Mistakes to avoid when outsourcing your fulfilment: No 1. Buying Cheap

Not all third party fulfilment services are equal and you can’t just look for the cheapest cost per pick or delivery per parcel service and think that this will be the best.

Many people will see store, pick, pack and deliver services as being a basic or commoditised service. As such, it is tempting to think of all third party logistics (3PL) providers doing pretty much the same thing and, therefore, the only differentiating factor is price. With such a mindset the cheapest is, naturally, the best. Nothing could be further from the truth…….

THE TRUTH
3PL is competitive market so if a business has been around for a while and its rates are a bit higher than a competitor’s that means there will be some differentiation in service. There will be a reason why they are seemingly more expensive, otherwise they would not have a right to be in business.

The difference will almost always be in the quality of the service. This could be reduced error rates, more care in packing, additional services that are built into the cost, or just better-quality well-paid staff who care about what they do as a result. It all makes a huge difference to the service you will receive and, ultimately, the value you get.

Remember being good value is very different from being cheap. Some very expensive items can still be much better value than their cheaper and worse counterparts. With something as essential as shipping your goods to your hard-won customers we think the focus should be on overall value rather than raw cost. Those that buy on price normally regret it.

A GRAVE ERROR
To think of 3PL as a commoditised service is, in our opinion, a grave error. To think of it as a basic and perhaps even unskilled part of the value chain is also erroneous. We just need to consider how important the service is to see the folly of such thinking. The 3PL is the “little bit at the end” of the whole process. It’s the final bit that hands over your goods to your customers. All the other parts of your value chain rest or fall on getting the goods handed over to your customer. All the time you spend sourcing or manufacturing your products, researching customers and markets, putting together your website, building and executing a marketing plan, processing orders and building up your customer base all can be for naught if you don’t hand over the goods in a timely and professional way. This “little bit at the end” is not something you want to treat as a commodity to be purchased as cheaply as possible.

WHAT IS THE TRUE COST OF FAILURE?
Asking the question: How cheaply can I get my 3PL? is the wrong question. The right question to ask is: “What is the cost of failure?”

If your 3PL provider messes things up, what will that cost you? Sure, there is the cost of redelivery or taking back the product that was damaged or delivered incorrectly. That costs some time and money but, to be honest, this is relatively small fry when compared to the potential reputational damage caused. In today’s online, social media world, a few poor reviews left by customers annoyed because their product was delivered late or damaged can be incredibly costly. A quick
scroll through customer review sections will reveal that many complaints are not about the product itself but instead are about late deliveries and the like. So, all the hard work of creating and supplying good products results in a poor review because “the little bit at the end” goes wrong.

That “little bit at the end” is, as it turns out, quite important and quite costly when it isn’t done well. The savings you might make on choosing a cheap provider will quickly evaporate if the service is poorer. The true cost of failure is higher than one might initially calculate given the propensity for customers to complain and down rate suppliers that let them down.

All that being said, you do still need a supplier that has sensible pricing. This missive is not in any way a suggestion that your chosen 3PL provider should have cart blanche to charge whatever they want. As stated above, it’s a competitive market so pricing will need to be sensible but if the price is too good to be true, or the provider spends their whole time pitching you on how cheap they are, then exercise extreme caution.

Cheap is not the same thing as good value!