In defense of 3PLs

This is a rant.

I was recently listening to a podcast where they had a section called “Going to War with your 3PL.” The bit was entertaining and funny but really highlighted the gulf that exists between brands and their fulfillment center.

It is so easy to dump on fulfillment providers and to be honest some deserve it some of the time, but typically the issue is a mix of bad fit and lack of empathy.

If it was so easy you’d be doing it yourself

Let’s suppose you’re right and your 3PL sucks and you decide to just do it yourself. If you’re a brand doing even modest volume (500-1000 orders per day), what might that look like?

First, you’d need to find some space that is secure, has a dock door, and is in a location that makes sense for your business. You’ll have to be sure that you have the right amount of space for your inventory; too much and you waste money, not enough and you end up making dumb decisions about where things go.

Second, you’d need to have someone who is nearby and available the majority of the week who also knows where things are, can coordinate inbound shipments, keep track of finances, publish reporting, and who can answer your questions on a regular basis. What if that person gets sick or leaves or goes on vacation? You probably will need 1-2 more. Shoot, now you need some sort of system of record like a WMS.

All of these costs so far are fixed costs regardless of how many items you ship.

Cool, now you need to pick orders. Your first few people don’t have much extra time to print off customer orders, get the inventory from your racks, replenish once a box is empty and do a quality check before taping those up so do you start hiring more people to just do this? Wait- your volume is inconsistent throughout the year? Marketing has an unexpected viral moment and you HAVE to deliver. Well, if you hire a bunch of extra people you will end up with periods of time where they are being paid to stand around. With more people comes more issues around vacation scheduling, personal health problems, never ending training, and dealing with the drama of who is dating who.

As your headcount starts to swell your finance team is naturally going to push to pay people less and to get them do more. This will be unpopular. You’ll then start looking at hiring temporary workers who are available on a day by day basis. You’ll have to cut back on making origami out of the packing list or super involved kitting in an effort to simplify the job for people you’ll potentially have to train every day and who only have to care for that long.

Well, if we’ve made it this far, now we need to figure out how to get the packages to the carrier. It sure would be convenient if they came and picked up. They are willing to do that for a few boxes but the local brown truck comes by your area at 1pm. That’s not great unless you want to run your warehouse (and all that cost for 3-4 hours a day). You look at getting a drop trailer for them to pick up in the evening. Turns out they’ll only do that if you guarantee a certain amount of volume each day that roughly equals all of your shipments. Looks like you won’t be able to rate shop against different carriers after all. Dang it! - the contracted rates you get directly are higher than what you were paying your 3PL inclusive of their margin!

To lower your rates or increase your efficiency you consider doing some work for other brands… but, wait, now you’re a 3PL!

My wife and I love the idea of gardening, but have found that a $45 tomato tastes the same as a $0.50 tomato.

They say you can’t put a price on empathy but I think we get close in fulfillment.