More Than Fulfillment: The Key Role 3PLs Play in Today’s Retail Landscape

Traditionally recognized for managing fulfillment services, today’s top third-party logistics (3PLs) providers play a much larger role — one that remains supportive while providing exclusive insights and guidance. They serve as an extension of the retail operations team, coordinating distribution, helping create customer experiences, ensuring on-time and correct delivery, and, maybe most importantly, serving as a data hub.

The information 3PLs collect — such as the data sets below — can uncover trends that tell retailers a complete story about their customers and provide insight into operational efficiencies and flaws, which can be utilized to generate increased revenue.

Shipping Data

Shipping costs are a considerable factor for any retailer, and a primary cost of running an e-commerce business. Technology used by top 3PLs enables real-time data for better visibility into shipping spending, allowing retailers to build better forecasts, reduce transportation costs, and improve delivery operations and profitability. Shipping insights 3PLs can provide include:

• Weight: Major carriers now place more emphasis on volume (dimensional weight) than weight in determining shipping prices. Making parcels as compact as possible can help realize major savings. Knowing the weight and dimensions of each shipment, retailers can identify and consider redesigning packaging that takes up too much space.
• Cost: Having total visibility into the cost of every package that leaves the warehouse enables shipping spend optimization. 3PLs can see charges for every shipping location, compare spend per shipment method, and help determine whether any cost can be passed along to customers.
• Geography: Identifying where you’re regularly shipping items provides rationale for setting ideal price points and negotiating with carriers. For example, your data might show that customers in Texas generate significant order volume and, based on what shipping methods they’re selecting, most are fine with a $15 shipping fee. With that knowledge, you can accurately determine the most cost-effective shipping method.
• Performance: If you paid for two-day delivery when a parcel was delivered in three days, you’d want to know — especially if it’s a recurring mistake. 3PLs can keep track of these and other carrier overcharges. Carriers also roll out new features, services and changes constantly, so the delivery time of the different shipping methods you use should be reconsidered annually, at minimum.

Inventory Data

An effective inventory management system is the cornerstone of a successful retail operation. Real-time tracking technology monitors inventory conditions and levels (product size, depth of inventory, etc.), what units are moving faster or slower, seasonal SKU activity, what’s being returned, and more. This allows retailers to make informed decisions about SKU strategy while facilitating accurate and on-time order fulfillment, as well as better planning and ordering.

With careful monitoring and optimization, retailers can identify patterns to mitigate ordering mistakes and returns. This can bolster strategic planning, improve customer satisfaction, and control operating costs.

Returns Data

Return policies and processes are defining online buying behavior. Dotcom’s 2019 eCommerce Consumer Survey discovered that 93 percent of shoppers find a free return policy important; of this group, 59 percent specify it’s very important.

Returns data speaks volumes about the health of retail operations. When returns are accepted, 3PLs collect all the information a retailer needs to evaluate its process efficiency, including which products are being returned, why, at what volume, and how quickly returns are processed.

Identifying patterns informs what measures must be taken to prevent or correct issues; it can also inspire new strategies. Nordstrom, for example, saw a 6 percent return rate during peak 2019, and responded by prompting customers to purchase gift cards.

Returns process data allows retailers to evaluate a 3PL’s efficiency. How long it takes to process a return, whether a return was examined, discarded without inspection, or put back into inventory — all this data is noted. Because it’s more expensive to process a return than an outbound order, effective data analysis can help plug revenue leaks.

Packaging Data

A growing objective in outbound shipping packaging is sustainability. 3PLs keep record of what packaging material is being used and how much, allowing retailers to monitor how they’re measuring up to their sustainability goals.

In 2020, metrics are everything. Data is a compass, there to guide retailers in making informed, strategic decisions to improve business. However, it takes time and commitment, both of which are sparse for marketing and operations professionals whose attention is required elsewhere. That's precisely why good 3PLs have become such a fundamental part of retail operations. The data they’re able to acquire empowers retailers to better measure and plan for success, making utilization not only wise, but vital to success.

Maria Haggerty is CEO and one of the original founders of Dotcom Distribution, a premier provider of B-to-C and B-to-B fulfillment and distribution services.