Choose the Best Amazon 3PL Companies in 5 Steps
As your business grows, it’s natural to explore ways to optimize your fulfillment operations. This is where Amazon 3PL companies (third-party logistics) providers come in.
By having Amazon 3PL partners with a reputable 3PL provider specializing in Amazon FBA (Fulfillment by Amazon), you can further harbor a range of benefits and potentially streamline your fulfillment process.
What is Third-Party Logistics (3PL)?
Third Party Logistics Amazon refers to the outsourcing of logistics services to a specialized company.
These services can encompass a wide range of activities, including warehousing, inventory management, order fulfillment, packaging, shipping, and returns processing.
In essence, 3PL for Amazon acts as an extension of your business, handling the critical behind-the-scenes tasks that ensure your products get delivered to your customers quickly and efficiently.
By outsourcing these logistics functions, you can free up your time and resources to focus on core business activities such as product development, marketing, and customer service.
How does a 3PL work?
Here’s a simplified breakdown of how a 3PL typically operates for Amazon FBA sellers:
Inventory Inbound Processing
You’ll initiate the process by sending your products to the 3PL’s warehouse. Amazon 3PL service will receive your shipment, carefully check each item against your packing list to ensure accuracy, and then securely store your inventory in their designated warehouse location.
Inventory Management
3PL Amazon will manage your inventory levels using warehouse management software. This software tracks the quantity and location of each item in stock, providing you with real-time inventory visibility.
Effective inventory management is crucial to avoid stockouts and ensure you have enough products on hand to fulfill customer orders promptly.
Order Fulfillment
When a customer places an order on your Amazon listing, the 3PL receives notification electronically from Amazon.
Their warehouse management system will identify the specific items required to fulfill the order and generate pick lists for their warehouse personnel.
Experienced warehouse staff will efficiently pick and pack the ordered items according to your specific instructions and Amazon’s FBA packaging guidelines.
Once the order is packed, the 3PL for Amazon FBA will prepare it for shipment using the chosen shipping method.
Shipment Processing
The 3PL will handle all aspects of shipment processing, including generating shipping labels, manifesting shipments with carriers, and tendering packages for pick-up or drop-off at carrier hubs.
They will also electronically transmit shipment confirmation details to Amazon, ensuring your order tracking information is accurate within your Amazon Seller Account.
Return Management (Optional)
Many 3PL providers offer returns processing services. This can be a valuable time-saver, especially as your business grows and you manage a higher volume of customer returns.
The 3PL will receive returned items from Amazon, inspect them according to your return policy, and process them accordingly.
They may involve issuing customer refunds, restocking returned items into your inventory, or disposing of damaged or unsellable products as per your instructions.
When should you use a 3PL?
There are several factors that may indicate it’s time to consider a 3PL solution for your Amazon business:
Increased Order Volume: As your sales grow, managing fulfillment in-house can become time-consuming and resource-intensive. A 3PL can handle the increased order volume efficiently, allowing you to focus on core business activities.
Storage Limitations: If you’re running out of storage space, a 3PL can provide access to a wider network of warehouses, strategically located for faster delivery times.
Geographic Expansion: If you’re looking to expand to new markets, a 3PL with a nationwide or global network can simplify fulfillment across different regions.
How 3PL for Amazon Fulfill Orders
3PL providers specializing in Amazon FBA can integrate seamlessly with your existing Amazon Seller account.
They will receive order notifications directly from Amazon, pick, pack, and ship orders according to Amazon’s FBA guidelines.
This ensures your products continue to qualify for Amazon Prime Benefits like free two-day shipping.
Factors to consider when choosing a 3PL provider for Amazon FBA
Here are some key factors to consider when selecting a 3PL provider for your Amazon FBA business:
Experience with Amazon FBA: Choose a 3PL with a proven track record of working with Amazon sellers. They should be familiar with FBA fulfillment guidelines and best practices.
Warehouse Network and Location: Consider the location of the 3PL’s warehouses in relation to your target audience. Strategically located warehouses can lead to faster delivery times and potentially lower shipping costs.
Technology and Integration: Ensure the 3PL uses robust technology that seamlessly integrates with your Amazon Seller account and provides real-time inventory visibility.
Scalability: Choose a 3PL that can scale with your growing business. They should have the capacity and infrastructure to accommodate future increases in order volume.
Pricing and Fee Structure: Carefully compare pricing models and fee structures offered by different 3PL providers. Look for a transparent pricing structure that aligns with your budget and business needs.
Supply Chain by Amazon 3PL programs
Amazon third party logistics offer comprehensive fulfillment solutions, some sellers may require additional services beyond core storage and fulfillment.
Amazon Multi-Channel Fulfillment (MCF)
This program allows you to leverage Amazon’s fulfillment network for orders placed outside of your Amazon listings, such as those from your own website or other marketplaces.
Seller Fulfilled Prime (SFP)
If you choose to manage fulfillment yourself but still want to offer Prime benefits to your customers, SFP allows you to meet strict performance requirements to qualify for the Prime badge on your listings.
What are the Benefits of Using a 3PL Provider for Amazon
As discussed earlier, partnering with a 3PL provider for your Amazon business can offer a multitude of advantages.
Reduced Costs: 3PL for FBA sellers can help you achieve significant cost savings in several areas:
Discounted Shipping Rates: Due to their high-volume shipments, 3PL providers can often negotiate more favorable rates with major carriers, passing these savings on to you.
Optimized Inventory Management: Effective inventory management is crucial for controlling storage costs. 3PL has the expertise and technology to optimize your inventory levels, minimizing the amount of dead stock and ensuring you have enough products on hand to fulfill orders without incurring stockout penalties.
Reduced Labor Costs: Outsourcing fulfillment tasks to a 3PL frees up your internal staff to focus on other areas of your business. This can potentially lead to reduced labor costs associated with in-house fulfillment operations.
Improved Delivery Performance: Faster delivery times are essential for customer satisfaction and achieving 3PL Amazon fulfillment metrics for programs like Prime. 3PLs often have strategically located warehouses closer to your target audience, which can translate to faster shipping times and a higher customer satisfaction rate.
Scalability and Flexibility: As your Amazon business grows, your fulfillment needs will evolve. 3PL Amazon FBA provider can provide the scalability and flexibility to adapt to your changing requirements.
Enhanced Expertise: Reputable 3PL providers specializing in Amazon FBA possess in–depth knowledge of Amazon’s fulfillment processes, packaging requirements, and best practices. They can leverage this expertise to ensure your products are prepared and shipping according to Amazon’s guidelines, minimizing the risk of fulfillment errors or delays.
How to Choose Amazon 3PL Services Step-by-Step
Selecting the right 3PL partner of your Amazon business is a critical decision:
Start by clearly identifying your specific needs and requirements. Consider factors like your current order volume, inventory levels, desired delivery times, and budget constraints.
Once you understand your needs, research potential 3PL providers with experience in the Amazon FBA space. Look for companies with a proven track record, positive customer reviews, and a strong reputation within the industry.
Shortlist a few promising 3PL providers and request proposals (RFPs) outlining their services, pricing structures, warehouse locations, technology integrations, and scalability plans.
Carefully evaluate the received RFPs, comparing pricing models, service offerings, and the overall value proposition of each provider. Ensure the 3PL’s capabilities align with your specific needs and growth projections.
Before finalizing your decision, conduct thorough due diligence on your shortlisted providers. This may involve checking references, verifying insurance coverage, and inquiring about their security protocols to ensure your inventory is safeguarded.
Once you’ve chosen your preferred 3PL partner, negotiate the terms of service and pricing to ensure a mutually beneficial agreement. Clearly define expectations, service level agreement (SLAs), and communication protocols within the final contract.
FBA vs 3PL Providers
Amazon FBA vs 3PL providers offer a convenient fulfillment solution for many sellers. However, there are situations where a 3PL provider might be a more suitable choice. Here’s a breakdown of the key difference:
Amazon FBA
Pros: Convenient, easy to set up, qualifies for Prime benefits.
Cons: Limited control over fulfillment process, potential storage limitations, may not be cost-effective for high-volume sellers.
3PL Providers
Pros: Greater control over fulfillment, potential cost savings, scalability, wider range of service (including returns management).
Cons: Requires more upfront research and setup, additional integration with Amazon Seller account.
3PL For Amazon FBA FAQ
What are the different types of third-party logistics?
Warehouse-Based 3PLs: These providers offer storage space, inventory management, order fulfillment, and pick-and-pack services. They are a good fit for businesses that require warehousing and fulfillment solutions.
Transportation-Focused 3PLs: These providers specialize in the transportation aspect of the supply chain, offering services like truckload shipping, less-than-truckload (LTL) shipping, and international freight forwarding.
Value-Added 3PLs: These providers offer a wider range of services beyond basic warehousing and fulfillment. They may provide services like kitting (assembling multiple components into a single product), packaging customization, and final-mile delivery.
What is a 4PL?
A 4PL, or Lead Logistics Provider, acts as a single point of contact for managing your entire supply chain.
They don’t own warehouses or transportation assets themselves but instead, orchestrate and manage a network of 3PL providers, carriers, and other logistics partners to create a customized solution for your business.
4PLs are ideal for complex supply chains with global operations.
How Do You Manage a 3PL?
Effective communication and collaboration are key to successfully managing a 3PL relationship.
Establish clear service level agreements (SLAs) that outline performance expectations, communication protocols, and dispute resolution procedures.
Maintaining regular communication with your 3PL provider, keeping them informed of any changes in your business or upcoming promotions that might impact order volume.
Track your 3PL’s performance against the agreed-upon SLAs. Monitor key metrics like order fulfillment accuracy, on-time delivery rates, and inventory management efficiency.
Schedule periodic reviews with your 3PL provider to discuss performance, identify areas for improvement, and ensure your partnership remains aligned with your evolving business needs.
What’s the difference between 3PL and a freight forwarder?
While both 3PLs and freight forwarders are involved in the supply chain, their primary functions differ:
3PLs: 3PLs offer a wider range of services beyond just transportation. They can provide warehousing, inventory management, order fulfillment, and even value-added services like kitting and packaging.
Freight Forwarders: Freight forwarders specialize in the international movement of goods. They handle tasks such as customs clearance, freight consolidation, and arranging overseas transportation via air, sea, or land. They may also offer limited domestic transportation services.
How Do 3PLs Connect With Amazon?
3PL providers specializing in Amazon FBA use integration tools and APLIs to connect seamlessly with your Amazon Seller account. This allows them to electronically receive order notifications directly from Amazon.
Maintain accurate inventory levels within their warehouse management system.
Generate pick lists, efficiently pick and pack orders according to Amazon’s FBA guidelines.
Electronically generate shipping labels, schedule carrier pickups, and transmit shipment confirmation details back to Amazon.