3PL and Order Fulfilment for Start Ups; Good, Bad, or Mad?
Whether you’re thinking about starting an e-commerce business, or if you’ve been selling products for a while, you might be considering employing a 3PL (third party logistics) provider to look after your warehousing, shipping, and fulfilment.
At PDX Logistics, we have worked with several start up companies. It’s a part of our business that we really love because it’s utterly infectious working with anyone who is enjoying the success of their ambition, innovation and energy spent on getting an idea out there and who are working hard on driving it forward. It’s where we were 25 years ago!
However, it is impossible to ignore the reservations some burgeoning business owners have when considering whether to outsource their order fulfilment to a third party or keep things ‘in-house’ – which is why we called this blog, ‘…Good, Bad, or Mad?’.
For example, here are just a few comments from individuals that we picked up from small business forums on the web regarding 3PL for start-ups. Perhaps you share some of their feelings?;
“Be careful using an order fulfilment company to start off with, it will be very hard making enough profit to cover your costs and a fulfilment companies cut, especially selling on Ebay with their charges”.
“Personally I would never ever consider [outsourcing fulfilment] as a start to my business, its lazy. You are also putting the running of your business in somebody else’s hands, which defeats the point of it being your business”.
“It will be more expensive, your labour is essentially free to start with, a fulfilment houses isn’t”.
“You wont get the service you would like and need as a start up – small fish in big pond”.
“Why go to all that trouble of researching/appointing a fulfilment house, when your time is needed on getting your new business off the ground? The investment in time in appointing a fulfilment house wont be returned for some time”.
“If your business is brand new, you may not get credit terms with a fulfilment house, so then you will have to pay upfront for costs that you don’t need to incur! Cash is king, so why deplete your cash reserves at such an early stage?”.
It just goes to highlight the pressure and nervousness that surrounds captaining a start up business. We appreciate it is hard making a multitude of important decisions without being worried about the impact one false step could have on the outcome.
But the reasons why somebody would want the pick, pack and dispatch aspect of their business contracted out is not “madness” or “bananas”. It’s just not for everyone.
If you are struggling with cash flow you might be better off handling things in-house. Sometimes you have more time to spend than money. But if your business is growing quickly and you have the cash on hand to outsource, explore the potential of third-party warehousing and order fulfilment.
Consider, not least the cost balance of warehousing / storage, stock insurance, packaging materials and their storage, packing stations, packing staff, courier agreements etc. (the list goes on )….all of those responsibilities disappear when third party fulfilment is used. Yes, there is a cost but it has to be balanced against the financial costs and the price of sanity of doing it yourself.
There is an assumption that because someone charges for a service it must be more expensive than doing it yourself and anyway, ‘they wouldn’t take the same amount of care’ that you would yourself. In some cases this can be true, but if you have a growing business to run, your time shouldn’t be valued as ‘free’ and you can avoid working with a fulfilment company you don’t trust. Take proper account for your time and trust your choices and the maths often sway (heavily) in the other direction. At PDX, we offer bespoke and flexible terms of business to those who require it and we take every care and responsibility for your business that you would expect.
If you are an online retailer, order fulfilment isn’t the dirty side of what you do, it is what you do.
Whilst we understand that there is no replacement for knowing your business inside out, we have found time and time again that our clients have benefited from trusting our professional service and experience and found their time has been better spent on marketing and building their business rather than packing orders.
Our advise would be to bite the bullet and open a conversation with a third party logistics provider like us. You’ve nothing to lose and you may find us a perfect fit and make a lot more sense to your business and your cash flow than you realise.
Top Tips to Start Ups;
1. Avoid the big boys at all costs as they really won’t care and you won’t matter to them.
2. Try to find someone that specialises in your business if possible. If you sell technical goods, try to find someone who has experience fulfilling that type of customer.
3. If it’s not possible to find someone with experience in your own products at least find someone that specialise in your business area. So if you are a B2B, find someone who warehouses and fulfils for other B2B’s. Its a completely different game fulfilling B2B and B2C.
4. Don’t be tempted to choose a company based solely on price. Although price is important, finding a company that is a good fit is just as important.
5. If you’re not sure about whether you’re ready to make the switch to third-party warehousing and fulfilment. As a potential customer, you can and should ask a lot of questions before choosing a company to work with.