Blog Posts 3PLs Help to Combat Rising Fulfillment Costs
U.S. ecommerce grew 44.5 percent in the second quarter of 2020, and the upward trend is expected to continue. While retailers and ecommerce companies undoubtedly welcome the sales growth, it does come at a price – an associated increase in order fulfillment costs.
Challenged to drive costs out of their fulfillment operations, many companies are turning to third-party providers.
How Can a 3PL Reduce Order Fulfillment Expenses?
3PLs are well equipped to help reduce costs in three critical areas.
- Warehouse Space
Ecommerce growth has increased demand and driven up costs for light-industrial warehouse space. In the past five years, rent for properties of less than 120,000 square feet has increased 30 percent, according to commercial real estate firm CBRE.
Utilizing a 3PL with established distribution centers (DCs) can be a cost-effective alternative to investing in high-priced warehouse space and building it out to suit ecommerce requirements. Shared-space facilities even have the flexibility to handle fluctuations in order volume – a valuable option given current marketplace uncertainty.
- Labor Needs
Ecommerce fulfillment tends to be more labor intensive than traditional warehouse operations – requiring as much as three times more labor to keep things running smoothly.
With an established workforce and ready access to temporary staffing, a 3PL can more easily adjust to peaks and valleys in staffing needs, so you only pay for the labor you use. 3PLs also can optimize processes and incorporate automation and robotics solutions to increase productivity.
- Parcel Shipping
Rate increases and new surcharges have significantly impacted parcel shipping costs this year.
3PLs can utilize technology solutions such as order management systems (OMS), parcel analytics and rate shopping software to optimize parcel management and minimize costs. Strategic network configuration can also be helpful.
For an animated look at how a 3PL can help to fulfillment costs, view Saddle Creek’s new infographic.