3PL Distribution Guide

With so many operational activities to oversee, it’s not always viable for ecommerce businesses to handle everything in-house. In these cases, brands often outsource to a third-party logistics service provider, or 3PL.

But selecting the right 3PL for your brand can be a complicated task, as there are many different elements to consider. In particular, ecommerce companies should always evaluate a 3PL candidate’s distribution network — that is, the number and locations of 3PL warehouses and/or fulfilment centres that the 3PL runs.

The size and reach of a 3PL’s distribution network is more important for an ecommerce business than one might think, as it directly impacts your business’s shipping costs, 2-day capabilities, and scalability in the future.

So to position your business for growth, it is absolutely critical to find a 3PL partner with a distribution network that fits your vision and enables your brand to reach its goals.

In this article, you’ll learn what 3PL distribution is, why it’s important to partner with a 3PL that has a distributed network of warehouses, and how ShipBob’s fulfilment centre network helps DTC businesses grow.

So, What do you want to learn?

• What is 3PL distribution?
• What role do fulfilment centres play in logistics?
• How 3PLs with are facilitating DTC growth
• How to get started with ShipBob
• 3PL partner FAQs

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What is 3PL distribution?

3PL distribution refers to when an ecommerce business outsources distribution (that is, the processing, fulfilment, and shipping of orders) to a third-party logistics company.

In 3PL distribution, your 3PL partner handles all logistics services involved in distribution, including:

• Procurement
• Inventory reception, storage, and labelling
• Picking
• Packing
• Kitting and assembly (when necessary)
• Arranging shipping and/or last-mile delivery
• Reverse logistics and returns

A 3PL may perform these functions for an ecommerce company in just one warehouse or fulfilment centre, or may utilise multiple fulfilment centres in different locations.

What role do fulfilment centres play in logistics?

Fulfilment centres are facilities where ecommerce businesses store their inventory and prepare orders to be shipped to end customers.

Typically, fulfilment centres receive inventory directly from an ecommerce business’s manufacturer or supplier, and then store that inventory within the facility. Once an order is placed, that order is prepared in the fulfilment centre — meaning the purchased SKUs are picked and packed in a box — and set aside to be shipped out later (usually through last-mile shippers such as UPS, FedEx, and USPS).

In this model, ecommerce brands get the best of both worlds: while they are not responsible for the facility’s rent, maintenance, or labour costs, they get access to warehouse space for their inventory and can completely outsource time-consuming distribution processes such as receiving, stowing, picking, packing, and shipping processes.

How 3PLs with distributed warehouses are facilitating DTC growth

While some third-party logistics companies operate using a single fulfilment centre, more established 3PLs will have a network of fulfilment centres in various locations across a country, or even internationally.

For ecommerce companies, partnering with a 3PL that has an extensive distribution and fulfilment network can serve as a major competitive advantage. Here are just a few of the benefits that ecommerce businesses can expect from working with a 3PL with a sizable distribution network.

Offer fast shipping to meet customer expectations

Thanks to retail giants like Amazon, customers have come to expect lightning-fast shipping for their orders, with 67% of consumers expecting 2-day delivery. 3PLs with a broad network of distribution centres enable smaller DTC brands to meet this expectation by optimising the physical distribution of products.

With multiple fulfilment centres at their disposal, the right 3PL can store portions of your inventory in different locations. This way, when an order comes in, it can be processed, fulfilled, and shipped from the fulfilment centre closest in proximity to the final delivery location.

This greatly shortens the average transit distance, which results in significantly faster deliveries that increase customer satisfaction.

“For us, changing from a 3 week lead time to 3 days through ShipBob is what drove our sales. Even now, one of the primary reviews we get on Etsy is, ‘My order arrived really quickly!’ Having the stock locally in the US means that lead times and shipping times are minimal, and that you’ll get higher conversion rates because you’re offering better lead times.”

John Greenhalgh, Co-Founder of A Year of Dates

Reach international audiences without the headache

For DTC brands that want to expand internationally, global shipping can be extremely complicated and time-consuming, as you have to consider import laws and customs procedures.

It can also be extremely expensive, as international orders are subjected to import duties, taxes, and fees that can balloon shipping costs, discourage buyers, and cut into your profits or bottom line.

3PLs with international warehouses help alleviate these burdens by allowing you to store inventory within the country you’re shipping to. This drastically reduces the distance orders must travel, meaning that orders arrive more quickly and cost less to ship.

Additionally, because your inventory is stored locally and never leaves the country, your brand can bypass many import duties and customs fees that you would otherwise be forced to absorb or pass on to the customer.

“Canada is our biggest market outside of the US. We were shipping from our Chicago area warehouse to Canada for a long time. We were missing out on revenue by taking on import fees and taxes. We wanted to outsource fulfilment there to reclaim some of that. We also wanted to help improve customer satisfaction by speeding up their order delivery time and avoiding those frustrating customs hold-ups. Being in ShipBob’s Canadian fulfilment centre has been great for us.” 

– Adam LaGesse, Global Warehousing Director at Spikeball 

Distribute inventory more tactically

When you have access to a solid network of fulfilment centres, you have the freedom to distribute your inventory between multiple locations.

By distributing inventory strategically, you can better manage inventory holding costs, allocate product to best meet customer demand regionally, and protect your business from inventory loss in the event of unforeseen disasters.

Some 3PL services include software and analytics tools to help you distribute inventory. ShipBob, for example, has built-in analytics to provide you with the historical sales data to help you understand where your current customers are buying from, and which distribution centres see higher inventory turnover rates than most.

Based on this data, our tool calculates your ideal inventory distribution proportions, so that you know precisely how much inventory to store at each fulfilment centre to minimise shipping time, maximise cost savings, and prevent stockouts.

Consolidate your fulfilment to a single 3PL

To expand into new regions, some ecommerce businesses choose to partner with several different 3PLs in different areas, each of which operates a single fulfilment centre.

However, this approach is almost always more trouble than it is worth; not only does it require a business owner to constantly check in with different stakeholders, but each 3PL’s idiosyncratic warehousing SOPs can easily lead to inconsistent customer experiences and pointless inefficiencies.

Working with one 3PL that runs multiple fulfilment centres eliminates this hassle. With the right partner, you gain all the benefits of a broad distribution network without complicating communication or juggling dozens of platforms — and with one standard set of procedures for ecommerce fulfilment, orders are fulfilled uniformly every time.

Getting started with ShipBob is easy

With a global network of fulfilment centres, ShipBob makes it simple to optimally distribute your inventory across multiple locations, save on shipping costs, and achieve 2-day delivery.

ShipBob’s distribution network includes dozens of fulfilment centres across the US, Europe, and Australia, making both regional and international expansion simple and cost-effective for smaller DTC brands.

Using our analytics, merchants can calculate their ideal inventory distribution to better meet customer demand while avoiding stockouts, backorders, and deadstock.

Powered by best-in-class fulfilment technology, ShipBob also provides full visibility in operations throughout the entire distribution network. From one dashboard, merchants can check real-time inventory levels, track orders through the supply chain, manage warehouse operations, and more — all while ShipBob’s trained experts handle order processing, fulfilment, and shipping for you.

To further optimise your 3PL experience, ShipBob also tracks critical metrics such as inventory turnover, order accuracy, and time in transit, and on-time percentage at every location you utilise.

With this data, you can identify opportunities for improvement and optimise supply chain management for success at every location you utilise.