Determining the Cost Benefit of 3rd Party Logistics
Posted by AMS / Friday, February 12, 2021
AMS Fulfillment is a full-service third-party logistics company (3PL). A 3PL is a specialist company that provides a range of distribution, storage, transport and fulfillment services to customers. The list of services on the AMS website is quite long – Fulfillment and Distribution, Order Management, All Things Amazon, Order Shipping, Pick / Pack / Ship, Kickstarter Fulfillment, Wholesale Product Fulfillment, Direct to Consumer Fulfillment, Packaging and Complex Assembly, Marketing Materials Distribution, Inventory Management, Returns / Refurbishment, Logistics Services, and Fulfillment Consulting.
We are a Full Service fulfillment company, which means we provide another service as well – administrative support. This is for clients who wish to completely focus on product development, sales and marketing while minimizing the need to hire a Back Office staff to administer their business. We are the Back Office. It’s called Business Process Outsourcing (BPO).
The question is often asked… what is the cost comparison? If a company is currently doing its own warehousing and fulfillment, would it make sense cost-wise to hire a 3PL company. In choosing a 3PL, companies should expect to 1) reduce the cost of shipping, 2) have far more flexible warehouse space and staffing to deal with seasonal and other ups and downs, and 3) receive the benefit of well-trained employees, a safe warehouse and advanced technology.
A recent article in Multichannel Merchant goes into detail on how a company would do a cost comparison. It gives specific steps to take in order to accurately determine the benefits of using a 3rd party fulfillment company. We hope that readers will enjoy the article below.
3PL vs. Internal Fulfillment: Comparing Costs
“For some ecommerce and multichannel companies, using third-party fulfillment (3PL) can be a viable alternative and provide high customer service as an option to internal fulfillment. As we consult with clients to assess the 3PL option, the burning question is this: “how will it compare to my internal fulfillment costs?”
“In order to get an accurate apples-to-apples comparison, you have to be sure to use fully loaded costs for both internal fulfillment and 3PL. Internal costs should include direct and indirect labor, facilities costs and utilities, packing supplies, management, IT and communications allocations and benefits.
“In comparison, 3PL providers generally base their invoicing on services and types of transactions (e.g., picked order and line-item charge), activities performed, space used, value added services (e.g., kitting) and agreed-upon service levels.”