  • Barcoding: Your inventory will need to be barcoded before it is shipped to allow the warehouse to keep track of inventory and report back to you. If your manufacturer does not barcode for you, you’ll need your warehouse to offer this service, which helps with inventory and order picking accuracy. 
  • Inventory QA inspection: Using a new manufacturer? Fragile merchandise? There are many reasons you might want your inventory to be inspected before it’s stored and shipped to customers. 

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.

Which fulfillment models does the 3PL warehouse specialize in?

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. 

What operational guarantees does the 3PL warehouse offer?

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.

Ready to start evaluating 3PL warehouses? Learn more about Airhouse’s unique model—schedule a call with us today.

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