3PL Providers: Beyond Drop-Shipping

Jan 31, 2007 8:52 PM  By

As businesses develop, management teams must continually implement new strategies and ideas to help manage this growth. In many instances this involves the outsourcing of the shipping and fulfillment departments to third-party logistics (3PL) provider. These providers typically offer a set of services that cater to the needs of midsize and large companies that require multiple packaging, shipping, and storage solutions.

When a multichannel merchant decides to shop for a 3PL provider, it may figure that almost any fulfillment house is qualified to provide a drop-shipping solution. In fact, the real benefits of drop-shipping services lie in the provider’s software and its ability to provide enhanced services to a merchant’s consumer and business customers as well as the ability to provide maximum integration into the merchant inhouse enterprise resource planning (ERP) system.

Third-party logistics providers with well-designed drop-shipping software can seamlessly offer enhanced services to a merchant’s customers. The software allows drop-shippers to effortlessly focus on providing value-added services that reach beyond typical shipment-tracking capabilities. Many of these add-on services focus on the customization of shipping labels: gift messages imprinted directly on the label; client-designed custom labels; providing customer identification information directly on the label, which can be useful when communicating with the merchant’s customer service department.

Many times 3PL providers can offer merchants the ability to communicate directly with the merchants’ customers using an e-mail alert system. This can lower a merchant’s customer service costs by providing automatic notification when items are packed, shipped, or backordered. Another important feature that many 3PL providers’ software can offer is the ability for a merchant’s customers to choose a shipping method based on shipping rates and delivery times.

Business-to-business merchants who are shipping to resellers must often adhere to specific guidelines to avoid expensive chargebacks and other related fines. Shipping compliance can in fact become a significant issue for b-to-b merchants deciding to outsource fulfillment. Fortunately, drop-shippers with a well-designed shipping system can easily integrate routing and labeling guides directly into the merchant’s shipping profile. Third-party logistics providers that use the most advanced shipping systems can even build shipping profiles to follow very detailed and specific instructions for each of its clients.

Before choosing a fulfillment house, you must understand the 3PL provider’s ability to export data from its shipping system into your ERP system. You should plan to import as much data as possible. This will allow access to accurate inventory levels and real-time shipping data, which can then be passed through to your sales and customer service departments for better customer service and the opportunity for increased sales. Integrating a 3PL provider’s shipping system with your inhouse ERP system also minimizes, if not eliminates, duplicate data entry, which creates labor savings and increased accuracy.

Kevin Faeger is president of OutBound Shipping System, a St. Louis-based provider of customized multicarrier shipping systems.