When trying to increase online order volumes, retailers will primarily focus on optimising their sales and marketing channels.

Often overlooked is operational infrastructure. The storage, picking, packing, and distribution of your products can make a big difference to your overall online sales, customer retention, and reputation.

In this article we will cover what third-party logistics (3PL) providers do, how to find the right specialist, and what the future holds for e-fulfilment.

Finding a fulfilment service

There’s a wide range of fulfilment providers on offer in the United Kingdom. Finding the right one involves investigating each of their strengths and weaknesses, pricing structures, customer feedback, and integration ecosystems.

While some 3PLs specialise in lightweight fast-moving consumer goods, others prefer bulky items. Some 3PLs can help small businesses shipping 10-100 orders per day, whereas others require a minimum of 300.

When negotiating with a 3PL, it is essential to agree on which value-added services they will provide you, along with key performance indicators (KPIs), objectives and key results (OKRs), to establish deliverables that can be monitored on an ongoing basis.

These could be metrics such as order processing speed, customer satisfaction scores (CSAT and NPS), picking accuracy, WISMOs (‘Where is my order?’ queries), and even website conversion rate.

How eCommerce order fulfilment works

Once you’ve found the best 3PL for your needs, and signed your contract, the first step is customer onboarding. This involves integration with your sales channels (e.g. Shopify, eBay, and Amazon), and/or order management system (OMS), with the fulfilment centre’s warehouse management system (WMS).

This is for a number of reasons; to ensure the 3PL has your different stock keeping units (SKUs), stock levels, dimensions and weight, and also to calculate ongoing picking, packing, delivery and returns pricing. Integration ensures that when a customer places an order with you, all of the necessary data is passed on to the fulfilment house, and vice versa.

Onboarding also involves establishing lines of communication between you and the 3PL, such as technical support, account manager, and head of customer experience. Onboarding can also involve the 3PL providing the client a guided tour around their warehouse.

Finally, notifying your suppliers of your new (third-party) address, and integrating their systems with the 3PL, will allow the fulfilment provider to receive ‘goods-in’, ready to receive and place in specific picking locations.

Now that you’re set up, it’s time for your orders to start flowing into the warehouse. Once an order is received, the 3PL’s WMS generates a picking note, for the warehouse operatives to collect your order from single, or multiple stock locations, ready for packing.

At the packing station, the shipping label is applied, and items are arranged by carrier (e.g. DHL, Royal Mail, Evri), ready for collection. While some fulfilment centres cut-off their orders at 12pm, others are offering later cut-offs, as late at 10pm, which means retailers can deliver on their next-day shipping promise, further into the evening.

Analysis by eCommerce fulfilment specialist Zendbox found merchants who don’t offer late order cut-off times, are “missing out on order conversions, and experiencing higher customer acquisition costs (CAC)”, so checking the order cut-off time different 3PLs provide, can be crucial to acquiring and retaining more customers.

The different types of logistics outsourcing (and insourcing)

Logistical infrastructure ranges from first, through to fifth party. First party logistics (1PL) is when a retailer carries out its own deliveries, with its own vehicles. Second party logistics, or ‘2PL’, is when a merchant works with courier partners.

3PLs generally refer to fulfilment warehouses, but it can be argued that carrier management firms are a blend of 2PL and 3PL. 4PL providers reach deeper into the supply chain, managing elements such as packaging sourcing, and even manufacturing.

Finally, 5PL providers are more strategic and can make executive decisions on behalf of the multichannel retailer client, deciding on elements such as outsourcing budget, and negotiating contracts and deliverables on behalf of the first party.

Whichever setup, it makes sense to diversify risk and work with a range of UK and international carriers for parcels, packets, mail, and bulk B2B pallet shipments.

Ecommerce fulfilment case study: Complete Strength

Previously, this workout supplements retailer struggled with the stress, costs, and time constraints of processing orders in-house, and was therefore motivated to seek out the support of a Shopify fulfilment provider. Founder, Rob Whitfield, explains how making the move to a 3PL enabled him to boost his conversion rates with an ultra-late order cut-off time, and sell products across the UK, and overseas:

“The majority of our orders will come in of an evening. When processing orders in-house, we had an earlier cut-off time, and missed out on sales. Now we’ve got a later cut-off time with our fulfilment house, we get less abandoned carts. We have also noticed customers are shopping with us simply because of the later cut-off time.”

The future of e-fulfilment

The eCommerce fulfilment services market is predicted to nearly triple in size by 2030. Due to this surge in demand for fulfilment centres, providers are having to diversify their offerings in order to stand out from the competition, and increasingly bestow value-added services such as customs clearance, outsourced customer service, bespoke packaging and product personalisation.

As consumers become increasingly comfortable with shopping online, demanding fast order processing, and speedy yet sustainable courier services, along with sophisticated in-flight delivery options. Fulfilment providers will need to leverage automation, along with emerging technologies such as AI, and IoT, to drive efficiencies.

3PLs will need to continuously pivot and evolve, to remain relevant. With Amazon, for example, using robotics in its warehousing facilities, automation and robotization will become more prevalent, further accelerating order processing, returns and inventory management.