Struggling with high shipping costs? Direct-to-consumer (DTC) brands face rising expenses in storage, shipping, and returns. By 2025, DTC sales are projected to hit $226 billion, making efficient logistics a top priority. Here's the key takeaway: 51% of online brands saw shipping costs rise last year, but 64% working with 3PLs reduced costs. The right 3PL partner can help you cut expenses, improve delivery speed, and scale effectively.
Key Insights:
- Storage costs: $0.45–$0.75 per cubic foot monthly.
- Order prep and packaging: $1.50–$2.50 per order, plus $0.25–$0.99 per box.
- Shipping zones: Longer distances increase costs, with final delivery accounting for over 50% of shipping expenses.
- Demand fluctuations: Seasonal surges drive up costs, while slow periods lead to wasted resources.
Solutions:
- Choose the right 3PL: Focus on expertise, scalability, and tech integration over just low rates.
- Use mapping tools: Optimize warehouse locations to reduce shipping times and costs.
- Leverage data and automation: Predict demand, streamline inventory, and reduce human error.
- Negotiate smarter with 3PLs: Bundle services and revisit contracts annually for better rates.
Platforms like Forthmatch simplify 3PL comparisons, offering real-time data and unbiased rankings. By switching to better 3PL providers or optimizing your fulfillment strategy, brands have saved up to $8,000 monthly and reduced shipping times by 50%. Ready to lower your costs and boost efficiency? Let’s dive deeper.
How To Choose The Right 3PL For Your eCommerce Business
Why Fulfillment Costs Are High
Knowing why costs go up is key when you need cheap ways to deal with third-party shops (3PL). Most online shops use about 70% of what they earn on orders just to cover these costs. If you don’t know why costs are high, you might make less money.
Many things make fulfillment costs rise, like storage fees, job costs, stuff you need to pack, and dealing with items sent back. Let’s look at what makes these costs go up.
Storage, Travel Zones, and How Many Orders
Every month, storing things costs between $0.45 and $0.75 for each bit of space. This price can go up if you're keeping too much or items that don’t sell fast. Also, each order costs about $1.50 to $2.50 to prepare, and each box is an extra $0.25 to $0.99.
Where you send things matters too. The U.S. breaks up into eight travel zones, and sending stuff further means paying more. Just getting the package to its last stop can cost over half of what it costs to send things.
"Shipping zones are more than just a pricing tool - they're a critical factor in scaling ecommerce operations, controlling costs, and exceeding delivery expectations." - Maria Helena Mikkelsen, Content Marketing Specialist, Flowspace
Think about how many orders you get. Big orders might get you lower prices from those who send your goods, but they could also push your current shipping setup too hard if you're not careful. On average, shops spend 8.7% of what they earn in a year on sending goods. Also, the way you run your business is key. For example, brands that sell straight to people have to spend $3–$7 for each order they send, while those who sell on big sites spend $2–$4.
Also, there’s the big problem of changes in what people want, depending on the time of year, which can make these costs go up even more.
How What People Want Changes and When They Want It
These changes are easy to see coming, but they are tough to deal with. In busy times, you’ll see you need more people working, deal with shipping being late, and have more things sent back. For instance, in 2022, 56% of people in the U.S. started buying their holiday gifts as early as October, making that busy time even longer.
When a lot of orders come in, you'll need more people in your warehouse, faster ways to send things, and more room. Just running out of things to sell costs shops $349 billion every year, making many keep more things in stock - which means paying more for storage.
When things are slow, the other problem pops up. Too much stock, not enough work for people, and space in your warehouse being wasted all keep adding to your costs. Bad guesses about what people will want make this worse, making you run out when things are busy and have too much when it's slow.
How Guessing Demand Can Cut Costs
Good guesses can keep you having just enough by using new data on sales and what buyers do. This lets you change how much you have, cutting waste and shortages.
Tools for planning your supply chain can pull data together and work with other systems to better deal with changes. By looking at past sales and trends, you can figure out what you need for different times, making sure you have the right things and enough people.
Using machines helps too. Machines that handle orders and keep track of stock cut mistakes made by people and let you adapt fast to new needs without adding much cost in people. These tools not only make things run smoother, but also keep the costs of sending out orders low.
How to Evaluate and Compare 3PL Providers
Selecting the right third-party logistics (3PL) provider involves much more than just finding the lowest quote. With 69,703 providers in the U.S. as of 2024, a poor choice can damage your brand and strain customer relationships.
"The most common mistake I see in the 3PL selection process is focusing too heavily on quoted rates or the perceived benefits of a particular location. Companies get excited about attractive pricing or proximity to a certain port only to discover their new 3PL can't properly handle their products or scale with their growth."
- Tony Runyan, Chief Client Officer, Red Stag Fulfillment
Key Factors When Choosing a 3PL
When evaluating 3PL providers, focus on six critical areas that directly impact your business's ability to grow and succeed.
Start with non-negotiable requirements. Identify your must-haves, such as product-specific expertise, geographic reach, and integration capabilities. For instance, if you sell fragile, temperature-sensitive, or oversized products, prioritize providers experienced in handling these items.
Look at the total cost of fulfillment (TCF), not just quoted rates. Avoid being swayed by low quotes alone. Instead, calculate a full cost model that includes storage fees, pick-and-pack charges, shipping rates, and extra service fees. Budget-friendly options may lack the technology, scalability, or customer support necessary for long-term success.
Check performance metrics before signing on. Ask for historical data on critical metrics like order accuracy, on-time shipping rates, and inventory accuracy. As Donovan Sulivan, Operations Manager at NFI, explains:
"Certain performance metrics reveal whether a 3PL can actually deliver on their promises. You should examine these across multiple providers."
Test system integrations. Ensure the provider's warehouse management system (WMS) integrates smoothly with your current platforms. If the process involves too many manual steps or workarounds, it might not be the best fit. Always test integrations before committing.
Assess stability and scalability. Confirm the provider has a solid foundation and can handle peak season demands. Choose a partner that meets your current needs but can also grow with you. For example, Guardian Bikes faced costly delays and inventory issues because their budget-friendly 3PL couldn’t keep up with their growth.
Evaluate communication and responsiveness during the sales process. Poor communication early on can be a red flag for future operational challenges. If possible, visit their warehouse facilities and establish clear communication expectations upfront.
Using Forthmatch for Clear 3PL Comparison
Traditional methods for selecting a 3PL can be slow and inefficient, bogged down by lengthy quotes, broker fees, and limited insights. Forthmatch simplifies this process with a transparent, comprehensive directory of vetted 3PL providers.
The platform provides real-time service area maps using isochrones and isodistances, allowing you to visualize delivery zones without waiting for quotes. Its robust search and filter features - covering region, category, platform compatibility, and product specialization - make it easy to find providers that match your specific needs.
With direct access to 3PLs, you can negotiate rates without dealing with broker fees or referral markups. This ensures unbiased rankings based on actual service capabilities rather than commission-driven recommendations.
Forthmatch also highlights integration compatibility with major eCommerce platforms like Shopify, WooCommerce, and Amazon. This feature helps you avoid costly and time-consuming integration challenges by ensuring your chosen provider works seamlessly with your systems.
Building a 3PL Provider Comparison Table
Creating a structured comparison table is a great way to objectively evaluate multiple providers. Focus on metrics and features that align with your operational needs and growth goals. Key metrics like dock-to-stock times, cut-off times, on-time shipping rates, order accuracy, and inventory accuracy can provide a clear picture of each provider’s capabilities.
| Provider | Geographic Coverage | Pricing Model | Platform Integration | Specializations | Performance Metrics |
|---|---|---|---|---|---|
| Provider A | West Coast + TX | Per-unit pricing | Shopify, WooCommerce | Electronics, fragile items | 99.2% accuracy, 2-day average shipping |
| Provider B | Nationwide | Activity-based pricing | Shopify, Amazon, BigCommerce | Apparel, subscription boxes | 98.8% accuracy, 1.5-day average shipping |
| Provider C | East Coast focus | Fixed monthly + per-order | Custom API, Shopify | Health & beauty, FDA compliance | 99.5% accuracy, 1.8-day average shipping |
Make sure to document each provider’s pricing model. Some use per-service pricing, while others offer all-in-one per-unit pricing. Note whether they require long-term contracts or offer flexible, pay-as-you-go options - this will help you evaluate cost commitments and flexibility.
Also, consider scalability factors like peak season capacity, warehouse space, and technology infrastructure. As Sarah, Founder of Bare Nut Butter, advises:
"Get everything in writing, look at total cost, verify processes."
Finally, customer reviews and testimonials from businesses similar to yours can provide valuable insights into each provider’s strengths and potential challenges. Using mapping tools to visualize coverage areas can further refine your selection process and optimize fulfillment.
Using Mapping Tools to Improve Fulfillment
Strategically placing warehouses with the help of GIS and mapping technologies can significantly cut down shipping costs and delivery times.
Mapping 3PL Service Areas
Knowing exactly where your third-party logistics (3PL) provider can deliver - and how quickly - is essential for optimizing costs. Mapping tools, using features like isochrones and isodistances, allow you to define precise delivery zones with accuracy.
These tools take into account transportation networks, traffic patterns, and geographic obstacles. Unlike simple radius-based calculations, they offer delivery time estimates that reflect real-world conditions, such as highway access, urban congestion, and even seasonal changes.
When assessing 3PL service areas, think about how their warehouse locations align with your customer base. For instance, warehouses in major cities can ensure faster delivery to urban customers, while rural areas may require a different approach. GIS tools can help you identify gaps in coverage, making it easier to determine if a provider’s network fits your shipping needs.
Real-time maps are invaluable for verifying service areas and ensuring they align with your customer base. This visualization sets the stage for strategically placing warehouses, which we’ll delve into next.
Benefits of Multiple Warehouse Locations
Insights from mapping tools can guide decisions on distribution strategies. Having multiple warehouses closer to end customers can dramatically improve fulfillment operations. By reducing the distance packages need to travel, localized distribution centers cut both shipping times and costs.
Take the example of a US-based medical device company. They expanded from a single warehouse in California to include another in Ohio. This change allowed 95% of their ground shipments to reach customers within two business days - up from just 38%. Additionally, they saved an average of $3 per shipment, saw a 10% boost in their Net Promoter Score, and reduced product return rates by 12%. Multiple warehouses also let companies tap into regional carriers offering lower rates and dependable service, further lowering per-shipment costs.
Using Past Shipping Data for Better Decisions
Mapping insights are even more powerful when paired with historical shipping data. Analyzing past shipping patterns can reveal opportunities to fine-tune your fulfillment strategy.
Start by reviewing freight volumes, types of goods shipped, and transport routes to uncover trends. Pay attention to geographic clusters of customers, seasonal demand spikes, and products that frequently face shipping challenges. These insights can guide decisions on where to open new warehouse facilities and strengthen your ability to negotiate better rates with 3PL providers.
Predictive analytics can take this a step further by forecasting trends like peak shipping periods, helping you allocate resources effectively and avoid delays. For example, a large retailer used historical data to optimize shipping routes and carrier selection, achieving a 15% reduction in shipping costs and a 20% improvement in delivery times.
Visualizing freight data geographically also supports better route planning. By identifying the most efficient shipment paths using historical traffic patterns and transport volumes, you can continuously refine your processes. Tracking metrics like delivery times, shipping costs, error rates, and customer satisfaction ensures ongoing improvements, ultimately lowering fulfillment costs and boosting efficiency.
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Practical Ways to Cut Fulfillment Costs
Let’s explore how to reduce fulfillment costs while maintaining top-notch service.
Optimizing Fulfillment Center Locations
Where you place your fulfillment centers can make or break your shipping costs and delivery speed. With the direct-to-consumer market expected to grow from $150 billion in 2022 to over $226 billion by 2025, the importance of strategic warehouse placement is only increasing.
Having multiple warehouses closer to your customers not only reduces shipping costs but also speeds up delivery. It even opens the door to regional carriers, which often offer lower rates and, in some cases, can minimize customs duties for international shipments. For instance, one DTC apparel brand relocated inventory closer to its primary customer base and saw a 22% reduction in costs while improving delivery times by 30%.
Once your fulfillment centers are in the right spots, use this setup to negotiate better shipping rates with your logistics partners.
Negotiating Better Rates with 3PL Providers
Cutting costs with third-party logistics (3PL) providers starts with understanding your shipping needs. Compare quotes from multiple providers and evaluate their full cost models. Regular renegotiation can lead to savings of up to 20% annually on logistics expenses.
Strong relationships with your providers are key. Show them your long-term business potential with data on shipping trends and growth forecasts. Timing your negotiations during off-peak seasons and bundling services can also help secure better rates.
Platforms like Forthmatch can give you an edge by providing transparent data on market rates and service comparisons. Armed with this knowledge, you can negotiate confidently while maintaining quality standards. Make it a habit to revisit contract terms annually or after major volume increases to keep rates competitive.
"Negotiation is not about getting desired price but getting a price in which both parties feel happy and enjoy relationship each of them love to contribute in success of each other businesses." - KAMAL JAIN, Director Cargomen | LSCI | 25 Year Logistician
Using Technology to Reduce Fulfillment Costs
Technology is a game-changer for fulfillment, automating processes and streamlining operations. Automated order routing (AOR) systems, for example, use pre-set rules to direct orders to the most efficient fulfillment location. This reduces transit times and shipping costs. Real-time inventory tracking combined with barcode scanning ensures accurate data across all warehouses, enabling smarter routing decisions.
The results can be impressive. One company used a tech-driven fulfillment partner to optimize operations across multiple U.S. centers. This reduced average shipping times from five to six days down to just two and a half, with 98% of parcels shipping locally to lower-cost zones. The changes saved them $1.5 million in outbound freight expenses.
"ShipBob's technology streamlines inventory management across our network, ensuring optimal inventory allocation. Once the inventory is allocated correctly, passing orders to ShipBob is seamless. ShipBob automatically routes orders to the nearest warehouse to the customer. We receive notifications confirming the warehouse selected for shipping, eliminating inventory discrepancies between the warehouses. Efficient inventory allocation significantly impacts our outbound shipping costs, and with ShipBob, managing this has been effortless." - Ali Shahid, COO of Our Place
AI and machine learning take optimization even further. Companies using AI-enabled supply chain management have reported a 15% reduction in logistics costs and a 35% improvement in inventory levels. These tools can predict demand, adjust stock levels, and streamline picking and packing processes with intelligent allocation.
Another example involves a brand that implemented a geolocation-based order management system. Orders were routed to the nearest of their two distribution centers, boosting fulfillment capacity from 1,000 to 10,000 orders per day. This drastically cut shipping times and improved customer satisfaction.
Advanced tools like high-speed QR code scanners and automated order processing systems also play a major role. These technologies instantly update inventory data and connect customer-facing platforms with backend systems, eliminating manual tasks and reducing errors. By automating processes like document generation and order routing, companies save on labor costs and improve accuracy.
Statistics highlight the importance of fast delivery: nearly 40% of online shoppers abandon their carts if delivery takes over a week, and 22% drop out due to slow shipping times. Investing in the right tech not only saves money but also keeps customers happy - directly boosting revenue potential.
These advancements in technology lay the groundwork for additional cost-saving strategies, which will be explored in the next section.
Case Studies: DTC Brands That Cut Fulfillment Costs
Examples from real businesses show how smart 3PL strategies and distributed warehousing can significantly lower fulfillment costs. These stories provide concrete evidence of how targeted changes can lead to measurable improvements.
Switching to Better-Located 3PL Providers
Prymal, a growing business, made a game-changing decision to switch to a strategically located 3PL provider. This move not only tripled their monthly revenue but also saved them $8,000 each month. Founder Courtney Lee shared her frustration with their previous provider:
"With my prior 3PL I was frustrated by constant errors and high costs."
After the switch in November, Prymal's monthly revenue skyrocketed from $40,000 in July to $160,000 - a 300% increase. Along with the savings, the company gained access to real-time fulfillment data and dedicated account management. This transformation highlights how a well-thought-out fulfillment strategy can boost both revenue and efficiency.
Similarly, an Australian footwear brand revamped its supply chain and is projected to save over $600,000 in COGS in 2024 and more than $1 million in 2025.
Using Multiple Warehouse Locations
Ample Foods shows how distributed warehousing can cut costs and improve delivery times. By adding a second fulfillment center in Pennsylvania to their existing West Coast facility, they expanded their 2-day shipping coverage from 32% to 65% of their customers. This adjustment resulted in a 13% savings to their bottom line.
Another example is A Year of Dates, which transformed its customer experience by strategically placing inventory across the U.S. This reduced lead times from 3 weeks to just 3 days, leading to happier customers and higher conversion rates.
Palouse Brand took it a step further, utilizing five warehouses across the U.S. to offer consistent 1–2 day shipping nationwide. This approach ensured comprehensive delivery coverage.
Before and After: Fulfillment Cost Comparison
The table below highlights the improvements these brands achieved by refining their fulfillment strategies:
| Brand | Before | After | Key Improvements |
|---|---|---|---|
| Prymal | $40,000 monthly revenue, high costs, frequent errors | $160,000 monthly revenue, $8,000/month savings | 300% revenue increase; $8K monthly savings |
| Ample Foods | Single West Coast facility; 32% 2-day shipping coverage | Two facilities (CA + PA); 65% 2-day shipping coverage | 13% cost savings; 103% improvement in 2-day delivery coverage |
| A Year of Dates | 3-week lead times, slow customer satisfaction | 3-day lead times, positive customer feedback | 85% reduction in lead times; improved conversion rates |
| Australian Footwear | High COGS, inefficient supply chain | Restructured fulfillment strategy | $600,000+ COGS savings in 2024; $1M+ projected savings in 2025 |
These examples underline the importance of selecting the right 3PL partner. With 57% of eCommerce companies outsourcing some or all of their fulfillment processes - and U.S. DTC sales expected to hit $186.6 billion by 2025 - having a solid fulfillment strategy is essential for staying competitive.
Finding Your Best 3PL Partner
Picking the right third-party logistics (3PL) partner is a balancing act between cost and operational efficiency. With over 24,400 3PL providers in the U.S. alone and a global market expected to reach $1.3 trillion by 2026, the stakes are high. The goal? Prioritizing total fulfillment efficiency over just chasing the lowest rates.
The best partnerships focus on the total cost of fulfillment (TCF) - a broader view that goes beyond the upfront rates for receiving, storage, and shipping. TCF also considers indirect costs like errors, lost revenue, and the time spent managing logistics. Financial stability and clear communication are equally vital. In fact, 98% of 3PLs say data-driven decision-making is key to the future of supply chains.
When evaluating potential partners, weigh factors like security, customer service, scalability, customization options, technology integration, and reputation. Performance metrics are also crucial to gauge reliability. To make this process easier, platforms designed to streamline 3PL selection can be incredibly helpful.
Technology is non-negotiable in modern fulfillment. Real-time inventory tracking, seamless integration with e-commerce platforms, and advanced analytics should all be on your checklist. With 71% of shippers emphasizing the importance of real-time data, choosing a tech-savvy 3PL can directly impact your operational success.
Platforms like Forthmatch simplify the selection process. They offer a free, unbiased directory of vetted 3PL providers, complete with real-time service area maps, feature-based filters, and direct provider contact. By removing brokers and hidden fees, Forthmatch ensures transparent comparisons of delivery reach, platform compatibility, and pricing - helping you make faster, data-backed decisions.
Think long-term when choosing a 3PL partner. Your business needs today won’t necessarily match your needs in one to three years. Aligning your 3PL’s technological and operational strengths with your growth strategy is critical. As a Shopify Fulfillment Network expert explains:
"It's best to pick a long-term partner and to anchor yourself to the one to three things that elevated that partner amongst the rest. Commerce and fulfillment will evolve over time, and by selecting a partner for the long term and establishing trust, you can benefit from their insight and suggestions into how to evolve your business along with the industry's changing landscape."
FAQs
What’s the best way to choose a 3PL provider to lower costs and speed up deliveries?
To find the best 3PL provider in the U.S., start by examining their warehouse locations. Ideally, choose providers with facilities close to your primary customer bases. This reduces shipping distances, trims delivery times, and helps cut down on fuel expenses.
Also, focus on 3PLs that offer competitive shipping rates and leverage advanced technology to improve efficiency. Providers with robust networks and flexible solutions can better support your business as it scales. To save even more, think about strategies like refining your packaging to lower dimensional weight fees or negotiating discounts based on shipping volume.
The right 3PL partner can help you lower fulfillment costs, speed up deliveries, and elevate your customer experience.
How can technology help improve fulfillment processes and lower costs?
Technology has become a game-changer in improving fulfillment processes, making them quicker, more precise, and less expensive. Tools like Warehouse Management Systems (WMS), Transportation Management Systems (TMS), and automation technologies such as Autonomous Mobile Robots (AMRs) are helping businesses minimize human errors, boost productivity, and simplify operations.
These systems also offer real-time data analysis and features like geospatial mapping, which are invaluable for optimizing shipping routes and expanding service coverage. The result? Reduced unnecessary expenses, enhanced logistics efficiency, and lower operational costs. Choosing the right technology can make your processes run smoothly while keeping costs under control.
How do seasonal demand spikes affect fulfillment costs, and what are the best ways to manage them?
Seasonal demand surges can significantly increase fulfillment costs. More orders mean higher labor demands and rising shipping expenses, especially during peak periods. If not managed carefully, these spikes can stretch resources thin and eat into profits.
To navigate these challenges, focus on strategies like demand forecasting to anticipate order volumes. This helps you prepare ahead without scrambling at the last minute. Pair that with inventory optimization - keeping enough stock to meet demand without overstocking. Another key approach is flexible staffing, allowing you to scale your workforce up or down depending on demand.
Using technology tools can be a game-changer. Platforms for demand planning and real-time tracking ensure smoother operations and help you keep costs under control, even during the busiest seasons.
