Fulfillment companies. Third-party logistics warehouses. Order fulfillment service providers. Why would you possibly need one of these for your drop ship business? Your order fulfillment needs are already being handled by your drop ship supplier – orders are shipped directly from your manufacturer, wholesaler, supplier, or retailer as they are placed by your customers.
You aren’t in need of warehouse space for inventory because you don’t carry inventory. And drop shipping is so widely used because of the multiple advantages versus a fulfillment strategy (low up-front investment, easy to implement and scale, lots of products to choose from, great for testing demand, ability to focus on other functions of the business such as marketing, etc.).
So how will 3PL companies (third-party logistics), also known as third-party fulfillment service providers, be beneficial to your dropshipping model?
This article covers the differences between the dropship and fulfillment models, scenarios in which you could benefit from the services of solid, reliable 3PL, the key characteristics of a reliable 3PL partner for drop shippers, how to find the best 3PL companies, as well as the top 5 3PL warehouses for drop shipper scenarios.
After reading, you’ll be armed with the knowledge to utilize the best dropshipping fulfillment and shipping strategies to supplement your overall drop shipping goals.
If Your Drop Ship Model Isn’t Broken, Then Don’t Fix It
Dropshipping affords online sellers tremendous power to offer products to customers quickly and without the hassle of managing inventory and shipping orders.
For many sellers, coming up with a large sum of money to purchase a bulk of inventory is out of the question, as is spending any additional time with logistics. In these cases, outsourced fulfillment services simply aren’t needed.
If you’re happy with your dropship strategy, there’s really no reason at all to consider rocking the boat. Don’t change something that is functioning well!
If, however, your business is encountering issues in the supply chain, switching to a fully outsourced 3PL warehouse model may be worth considering. Examples of reasons to switch include:
· A need to reduce the cost per unit of your product by either increasing your purchasing power or by cutting out a layer of subcontracted work
· Loss of sales due to out-of-stock scenarios
· Problems with late or inaccurate order deliveries
Thankfully, most drop shippers are quite adept at fulfilling orders in a timely fashion, and most suppliers have adequate stock to avoid out-of-stock issues.
So, unless you’re looking to switch to a fulfillment model whereby you purchase bulk inventory from your supplier, store it at a warehouse, and ship it to your customers yourself or via a 3PL warehouse, an outsourced fulfillment center is better used in conjunction or to supplement your drop shipping model.
In other words, using a 3PL service on a limited basis under certain circumstances will help your business perform better and create a unique competitive advantage.
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Best Use Cases for Using a 3PL to Supplement the Drop Shipping Model
Because most businesses use a drop ship model in large part for ease of use, avoiding any unnecessary time spent on supply chain activities is extremely important.
But there are scenarios where drop shippers either can’t provide logistics services or aren’t best suited to help – which leaves you with the decision to either handle it yourself or outsource with a 3PL.
If minimizing time spent on logistics is important, outsourcing to a 3PL is critical in several instances: handling returns, fulfillment for high opportunity products, dealing with spikes in demand and seasonality, forecasted challenges in the macro environment, relabeling and shipping to international clients in bulk, shipments that require additional kitting, cases where there is a true time sensitivity for product delivery, and enhancing the unboxing experience.
Many drop shippers will not handle your returns. 3PL warehouses offer a viable solution for receiving returns into their warehouse, inspecting the returns for damage, destroying damaged products, inventorying any resalable products, and shipping out additional orders as needed using the returned stock. By outsourcing with a 3PL, you don’t have to handle this time-consuming task.
High Opportunity Products
Not all products sell at a high level, but usually, a small subset of your product mix will have great success – selling at a higher rate than other products. For these products, it might make sense to purchase in bulk, driving down the per-unit cost, and fulfilling and shipping orders using a 3PL warehouse.
Spikes in Demand and Seasonality
During certain times of the year, your sales will likely spike. For example, the holiday season is the peak season for many merchants. During these spikes in demand or seasonally high periods of sales volume, using a 3PL company to store additional products will not only drive down per-unit costs but also help meet delivery timelines and increased sales volume.
Forecasted Challenges in the Macro Business Environment
Enduring a catastrophic pandemic over the last few years has humbled many businesses, reminding owners and operators that outside events can have a significant impact on day-to-day operations.
Once outside environmental changes have been identified, purchasing excess stock may be the best course of action to avoid supply chain issues and keep the business afloat. Some companies that have been significantly impacted by COVID over the last few years have made it a standard business tactic to carry excess inventory to avoid potential hiccups or major catastrophes alike.
Relabeling and Shipping to International Clients
Sometimes, users of drop shipping services need the product to be delivered without any vendor labels that would identify where the product was purchased from, so that customers can’t source the product themselves.
Often, this occurs when customers are purchasing in larger quantities, oftentimes to forward to domestic or international customers.
A 3PL warehouse can receive product from your drop shipper, strip it of any vendor labeling, relabel it if necessary, and forward internationally if needed. Some 3PL warehouses even specialize in handling bulk projects of this nature with quick turnaround times.
Shipments that Require Additional Kitting Services
If your product needs to be bundled together with another product from a different drop ship supplier, a 3PL company offers a viable solution. Simply put, the 3PL would receive the products from the various suppliers, kit them together in bulk, and forward them to your customers.
Time Sensitive Product Delivery
3PL services are a great option when time matters. Especially in cases where drop shippers are overseas, a 3PL can be used to minimize delivery timelines and address customer issues related to quick receipt of goods.
To avoid any delays, wholesale orders can be placed and then a 3PL can be hired to warehouse, ship, and fulfill. This allows the company to deliver orders quickly, in a few days, as opposed to a few weeks or months.
Enhancing the Unboxing Experience
Finally, the unboxing experience is one area where you have a great deal of contact with the customer (and the opportunity to make a connection). It is also the area as a drop shipper that you have the least amount of control.
The assistance of a suitable 3PL can help you add those personal touches – like thank you notes to each order – that your current supplier does not have the capability to perform. The unboxing experience is where you can distinguish yourself from the competition but is a challenge for many drop shippers. 3PLs offer a way of elevating your unboxing experience.
Many 3PLs offer custom packaging and unpacking services including branded boxes and personalized services.
Whether you are looking for the addition of thank-you stickers or would like to add a plastic wrap layer before shipping label application – many 3PLs offer special services that are greatly appreciated by clients.
Key Characteristics of a Reliable 3PL Partner for Drop Shippers
If using a 3PL makes sense for your drop shipping strategy, you will want a specialized order fulfillment service provider that offers the services you need. Not all 3PLs are created equal, and only a small percentage of fulfillment services will be a proper fit for the unique challenges of a drop shipping model.
In fact, searching online for a fulfillment company most likely won’t unearth a lot of solid options, because most 3PLs don’t focus on supporting the drop ship model. Therefore, it pays to know what to look for when choosing a 3PL for drop shipping support.
The best potential 3PL matches for your drop shipping business will most likely have the following characteristics:
· They will be smaller, regional warehouses
· They will usually have 1 regional location as opposed to multiple warehouse locations
· They will focus on smaller business fulfillment solutions
· They will have a much more competitive and aggressive set of pricing
· They will have a mindset of helping customers with smaller monthly order volumes, oftentimes without any minimum monthly order volume limitations
· They will have a flexible set of fulfillment service offerings, including kitting, labeling, and returns handling
How to Find the Best 3PL for Your Drop Shipping Business
You could perform an internet search for a 3PL for your drop shipping business because there are scores of reviews, ratings, and rankings of order fulfillment service providers and third-party logistics service providers.
But unfortunately, it won’t likely be an accurate list of 3PLs that are best suited for your drop shipping operation, nor will it be a dependable list because of the way that they are ranked.
You will be viewing lists that appear highest in Google search engine results. The names of 3PL’s that you are going to see won’t necessarily be the best ones suited for drop shippers or are interested in helping smaller sellers scale – they are the ones that have paid the most marketing dollars to appear high in search results, and they won’t necessarily offer the features a drop shipper could use.
Big marketing dollars spent isn’t a bad thing, it just means most of the time, they are looking for large deals and ongoing fulfillment scenarios, rather than a supplementary service for your drop shipping business.
Additionally, the top fulfillment companies that are commonly featured on lists of “best fulfillment companies” don’t always have services that will directly benefit a drop ship company. They just don’t feature smaller companies that are as competitive in price and service.
Rather than using the internet drive “top lists” for the best 3PL service for your drop shipping business, there are a couple of more suitable solutions:
· Utilize more targeted keyword searches online, such as “small business 3PL fulfillment services” or “best fulfillment companies for drop shippers”. But be careful – even these searches may generate results that aren’t truly the best match.
· Utilize drop shipping resources and forums to find non-competitive drop shippers that use 3PLs and ask them for a referral. Oftentimes the best source for a 3PL reference is someone that has had a stellar experience with a 3PL themselves.
· Tap into a 3PL matching service – some businesses specialize in matching you with the best 3PL and will know precisely which company that is best suited for your needs. In this case, be cautious of any referral businesses that charge you for the matches or passes on a layer of commission for the referral.
· Check below for a few options that provide stellar service for drop shippers.
The Top 5 3PL Warehouses for Drop Shippers
Need a few options to kickstart your search? The below five companies check all the boxes for drop shippers – they work with small businesses, have competitive pricing, are smaller in nature themselves, have a very flexible set of services they offer customers, and have compiled great reviews online.
ShipBots is a fulfillment service provider with one main warehouse in L.A, which is helpful for receiving inbound products from overseas quickly. The company is known for speedy shipping to most of the lower 48 states. Though international shipping is available, it does not have centers located outside of the U.S.
ShipBots offers dedicated customer support to quickly handle your shipping challenges – shipping delays are common in drop shipping fulfillment. Chat windows and social media access give you fast customer care to resolve shipping and fulfillment issues.
ShipBots also offers discounted shipping rates, returns services, and Amazon Fulfillment preparation. Free services include warehouse receiving photos and claims management.
Based in Cincinnati, Ohio, Frankly Fulfillment operates from a 45,000 square feet warehouse space. Frankly Fulfillment promises full transparency on its pricing model and has secured discounted shipping rates with FedEx and UPS.
Frankly Fulfillment offers full-scale fulfillment services including special project requests such as shrink-wrapping, crowdfunding fulfillment, bundling, re-tagging, etc.
There are no set-up fees, no monthly minimums, no software fees, and no receiving fees. Pay per shipment only with fair storage fees – a 30-day free trial is offered along with customer support channels that include WhatsApp.
A Charlotte, North Carolina location gives Sweetwater Logistics the ability to reach 80% of the U.S. within two days. Founded in 2009 by President Steve Thomson, users of Sweetwater Logistics will experience high accountability because Thomson is the main point of contact, as well as a hands-on member that is actively involved in daily operations.
Sweetwater Logistics promises speedy fulfillment (99.8% of orders before 3:30 p.m. are shipped the same day they are placed) while focused on helping clients reduce costs while increasing orders.
Ideal for drop shippers with smaller sales volumes, there are no monthly minimums or contracts to sign. Your packaging can be used, or packaging can be provided, along with assembly or kitting services including specialized services like UPC label addition.
Sweetwater Logistics guarantees order accuracy: the cost of shipping wrong orders to the warehouse and shipping costs to send the correct item out – are covered.
ShipsRight is an e-commerce fulfillment and shipping service provider that offers to “package & ship your order in 24 hours or less”. Advertised as an on-demand, same-day order fulfillment service, ShipsRight is happy to work with customers with lower monthly shipping volumes.
ShipsRight offers return handling services. Though they ship internationally, ShipsRight offers competitive rates for small and lightweight packages shipped domestically.
Setup, receiving fees, and initial consultation fees are $0; pick-and-pack fees are $2-2.50 with no charges on most returns. ShipsRight offers one of the “lowest warehousing fees in the country” based on per-pallet or per-shelf quantities.
For drop shippers that are considering buying in bulk or using a 3PL service provider to store and fulfill orders from international suppliers, ShipsRight’s 24-hour packaging and shipping pledge could be your perfect solution.
Power Supply Chain Management
Power Supply Chain Management was founded in 2020 in Utah.
Power Supply Chain Management offers “full range logistic and fulfillment services”, including consolidation services that will consolidate orders for the same address and name, as well as international export services.
Customer support services include a dedicated account manager that is assigned to each client: this ensures immediate responsiveness, optimal order fulfillment, timely dispatch, and proper inventory management.
Receiving real-time updates on shipping confirmations and tracking is part of Power Supply Chain’s order tracking services. If you are looking for assistance with international orders.
Returns are handled with their return processing service which will manage your entire return process, whether you require re-stocking or disposal. Return tracking, returned shipment re-labeling, and return updates (as well as refusals/rejections) are managed by Power Supply Chain Management’s reverse logistic services.
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The Conclusion on 3PL Drop Shipping Options
A good 3PL can cut costs and save you cash – they are logistics specialists and have the power to secure cheaper deals on everything from transport to volume discounts.
Good 3PLs are scalable and flexible to your needs whether you are super busy or have a few orders a day. Choose a 3PL without an order minimum instead of spending time worrying about an expensive initial investment.
If you implement an outsourced order fulfillment strategy, make sure that you choose the best 3PLs and one that is reliable.
In doing so, you will supplement your overall dropshipping model in a way that could not only transform your business but also add a competitive advantage that separates you from the pack.