How Can Outsourcing to 3PL Help Your Business Cut Costs?

The cost of living crisis is dominating headlines. But, it’s not just individuals that are feeling the pinch. eCommerce businesses are, too. If you can identify with that last sentence, then keep reading, and we’ll tell you how outsourcing your fulfilment to 3PL can help your brand to cut costs and become more profitable…

The cost of living crisis and how it impacts your business

If you run an eCommerce business, then you’ve undoubtedly noticed that costs for all sorts of business essentials have been rising over the past six to 12 months.

Whether it’s your energy bills, the cost of materials, or your wage bill, it must seem like every part of your business is becoming more expensive to run.

You’re not alone.

According to a survey carried out by Nucleus Commercial Finance, 72% of business owners say the current cost of living crisis is a major concern regarding the survival or growth of their business.

The same survey also highlighted the key areas where rising costs are most pressing:

• Rising cost of energy.
• Cash flow.
• Employee retention.
• Transportation costs.

There are numerous reasons as to why costs are rising in these areas, but there are two overarching themes that have been identified as being responsible for rising costs.

The COVID-19 pandemic

One of the key drivers of inflation has been identified as the COVID-19 lockdowns of 2020 and 2021.

With the economy effectively being put ‘on ice’ for long periods of time, this resulted in very significant disruptions to supply chains, huge changes in demand profiles and more.

This has resulted in significant levels of inflation across the world – the UK is expected to see inflation of 11% by the end of this year – and as a result rising prices for a whole range of basic business inputs such as materials and goods.

Energy

With the introduction of the COVID-19 lockdowns, demand for oil and gas collapsed. This resulted in the cancellation of numerous large oil and gas projects around the world.

As demand for energy returned following the ending of lockdowns, we found that the energy industry was only able to offer constrained supply – resulting in higher prices for energy.

This curtailed energy supply situation was greatly worsened following the Russian invasion of Ukraine in early 2022. With Russia closing off major gas pipelines to Europe, the cost of energy has risen yet higher.

These overarching themes are the reason that eCommerce brands are facing rising costs in nearly every part of their business.

So, what’s the answer?

One of the key things you can do to help your business cut costs and increase your profit margins, is to outsource your fulfilment to 3PL.

Keep reading to find out more.

Why outsourcing your fulfilment can save your business money

If you’re an eCommerce business, then you’ll no doubt be aware that the process of fulfilment involves numerous inputs – inputs which cost you money.

Fulfilment also requires a significant knowledge base; something which can be difficult to develop when you’re focusing on the wider operational aspects of your business.

The solution to these problems (and more), is to outsource your fulfilment to what’s known as a third-party logistics provider. Below, we’ve set out the many benefits associated with doing this.

Expertise

The chances are, you’re an expert when it comes to the products you sell. But, are you an expert at running fulfilment at scale?

If you’re not, then it makes sense to outsource your fulfilment to a dedicated third-party fulfilment provider like ourselves here at 3PL.

Companies like 3PL do nothing but fulfilment for other companies. It’s their sole job to ensure that your fulfilment process is run as efficiently and effectively as possible.

By choosing experts to carry out your fulfilment, you’ll be reducing the number of costly mistakes that you’d incur if you tried to run all of your fulfilment in-house.

Better labour allocation

As you’re probably aware, running fulfilment operations in-house can be a rather labour-intensive affair.

Not only do you need people to process orders, but you need people to manage inventory, run the pick and pack process, maintain customer communications, arrange delivery and negotiate with couriers etc. There’s a lot to do!

By outsourcing your fulfilment to 3PL, you can allocate your employees to more value-add tasks such as marketing or sales, improving your revenue and profitability.

Reduced material costs

Customers expect orders they place with eCommerce stores to arrive perfectly packaged.

But, in today’s world of increasing materials costs, this can end up costing you a small fortune.

If you outsource your fulfilment to a third-party logistics provider, then you can significantly reduce, even eliminate, these costs.

A provider like 3PL will include the packaging of orders within their service. Plus, because 3PL provides packaging services to tens of other eCommerce brands, it is able to make use of economies of scale to purchase packaging materials at rates far lower than an individual brand could ever hope to negotiate.

The result is that you get packaging at far lower costs than if you were to try to buy it yourself.

Reduced fixed capital

If you attempt to run your fulfilment in-house, you’ll quickly find that much of your capital quickly becomes tied up in fixed assets.

For example, as you grow, you’ll need to invest in a larger warehouse for your inventory. You’ll need to invest in fixtures and fittings for the warehouse. You’ll need to invest in fulfilment software and tech to run the warehouse and associated fulfilment operations.

These things tie up your capital in assets which aren’t necessarily the best use of that capital.

By outsourcing your fulfilment to 3PL, you won’t have to invest your hard-earned capital in fixed assets, and instead can use it for more growth-oriented activities such as sales and marketing campaigns instead.

You’ll also benefit from economies of scale, too. Because a 3PL carries out fulfilment on behalf of multiple brands, you’ll benefit from having a large, modern warehouse for your inventory (which you probably couldn’t afford if you were running fulfilment in-house).

Lower transportation costs

With fuel costs being a major driver of inflation, the cost of transporting orders to customers is one of the biggest things that is cutting into the profits of eCommerce brands at present.

As you’ve probably found, couriers are being faced with much bigger fuel bills, and they are passing these costs onto you – the customer.

However, there is a solution. Yes, that’s right! Outsourcing your fulfilment to 3PL.

It’s about negotiating power.

At 3PL, we carry out fulfilment for multiple eCommerce brands, meaning we send hundreds (even thousands) of parcels from our distribution centres each day.

This means that we are able to negotiate very competitive rates from our pool of courier companies. These rates are far cheaper than an eCommerce brand would be able to negotiate on their own.

Thus, it makes sense to outsource your fulfilment to 3PL, and benefit from significant cost savings across every point of your fulfilment process!

Outsource your fulfilment to 3PL today

With the peak selling season nearly upon us, and little sign of the cost of living crisis abating, there’s never been a better time to outsource your fulfilment.

We work with eCommerce brands big and small to ensure their fulfilment is as cost-effective as possible, helping them to achieve higher revenues and better profit margins.

If that sounds like something that would work for your brand, then speak to 3PL today!

Discover more about 3PL’s eCommerce order fulfilment services now

For more eCommerce fulfilment, logistics and shipping advice, read the 3PL blog…

How to Choose the Best eCommerce Fulfilment Service for Your Business | When to Make the Switch From In-House to Outsourced Fulfilment? | A Guide to Omnichannel Fulfilment