Benefits of 3rd-party fulfillment for B2B digital commerce

Working with a 3rd-party logistics (3PL) company to handle the fulfillment of orders is just one way B2B leaders are handling their digital commerce channels. In this article, guest writer Jake Rheude tells us why 3PL is the scalable solution B2B ecommerce leaders need.

Getting your B2B digital commerce site up and running can feel like the most important step in establishing your business. Yet, an ecommerce website does not itself make an online business. The Internet is filled with thousands of once-promising digital commerce companies that have faded into oblivion. 

There are many reasons ecommerce sites fail. One thing that you absolutely have to get right is the fulfillment process. The quality of your fulfillment tells your customers that you talk the talk and walk the walk. Working with a third-party logistics (3PL) company could be your best bet because fulfillment is essential to your business's survival. 

Many 3PLs do not just offer shipping but also warehousing, freight consolidation, and optimal inventory control. Here’s why working with 3rd-party fulfillment services is good for B2B digital commerce companies.

Ten reasons why 3rd-party fulfillment works for B2B ecommerce

1. Subject matter expertise

B2B order fulfillment looks like a fairly straightforward process. Once you get down to actually doing it, you start to appreciate the many nuances and complexities of controlling how efficiently you can get the product out. The average digital commerce business that opts to do its own fulfillment will be out of its depth for months at the least before it can have a meaningful grasp of the process.

Only a fraction of digital commerce stores possess a depth of fulfillment expertise of your average 3PL— typically only the largest like Amazon. As established industry players that move large volumes, 3PLs understand the process end-to-end and have favourable rates with carriers. This knowledge and network eventually translate to a better service experience for your customers.

2. Fulfillment infrastructure savings

Fulfillment infrastructure is expensive – from warehouses and equipment to labour and logistics technology. For a B2B ecommerce company, investment in fulfillment infrastructure can easily be your single biggest cost and one that takes years to recoup.

By working with a 3PL, you slash your fulfillment infrastructure costs substantially. You no longer have to spend large amounts of money upfront in creating an effective fulfillment process. Remember, you will be sharing the 3rd-party fulfillment service’s infrastructure with other businesses. Thanks to the economies of scale, the 3PL can afford to levy a relatively low service fee.

3. Speed

Customers have grown accustomed to rapid order delivery. This is particularly important for B2B commerce where buy orders may be for onward distribution to retail customers. While you may have a rational reason why your order takes two weeks to get to the buyer, your buyer may not buy your explanation if your competition does it in a week. Speed is critical.

Behind quick order fulfillment though is a complex, well-oiled process that has taken years to develop. When you work with a 3PL, you can guarantee quick delivery by riding on their established, resilient distribution network.

4. Distributed locations

The closer your customer is to your warehouse, the less it costs to deliver your product to them. When you are doing your own fulfillment, you are unlikely to have more than a couple of warehouses in your distribution network. Now, imagine if all your warehouses are in North Carolina but a number of your orders come from California. It’s going to be difficult to offer free shipping without running under losses.

A good 3PL service provider will have warehouses spread in multiple locations across the country. With such proximity, they will ship your product at a low cost irrespective of where the buyer is. This allows you to offer free shipping without wiping out your profit margin.

5. Scaling on-demand

When fulfillment services are all handled in-house, scaling fulfillment infrastructure can require weeks, months, or even years of planning and investing. This impedes your ability to take advantage of spikes in demand such as during seasonal peaks.

3PLs serve B2B digital commerce businesses of different sizes. You can go as big or as small as you want in terms of volume and the type of fulfillment services you need. For instance, a small B2B ecommerce company may choose to only outsource warehousing and shipping. A larger business on the other hand may be keen on a more comprehensive package that manages all or a large part of its supply chain.

6. Optimized inventory

Inventory can hoard your cash. Yet, inadequate inventory would be catastrophic to your business. It comes down to striking the right balance.
 
3PLs have mastered that art. No overflowing warehouses or obsolete items or unexpected stockouts. Your inventory is maintained at levels that are consistent with demand.

7. International shipping capability from the get-go

A key advantage of digital commerce is making your products viewable and accessible to prospects wherever they are around the world. Shipping in-country is hard enough; once your product crosses international borders, you must contend with a higher level of complexity. 

If you do not know what international shipping options are most viable for you, your costs may be so high as to render your product unattractive to overseas buyers. Contracting a 3PL means you are ready to ship internationally at competitive rates from the get-go.

8. Fewer errors

Fulfillment isn’t a fully automated process. Even for organizations like Amazon with the most sophisticated logistics, there is some manual intervention. Where humans are involved, there is always a risk of error.

Moving your fulfillment process to a 3PL does not mean the end of shipping errors. Still, 3rd-party fulfillment services have perfected their process through numerous orders and by working with diverse clients. You are less likely to face order errors than when handling the fulfillment on your own.

9. Compliance with shipping laws and regulations

Some products must comply with special shipping laws and regulations. These include heavy cargo and hazardous materials. It can be difficult for you to keep abreast of the changes to such requirements. You could unknowingly break the law.

Shipping is a 3PL service provider's core business. They are in the know-how of relevant laws. A 3rd-party fulfillment service rapidly alters its process whenever changes to these laws require it. 3PL companies are less likely to be non-compliant with special shipping laws.

10. Focus on strategic and growth-oriented processes

The more time and employees you devote to logistics, the less time your B2B digital commerce business has for more strategic and growth-oriented processes. Yet, it is these processes that drive your company’s profitability and create a steady pipeline of orders. 

As a digital commerce business, you want to invest as much time and money in marketing and other activities that drive business growth. When a 3PL service is taking care of your fulfillment, you are freed to devote time and thought to the thing you are really good at selling your product.

Wrapping up

The time and cost you require to close a B2B transaction are on average substantially more than that of a B2C sale. A B2B transaction itself is also of much higher value. The last thing your B2B digital commerce business needs is to have a prospect who believes your value proposition and orders your product but who later has an unpleasant experience with your fulfillment process. 

Handing over your fulfillment to a 3PL company can help you meet order demands, scale quickly and boost customer satisfaction. Before you opt for a 3rd-party fulfillment service, evaluate your digital commerce business and determine which fulfillment processes you are better off keeping in-house. Zero in on the fulfillment pain points and prioritize those best suited for transfer to a 3PL service provider. 

You could of course choose to outsource your entire fulfillment process to avoid the number of time-consuming handoffs though that does come at a higher cost. But the efficiency gains can make it more than worth it.

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Jake Rheude is the Vice President of Marketing for Red Stag Fulfillment, an ecommerce fulfillment warehouse that was born out of ecommerce. He has years of experience in ecommerce and business development. In his free time, Jake enjoys reading about business and sharing his own experience with others. top