Managing each and every aspect of a direct-to-consumer (DTC) company can quickly become overwhelming. What started out as a small business you ran from your garage can seemingly outgrow that space overnight. In this case, you may want to consider working with a 3PL company to help you continue to grow your DTC company and experience even more success.
Third-Party Logistics (3PL) Explained
Third-party logistics or 3PL refers to the outsourcing of logistics and supply chain management, including but not limited to inventory management, order fulfillment, and shipping. These services can be particularly beneficial for DTC companies that tend to try to limit their operations and footprints.
So instead of directly bringing on multiple staff members to handle inventory and other logistics processes, DTC companies can contract out to 3PL companies that already have the capacity and expertise needed to handle various logistics processes. Instead of investing in warehouse space and software tools to aid in these processes, DTC companies can gain direct access to these benefits by working with a 3PL company.
What Is 3PL Distribution?
3PL distribution is a subset of third-party logistics that focuses on the distribution of products and orders from a storage location or warehouse directly to customers in the case of DTC companies.
What Do 3PL Distributors Handle?
At the most basic level, 3PL distributors handle the distribution of orders received by DTC companies. However, they do much more than that. For example, 3PL distributors manage the inventory of DTC companies so that orders can be easily distributed once received.
3PL services may also handle the picking and packing process that has to occur before orders can be shipped. Finally, 3PL distributors handle the actual shipping process that transports orders from warehouses to customers’ mailboxes.
3PL Distribution and Fulfillment Center
3PL companies are able to handle distribution and other essential functions through distribution and fulfillment centers. The logistics operations of many different clients are handled within a single 3PL distribution and fulfillment center.
For example, let’s say that a 3PL distribution service works with Company A, B, and C in a distribution center that’s centrally located in Houston, Texas. The same employees would work to fulfill all three companies' orders — all at the same time. Each company’s products would be organized and separated in such a way that they are easily accessible by employees for fulfillment.
How 3PL Distribution Can Help DTC Companies Grow
3PL distribution is designed to help DTC companies grow and expand their operations. Here are some of the ways that 3PL companies are able to help you achieve this level of growth and success:
3PL Distribution Helps Your Company Expand Its Reach
Managing a newer or smaller business requires a lot of multitasking, which can actually limit your growth and bottom line. For example, say that you’re a new DTC clothing business that’s just getting started. When you’re spending all of your time and resources on fulfillment, that means that you’re not able to spend enough time and resources on clothing design, which at the end of the day, is the entire foundation of your company.
When you work with a 3PL, you’re able to outsource many of the tasks that were previously taking up a lot of your time. Now, thanks to your 3PL partnership, you’re able to focus on more important aspects of your business to grow and expand your reach into other parts of your industry.
Using a 3PL Fulfillment Center To Keep Your Inventory in One Place
If you’re a new business that’s just starting out, you’re likely keeping your inventory in your home or in a different location close to your home so that you can easily access it. However, your home likely isn’t located in an ideal or cost-effective location for distribution.
Instead, 3PL companies have centrally-located warehouses where you can keep your inventory and ship orders faster. And since customers largely expect two-day shipping, the faster you can ship your orders, the better your customer experience will be.
With a third-party logistics provider, you can even split your inventory between different 3PL warehouse locations so that you can ship out orders even faster, often at reduced shipping costs. For example, a 3PL provider might have a West Coast location, an East Coast location, and a Midwest location so that you can quickly and easily cater to end customers from all parts of the country.
3PL Distribution Helps You and Your Team Manage Finances
Believe it or not, but 3PL distribution also helps you and your team manage your finances. While working with a 3PL does require some level of investment, you really have to consider your return on investment and cost savings.
For example, 3PL companies have systems and tools in place that are able to track invoices, payments, and your overall finances. These systems are designed to ensure that you actually get paid the right amount at the right time.
3PL Distribution Companies Handle Shipping for You
Last but certainly not least, 3PL distribution companies can handle the entire shipping process for you. In fact, many 3PL companies have established partnerships with shipping companies that may come with lower rates than if you were to use these shipping companies independently.
From there, 3PL distribution companies handle the entire shipping process, taking care of everything from printing shipping labels to sending out packages and even managing order returns if that’s a service you’re interested in.
How To Start Working With a 3PL Distributor
Clearly, working with a 3PL service provider is beneficial for growing companies. But how can you start working with a 3PL and actually start receiving these benefits and boosting your growth?
Here are some tips to help you:
Find the Right 3PL Distribution Company for You
While working with a 3PL can help you grow your company, not all 3PL companies are created equal. As a result, you need to do your due diligence to find the right 3PL company for your needs and goals.
The best way to find a 3PL company is online. Simply conduct a simple search for a DTC 3PL. It’s important to look for 3PLs with experience in your specific industry since managing the logistics for a DTC eCommerce clothing business is quite different from managing the logistics for a B2B chemicals business.
Based on your online search results, you can now start verifying and vetting your 3PL contenders. For starters, make sure that each 3PL offers the specific logistics services you’re looking for. Not only that, but also make sure that each 3PL offers the types of services that you might need to add in the future as you grow.
For example, if you’re looking for a transportation-focused partner like RPM, make sure that they have the capacity and equipment that you need to transport your products from one place to another.
Next, you need to verify their qualifications. Check to ensure that they have any/all necessary certifications and licenses. Also, see that they don’t have any complaints on file with consumer organizations like the Better Business Bureau (BBB). Finally, check their online reviews and ask for references that you can contact yourself if you’re looking for more detailed information.
The last step involves reaching out to your final contenders to inquire about pricing and make sure that it falls within your budget. At the same time, keep in mind that you tend to get what you pay for when it comes to 3PLs, so be wary of very low quotes that might indicate low levels of service.
Using a Warehouse Management System: How It Works
One service that many 3PL partners offer that may be beneficial to your business is the use of a warehouse management system or WMS. A warehouse management system is designed to help businesses manage their inventory and supply chain fulfillment operations through quick and easy access to comprehensive information updated in real-time.
Here are just a few of the features offered by warehouse management systems:
- Warehouse design optimization
- Advanced inventory tracking
- Receiving and putaway
- Picking and packing
- Shipping automation and organization
- Labor management
- Yard and dock management
- Reporting and analytics
When it comes to actually choosing a warehouse management system, many people tend to prefer cloud-based tools that can be accessed anywhere and at any time. As an added bonus, cloud-based systems tend to be easier to install and cheaper to implement and manage as well.
At the end of the day, you need to choose a system that works for you, meets your needs, and is easy for everyone to use.
Conclusion
Managing a DTC company can be overwhelming, but the good news is that you don’t have to do everything on your own. Partnering with a logistics company like RPM can help take a lot of the work and stress off your plate so that you can focus on other priorities, like design and customer satisfaction.
So let RPM make your life easier with fast, easy, and convenient shipping with our network of over 40,000 carriers. Whether you’re in consumer packaged goods or food and beverage, RPM is here to help.
Reach out to a logistic services expert today for more information on how RPM can help you with your logistics.
Sources:
Guide to 3PL Logistics | Business News Daily
What Is 3PL and Where Do You Find a Provider? | U.S. Chamber of Commerce
What Is a Warehouse Management System (WMS)? | Forbes Advisor
