3PL Services Defined
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As an entrepreneur you wear multiple hats to get your brand off the ground. From product development to design and sales to shipping, you are responsible for doing it all! When all your hard work increasing brand awareness pays off and your daily order volume increases exponentially, it’s time to take a serious look at how to process the larger order volume while you focus on generating more sales. Should you hire your own team or outsource to a 3PL (third party logistics) provider who specializes in order fulfillment? If you decide to hire employees, your monthly labor cost (associated benefits and taxes) is the same whether you ship 100 orders of 10,000 orders. With a 3PL provider, your monthly billing directly correlates to your inventory level and the number of orders processed. In many instances, the right choice is to outsource these functions as the cost directly relates to order volume.
If you decide to go with a 3PL, seek out quotes from various vendors. If you have already started the quoting process, you most likely have a quote with several line items with unfamiliar terminology. Download our 3PL Guide of Warehouse Services to learn more about 3PL Services defined.
After receiving your quotes, run some calculations to determine the average monthly for your company. They key cost drivers are the number of customer orders received in a month, how many units do your customers typically order at one time, and the amount of products you will be storing each month. For emerging brands focused solely on D2C, monthly billings from a 3PL can vary widely from $2,500 - 10,000 per month. Companies shipping both D2C and B2B billing can vary from $5,000 - $30,000. It all depends upon your volume. With quotes in hand, we suggest creating dummy invoice based on your inputs (pallets to store, orders fulfilled per month) to determine your costs. This exercise can not only help you not only decide on a 3PL; but can give you an estimated monthly budget for future financial planning.
Be sure to ask questions on any other If you need some help understanding your 3PL quotes. If there is a line item that has not been covered in the fee explanation, contact LDR for a free 3PL quote review.