5 Things to Know Before Selecting a Fulfillment Center or 3PL for Your E-Commerce Brand: Part 2
This is the second of a five-part series. Read Part 1 here.
After you have figured out how a fulfillment center manages and prices small parcel shipping, you need to understand its market specialization. As cliche as it sounds, not all 3PLs are created equal – capabilities and specialization can vary widely for fulfillment companies, even ones that market themselves similarly.
The fulfillment center’s specialization will show up in how they price, what services they offer, what carriers and service classes they offer, how they typically store products, what certifications they have or highlight, where their locations are, and more.
There are unique facets to various product categories in e-commerce that make each category unique from a fulfillment perspective. Some products sell well in colder climates or near coastal areas. Some products, like apparel, typically have high SKU counts with more complexity and high return rates. Shelf-stable food products typically have high logistics costs in terms of a percentage of the average order value (AOV) with the potential for B2B logistics needs as well. If Amazon (FBA or FBM) is one of your major sales channels, you need a 3PL that understands the specific nuances of selling through Amazon and incorporates its requirements into its SOPs (standard operating procedures).
Many 3PLs will promise during the sales process that they are experts in something that they really just aren't. (It's hard to find a 3PL that doesn't say it's an Amazon expert, for example.) Shipping errors, long lead times and retailer compliance issues (or worst of all, account suspension) are common repercussions of a fulfillment center using your brand as a guinea pig to get into other product types or to fill the void left by the recent loss of a large customer. Numerous factors can make your brand a good fit or a bad fit with a particular fulfillment center, and it's one of the most important things to figure out. Cost should actually be a secondary consideration to fit -- the wrong fit can cost you hundreds of thousands later, or risk your company facing financial or inventory losses it can't recover from. You could unexpectedly have to incur the costs of moving to a different 3PL, anger your customers, lose inventory or have your account suspended or canceled with a major retailer or marketplace such as Amazon.
Figure out what the 3PLs you are talking to actually specialize in -- ask questions to test their expertise. Ask for customer references that have similar products to yours. If necessary, check licensure or certifications. If the 3PL tells you they don’t have a specialty, well -- that may be a sign that you are talking to a company that just doesn’t specialize in your type of product. (At the very least, a truly good 3PL generalist should have product categories it won't do.)