Is your DTC brand struggling with fulfillment? Partnering with the right third-party logistics (3PL) provider can streamline your operations, cut costs, and improve delivery times. Here’s what you need to know:
- Why 3PL Matters: 3PLs handle warehousing, shipping, and scaling during demand spikes, allowing you to focus on product innovation and customer relationships.
- How to Choose a 3PL: Look for speed, reliability, transparent costs, and strong tech integration. Key metrics like order accuracy (≥99.9%) and on-time shipping (≥98%) are crucial.
- Managing Costs: Understand pricing models (fixed, activity-based, cost-plus, hybrid) and watch for hidden fees like storage and setup costs.
- Tech Integration: Ensure seamless connectivity with platforms like Shopify or WooCommerce for real-time tracking and inventory management.
- Performance Tracking: Monitor KPIs like delivery accuracy, processing speed, and return times to ensure reliability.
Quick Tip: National 3PLs are ideal for broad reach, while regional providers excel in local expertise. Choose based on your scale and goals.
This guide simplifies the complex world of 3PLs, helping you find the right partner to grow your business.
What If You Actually LOVED Your 3PL? (With Chad Carelton)
How to Pick the Right 3PL Partner
Choosing the right third-party logistics (3PL) partner is a crucial step toward ensuring smooth fulfillment operations. The right provider doesn't just handle logistics - they become an integral part of your team, helping you deliver on customer expectations and scale your business effectively. Here's what to look for when evaluating potential partners.
Main Factors to Consider
Speed and Service Level Agreements (SLAs) are non-negotiable. If your brand promises 2-day delivery, your 3PL must be equipped to support that reliably. Look for providers that can handle same-day pick and pack services, especially during peak seasons.
Performance metrics reveal a lot about a 3PL's reliability. Insist on seeing their track record and key performance indicators (KPIs). Here are some critical metrics to evaluate:
| Metric | Target Performance | Why It Matters |
|---|---|---|
| Order accuracy rate | ≥99.9% | Errors erode trust |
| On-time ship rate | ≥98% | Delays hurt customer loyalty |
| Inventory shrinkage | <0.2% | Lost inventory eats into profits |
| Platform uptime | ≥99.99% | Downtime impacts order fulfillment |
Real-time visibility and control are essential. Your 3PL should offer a branded portal where you can track orders, check inventory levels, and review carrier performance. Request a live demo of their software to see how intuitive and functional it is.
Scalability without hidden costs is key. A great 3PL offers flexible solutions like elastic labor, multi-node fulfillment, and custom SLAs that accommodate retail, Amazon, B2B, and subscription orders - all from a single inventory pool.
Experience with direct-to-consumer (DTC) brands is a must. Choose a 3PL that has successfully scaled DTC businesses and understands the metrics that matter most in this space. Ask for their client retention rates - reputable providers will be happy to share this data.
"When choosing a 3PL it's important to do your homework but in the end, you'll have to trust your instincts. Are they listening to you? Do they have a good understanding of your needs but also show a willingness to adapt? Is their technology where it should be today, and are they investing in tomorrow? The answers to these questions will tell you whether or not you can trust them with your brand."
- Esther Kestenbaum, president of Ruby Has Fulfillment
Transparent cost structures are critical to avoid unexpected fees. While it may be tempting to go with the cheapest option, low rates often come at the expense of quality. Instead, focus on value and total cost of ownership, including savings from shipping discounts or multiple fulfillment center locations.
Branded packaging options allow you to create a memorable, personalized unboxing experience that reinforces your brand identity. This small detail can enhance customer satisfaction and encourage repeat purchases.
Finally, ensure your 3PL partner offers seamless tech integration to keep your operations running smoothly.
eCommerce Platform Integration
Integrating your 3PL with your eCommerce platform is vital for maintaining accurate inventory and offering real-time order updates.
Platform compatibility should be your first consideration. Look for 3PL providers with proven expertise in platforms like Shopify, WooCommerce, or any others you rely on. Not all providers integrate equally well, so verify their capabilities in detail.
Thorough testing and synchronization are necessary to avoid costly errors. Install the provider's plugin, configure settings, and test every aspect - order placement, inventory updates, and shipping notifications. Any lag or mismatch can lead to overselling, unhappy customers, and damage to your brand's reputation.
Some providers excel in WooCommerce integration, offering customizable storage systems and real-time inventory tracking. Others go further, providing robust solutions for inventory management, order processing, and shipping through advanced warehouse management systems.
Ongoing monitoring ensures your integration remains effective as your business grows. Keep an eye on key metrics like order accuracy, shipping times, and customer satisfaction. Reassess your integration strategy regularly to align with new products, expanded markets, or changing logistics needs.
Strong eCommerce integration supports your overall fulfillment strategy, ensuring your 3PL partner consistently meets customer expectations. Tools like Forthmatch's platform-specific filters can help you quickly identify 3PLs that align with your tech stack, saving time and reducing compatibility risks.
Understanding 3PL Service Coverage and Growth Capacity
When evaluating third-party logistics (3PL) providers, it’s crucial to assess their service coverage and ability to scale with your business. The right partner ensures smooth operations during peak seasons and supports your growth.
National vs. Regional Coverage
Choosing between a national or regional 3PL provider impacts your fulfillment strategy and customer satisfaction. Each option caters to different business needs and growth stages.
National 3PL providers are ideal for direct-to-consumer (DTC) brands aiming for nationwide reach. With multiple fulfillment centers strategically located across the U.S., they help minimize shipping distances and cut costs. For example, the U.S. third-party logistics market was valued at $247.4 billion in 2023, with a projected growth rate of 9.2% annually from 2024 to 2030. National providers also simplify pricing across shipping zones and offer the infrastructure needed for rapid expansion, eliminating the hassle of managing multiple regional partnerships.
Regional 3PL providers, on the other hand, specialize in specific areas. They bring deep local expertise and often deliver faster within their zones. They also tend to offer more personalized service and competitive pricing for brands focused on a concentrated customer base.
| Coverage Type | Best For | Key Advantages | Potential Drawbacks |
|---|---|---|---|
| National | DTC brands with nationwide goals | Broad reach, consolidated pricing, scalability | May lack localized attention |
| Regional | Brands with local focus | Local expertise, faster delivery, personalized service | Limited reach, harder to scale |
Consider this: 13% of shoppers never return if their delivery is late. This highlights why strategic warehouse placement is so important - a strength of national providers. Advanced 3PLs also use real-time tracking and data analytics to optimize inventory placement, ensuring products are stored close to high-demand areas. For growing DTC businesses, flexibility and scalability are non-negotiable, whether that means partnering with a national provider or planning for additional regional support as you grow.
These differences in coverage pave the way for understanding how 3PLs handle demand surges.
Managing Seasonal and Promotional Demand
Seasonal peaks and promotional events test the agility of your fulfillment operations. A capable 3PL partner can scale up during these surges without compromising service quality.
During the 2024 holiday season, for instance, retailers hired 400,000 to 500,000 extra workers to meet increased demand. Similarly, your 3PL should have the infrastructure, carrier partnerships, and surge capacity to handle spikes in orders.
Stockouts are another challenge, costing businesses in the U.S. and Canada nearly $350 billion annually. Advanced inventory management systems can help by tracking stock levels in real time and alerting you before inventory runs low. Additionally, 3PLs with strong relationships with multiple carriers can secure extra transportation capacity, ensuring fast deliveries even during high-demand periods.
Real-time performance monitoring is equally important. Advanced tools can track order processing times, shipping performance, and potential bottlenecks before they impact customers. With 76% of customers likely to abandon a business after two bad experiences, maintaining reliable service during promotions is critical.
Returns also spike during peak periods, with about 16.5% of U.S. e-commerce sales resulting in returns. Efficient returns processing becomes a key factor in keeping customers happy.
To prepare for seasonal demand, maintain open communication with your 3PL about upcoming promotions and expected order volumes. Collaborate to position inventory in high-demand regions. Tools like Forthmatch’s real-time service area maps can help identify logistics partners with the best coverage for your peak-season needs.
Effective demand management and strategic inventory placement are essential for DTC brands aiming for fulfillment success.
Breaking Down 3PL Costs and Contracts
Understanding 3PL pricing and contract terms is crucial since logistics typically account for about 11% of revenue. Choosing the right pricing model can save your business significant money each year. However, hidden fees can quickly eat into your profits if not carefully addressed.
Common Pricing Models
3PL providers offer various pricing structures designed to meet different business needs and order volumes. Here’s how the costs compare across monthly order volumes:
| 3PL Pricing Model | ~500 Orders | ~5,000 Orders | ~20,000 Orders | Best For |
|---|---|---|---|---|
| Fixed (flat-rate) | ~$2,000 | ~$5,500 | ~$10,000 | Businesses with steady, predictable order volumes |
| Activity-based | ~$1,700 | ~$16,000 | ~$57,500 | Small- to medium-sized businesses with seasonal demand |
| Cost-plus | ~$1,600 | ~$15,000 | ~$55,000 | Enterprises or companies without historical data |
| Hybrid | ~$2,500 | ~$15,000 | ~$50,000 | Mid-size to large businesses experiencing growth fluctuations |
Note: These estimates exclude outbound shipping costs, which are usually billed separately.
Each pricing model has its strengths and trade-offs. Fixed pricing offers predictability but may include additional charges if your order volume exceeds agreed limits. Activity-based pricing is flexible, charging only for services used, but costs can spike during busy periods - pick-and-pack fees, for example, range from $1 to $5 per order. Cost-plus pricing, which adds a markup (around 15%) to actual service costs, provides transparency but requires close monitoring. Hybrid pricing blends features from multiple models, often including a monthly fee ($5,000 to $10,000) plus $2 to $5 per order, offering customization but adding complexity.
Other pricing options include pay-as-you-go models, where storage fees range from $20 to $40 per pallet per month, and fulfillment fees are $1 to $4 per item. Some providers also use a revenue percentage model, taking 4% to 8% of total sales.
"The only way you can really get to an apples-to-apples 3PL price comparison is to calculate the total cost of fulfillment."
- Tony Runyan, Chief Client Officer, Red Stag Fulfillment
Avoiding Hidden Fees
Hidden fees can undermine your profitability if overlooked. Fulfillment fees alone can make up 25% to 35% of each order. Common additional costs include unclear minimum order requirements, peak season surcharges, and monthly account fees. For example, setup fees average $425, inbound receiving costs about $10.52 per pallet, and storage fees typically run $20 per pallet per month.
To avoid surprises, watch for red flags like software access fees, vague volume requirements, and ambiguous surcharges. Peak season pricing, in particular, can significantly increase costs, so ask for detailed rates and thresholds upfront.
When reviewing contracts, read the fine print carefully to identify hidden costs. Request a full breakdown of fees, including setup, account maintenance, and overage charges.
"You need to understand the full pricing structure - storage, pick-and-pack fees, shipping rates, and any potential surcharges. A clear view of your total costs can help avoid surprises and make sure the 3PL aligns with your budget."
- Joe Spisak, CEO and Founder, Fulfill.com
Forthmatch’s direct-contact model eliminates broker markups and referral fees, providing transparent pricing and more straightforward negotiations.
When comparing 3PL proposals, create a checklist of required services and request detailed pricing for each. Model your fulfillment costs based on your specific order volumes, inventory needs, and services. Also, consider the cost implications of using your own packaging materials versus the 3PL’s options.
Set clear terms for pricing updates and notifications in your contract, and share detailed historical data to help the 3PL fine-tune their operations and provide accurate quotes. Additionally, many 3PLs offer shipping discounts of 10% to 30% off standard rates, so factor these savings into your overall cost calculations.
Up next, we’ll look at key performance indicators to evaluate your 3PL provider’s performance.
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Using Technology for 3PL Improvement
Integrating modern technology into your operations bridges your eCommerce platform with your 3PL provider, creating a streamlined flow of data and operations. This is especially crucial as the 3PL market is expected to reach a staggering $1.52 trillion by 2029. Let’s dive into how tools like real-time tracking and advanced APIs are reshaping this space.
Importance of Real-Time Tracking and APIs
Real-time tracking gives you live updates on inventory movement, order fulfillment, and shipment statuses across your supply chain. This constant flow of information helps prevent stockouts and overstock situations, boosts order accuracy, and enhances customer satisfaction. Unlike older systems with delayed updates and limited visibility, real-time tracking keeps everything running smoothly.
In fact, back in 2018, companies using real-time tracking saw a 30% increase in customer retention, a marked improvement in order accuracy, and a 25% reduction in distribution delays.
APIs (Application Programming Interfaces) are the backbone of today’s 3PL operations. For example, integrating a warehouse management system (WMS) API with eCommerce platforms and shipping carriers allows real-time data sharing on orders and inventory. This kind of integration reduces manual tasks, optimizes routing, and simplifies coordination.
When choosing a 3PL provider, look for platforms that offer key features like real-time inventory and shipment visibility, integrated WMS capabilities, and seamless API connections. Other must-haves include modern scanning tools (barcodes, QR codes, RFID), GPS tracking, telematics, and IoT sensors that provide frequent data updates and automated alerts. Providers with advanced stock control systems report up to a 40% reduction in picking errors, with 26% of users noting time savings.
Cloud-based WMS solutions are another game-changer for direct-to-consumer (DTC) brands. These systems allow remote access, synchronize data in real time, save costs, and scale easily as your business grows. They also integrate effortlessly with other platforms and offer better compliance compared to traditional on-premise systems.
Finding Tech-Compatible 3PL Providers
To fully leverage these technologies, it’s essential to choose a 3PL provider that’s compatible with your tech ecosystem. Start by ensuring their platform is up-to-date and integrates easily with popular eCommerce systems like Shopify or WooCommerce. Check whether they offer pre-built integrations or if you’ll need custom development.
A robust order management system (OMS) is another critical factor. A good OMS tracks stock levels across multiple warehouses, ensures timely order fulfillment, and integrates smoothly with your existing systems. Look for 3PLs that connect with your inventory management, order processing, and warehouse systems. Key integrations often include ERP platforms, sales channels (like Amazon), and carrier partnerships with companies like DHL, UPS, and DPD.
Work closely with your 3PL to outline technical requirements, data synchronization needs, and any necessary customizations. Conduct thorough testing to confirm smooth processes for order placement, inventory updates, and shipping notifications. Also, consider factors like scalability, shipping speed, and regional coverage. Don’t forget to ask about reporting capabilities to track metrics like delivery timeliness, order accuracy, and any shipping issues.
Platforms like Forthmatch simplify this process by offering detailed integration support for major eCommerce systems. Their tools include compatibility filters, real-time service area maps, and direct contact options - all without broker fees or referral markups. This makes it easier to identify 3PL providers with strong tech infrastructures and proven track records.
When evaluating advanced technologies, focus on features like automated order processing to speed up fulfillment, real-time inventory tracking to reduce errors, seamless ERP and TMS integration, and robust reporting and analytics. The industry is also moving toward warehouse automation and robotics, including conveyors, automated storage and retrieval systems, and mobile robots, along with digital data management systems. These innovations are shaping the future of 3PL operations, making them more efficient and reliable than ever.
Measuring 3PL Performance and Reliability
Once you've integrated a 3PL provider into your operations, keeping a close eye on their performance is essential. While technology integration ensures smooth workflows, regular performance tracking ensures your 3PL partner consistently meets your standards. This ongoing evaluation helps you spot potential issues early - before they affect your customers.
Key Performance Indicators (KPIs)
To ensure your 3PL is delivering as promised, track key metrics like order accuracy (aiming for ≥99.9%), shipping accuracy (≥99%), on-time delivery (≥95%), and inventory accuracy (98–99.9%). When these metrics are high, customer complaints drop, returns are minimized, and your brand's reputation strengthens. For instance, providers like ShipBob boast an impressive 99.95% order accuracy rate.
"The technology employed by ShipBob guarantees accurate deliveries to our customers. ShipBob's warehouse management system is equipped with numerous checks and balances, minimizing the possibility of incorrect items being shipped by warehouse associates." - Ali Shahid, COO of Our Place
Another critical metric is dock-to-stock time, which measures how quickly your 3PL processes incoming inventory. While the industry average is around 48 hours, top-tier providers can reduce this to under 24 hours. Faster processing means products are ready for sale sooner, improving cash flow and reducing storage delays.
Return processing time is equally important for maintaining customer trust and managing inventory effectively. While many 3PLs process 95% of returns within 48–72 hours, the best providers can handle returns in about 24 hours, ensuring customers remain satisfied and returned items are quickly restocked for resale.
Another key metric is cost per order, which includes fees for storage, picking, packing, shipping, and any additional charges. Keeping tabs on this helps you understand the financial impact of your 3PL partnership. As Tyler McCann, Co-Founder of Taste Salud, puts it:
"ShipBob can handle our order volume because they're experts at what they do... It's no wonder that orders get out within 24 hours of being received – ShipBob is really good at what they do."
By regularly monitoring these metrics and generating monthly reports, you can identify trends, address issues, and maintain the reliability established during the initial integration phase.
Using Data and Reviews to Evaluate Providers
Internal KPIs are important, but external feedback can provide a broader perspective on your 3PL's performance. Customer reviews, for example, can reveal details about the delivery experience that your internal metrics might miss. Encouraging post-purchase feedback focused on shipping can uncover regional service gaps or areas where improvements are needed.
Metrics like Customer Satisfaction Scores (CSAT) and Net Promoter Scores (NPS) related to shipping provide measurable insights into how your fulfillment process affects customer loyalty. Benchmarking your provider’s performance against competitors can also be revealing. For instance, FedEx reports an on-time delivery rate of about 98%, making it a useful standard for comparison.
Community-driven platforms like Forthmatch add another layer of accountability by offering unbiased reviews and trust scores based on real merchant feedback. This allows you to evaluate your 3PL provider’s reputation without relying solely on marketing claims.
Regular performance reviews are crucial for maintaining accountability and driving improvement. Monthly meetings with your 3PL to review performance data, address concerns, and brainstorm solutions ensure that operational and customer satisfaction goals remain on track.
Finally, consider this: 53% of 3PL providers process orders in under an hour. If your current provider consistently takes longer, it might be time to reassess the partnership. As the logistics landscape evolves, your evaluation process should adapt to ensure your 3PL continues to support your brand’s growth and customer expectations effectively.
Conclusion: Improving Fulfillment for DTC Success
Choosing the right 3PL partner goes far beyond just managing shipping logistics - it’s about laying the groundwork for long-term growth. With global e-commerce sales projected to hit $8.1 trillion by 2026 - a 56% jump from 2021 - DTC brands need fulfillment partners capable of evolving alongside their expanding operations.
The benefits are clear: 73% of shippers report enhanced customer experiences, and 86% see improved cost efficiency when working with 3PL providers. These outcomes are often the result of transparent, scalable, and technology-focused solutions offered by the right partners. It’s these qualities that make a 3PL more than just a service provider - they become a key driver of your fulfillment strategy.
"After working with multiple 3PLs that overpromised and underdelivered, we finally found Atomix, a fulfillment partner that truly understands the needs of a growing ecommerce brand. Their tech-driven approach, seamless communication, and scalable solutions have been a game-changer for our business."
- Adam Wright, Founder and CEO at Supergreen Tonik
"The Barrett team does a great job of being flexible and responsive to all our logistics needs... Our multi-year relationship started small, and each year we do more with Barrett as they have become a reliable and trusted asset in helping us manage the tremendous growth we experience annually."
- Jim Bourne, Sr. Director @ Ken's Foods
When assessing potential 3PL partners, focus on those with a proven track record and straightforward pricing models. Transparency and reliability are critical to ensuring a smooth partnership.
To simplify your search, technology can play a pivotal role. Platforms like Forthmatch streamline the evaluation process by offering tools such as real-time service area maps, platform compatibility filters, and community-sourced reviews. With Forthmatch, you can compare 3PL providers based on actual performance metrics instead of relying on marketing claims. Plus, by eliminating broker fees and hidden markups, the platform allows you to negotiate directly with providers that align with your business goals.
FAQs
How do I decide whether a national or regional 3PL provider is the best fit for my DTC brand?
National vs. Regional 3PL Providers: Which One Fits Your Needs?
Deciding between a national or regional 3PL provider comes down to your business goals, operational scale, and future plans. Here’s how to weigh your options:
National 3PL providers are the go-to choice if your business demands extensive coverage across the U.S. They’re equipped to deliver consistent service across multiple regions and can scale seamlessly to support nationwide growth. These providers are typically well-suited for managing larger, more complex logistics networks.
Meanwhile, regional 3PL providers may be a better match if your focus is on specific markets or testing out new regions. They often provide more tailored services, faster response times within their operating areas, and can sometimes offer cost advantages for localized fulfillment.
To make the right choice, consider your current and future needs - think about your geographic reach, service expectations, and growth plans. Align these factors with your fulfillment strategy to select the provider that’s the best fit for your business.
What hidden fees should DTC brands look out for when choosing a 3PL provider, and how can they avoid them?
When choosing a 3PL provider, it’s important to be aware of potential hidden fees that might not be obvious at first glance. These can include onboarding or setup fees, storage costs, order picking and packing charges, shipping expenses, and fees for processing returns. If not addressed upfront, these extra costs can pile up quickly.
To steer clear of unexpected expenses, take the time to thoroughly review the contract. Request a detailed breakdown of all pricing and make sure to clarify any terms or charges that seem unclear. Clear communication and careful review can go a long way in keeping your 3PL partnership aligned with your budget.
How does integrating technology, like real-time tracking and APIs, improve 3PL services for DTC brands?
Integrating technology like real-time tracking and API connections is a game changer for 3PL services, making operations smoother and improving visibility across the board. With real-time tracking, you and your customers can follow shipments at every step, fostering transparency and building trust. On the other hand, APIs create a direct link between your 3PL provider and ecommerce platforms such as Shopify or WooCommerce, automating essential tasks like syncing orders and updating inventory.
These tools don’t just simplify processes - they also fine-tune delivery routes, cut down on errors, and speed up fulfillment times. The result? Lower operational costs, quicker shipping, and a much better experience for your customers.
