E-commerce fulfillment during the holiday season often has different requirements than the rest of the year. This means that your 3PL provider will face a different set of demands – and you need to be certain that they have the bandwidth and capabilities to meet them.
In this blog, we’re going to cover 7 vital questions you should be asking your 3PL partner before the holiday season.
The holiday is the busiest time of year for many ecommerce businesses, with gift-buying traditions driving increases in sales and website inquiries. This requires a rapid scale-up in operations to meet demand, which in-house fulfillment workflows often struggle to action due to limited staffing, technology, and storage space in their own warehouse.
By outsourcing fulfillment to a reliable 3PL provider, e-commerce brands can focus on their seasonal marketing and driving sales, whilst leaving order fulfillment to the professionals.
If you already work with a 3PL (third-party logistics) provider, you might not see a reason to assess your partner as the holiday season approaches. After all, what’s the need if you have a good relationship and they are meeting your performance requirements?
But while your 3PL might be entirely competent at coordinating the order fulfillment process during the rest of the year, managing peak season is a different undertaking. This is why as the holiday season draws closer, it’s important to sit down with your fulfillment partner to determine their readiness for overseeing your holiday fulfillment strategy.
Here are some questions to raise with your 3PL before the holidays begin:
This is the number one question you should be asking your fulfillment provider as peak shipping season beckons. Retail is a cyclical business, where activity spikes in the months leading up to the end of the year. This means that any partner should have the ability to manage a sharp increase in order volume at their fulfillment centers.
In practice, your 3PL provider should be reviewing sales and inventory data from previous years to determine what resources are required to meet customer demand. It’s a good idea to ask your team for a surge fulfillment plan to see how they plan on managing big online sales days, such as Black Friday and Cyber Monday. These events are massive revenue earners, so your logistics process needs to be able to handle increased demand without delays or errors.
More orders coming in means that more labor is required to ensure that products are picked, packed, and shipped quickly enough to ensure fast delivery. Suppose your 3PL provider doesn’t scale up their warehouse staff during the holidays. In that case, you’re much more likely to experience delays in processing and shipping orders, especially for events such as flash sales that help you to shift seasonal inventory. With such a tight labor market right now, it’s a good idea to understand your 3PL’s fulfillment automation capabilities and how this lessens their need for seasonal labor.
Every ecommerce business should have support available to assist customers with issues related to orders, shipping, and delivery to ensure a positive customer experience. This is even more important during the holidays, when you’re likely to have a larger proportion of first-time customers and anxiety around on-time delivery during the busy season. However, a larger order volume can result in high demand for support that your team cannot easily meet, resulting in lengthy delays.
A 3PL provider will normally have preferred carrier partnerships that they use during the year. However, it’s always worth inquiring if they expand their carrier selection during the peak shipping season, when peak season surcharges and other handling fees push up shipping costs considerably.
It’s important to be aware that the more options your 3PL has available, the more shipping flexibility you have during the busiest season. This is important because your holiday season shoppers are likely to be more spread domestically or internationally than customers during the rest of the year. If your 3PL provider cannot easily shop around for more discounted shipping rates during the holiday season, you’re likely to end up with sky-high shipping costs that take a considerable chunk of your bottom line.
Peak season surcharges
Peak season surcharges kick in during peak season to help parcel carriers manage higher operational demand and should form a key part of your holiday shipping strategy. Additional fees can add significantly to your shipping costs, which is why it’s important to have multiple carrier relationships at your disposal to manage these expenses effectively. Different shipping carriers will implement different surcharges, so having a 3PL provider who can help your ecommerce business compare options can help you access significant cost savings.
Keeping the dimensional weight of your packages as low as possible is essential to save money on shipping during the holidays. Because automated sortation systems are set up for certain parcel dimensions to increase efficiency, many parcel carriers levy steep fees when any additional handling is required for oversized packages. As your online store grows, it’s even more important that your 3PL provider practices advanced cartonization to keep parcels as streamlined as possible.
Minimum shipping threshold
Many shipping carriers have a minimum monthly order volume that businesses must meet to qualify for wholesale rates. It’s important to enquire which parcel carriers your 3PL provider works with can offer lower rates, as this all depends on the size of your partner’s shipping volumes.
Limited space within fulfillment centers is a common issue for brands during the peak holiday season. With more inventory required to meet customer demand for holiday gifts, ecommerce businesses need to begin accumulating stock well in advance of holiday events like Black Friday. However, they need somewhere safe and secure to store it.
For this reason, you need to ensure that your 3PL provider has the necessary space available in their fulfillment center to store fresh inventory ahead of the holiday season. Because space is at a premium at this time of year, your fulfillment partner may charge more for storage during peak season. You may also require a change of storage strategy to optimize space or need to adjust your inventory planning to accommodate your provider’s storage availability.
Using multiple warehouses during the holiday season is one of the most effective ways to reduce shipping costs. By allocating new orders to the fulfillment center which is closest to your customer, you can shorten last-mile delivery and avoid costly, cross-country shipping methods. If your 3Pl provider has multiple fulfillment centers, it’s always worth enquiring whether you can be allocated additional space in other warehouse locations to ensure quick delivery and boost customer loyalty.
Scaling up – and scaling down
Being able to scale up capacity isn’t a bonus if your 3PL provider isn’t able to scale down just as efficiently once the holiday season is over. Otherwise, your business will be paying for warehouse locations, labor, and shipping materials that outstrip your fulfillment needs during quieter parts of the year. Make sure that your fulfillment company has a robust post-holiday season plan to optimize costs as much as possible.
Your regular inventory may not have any need for specialist packaging or kitting, but this could be very different during the holiday shopping season. Gift kits, subscription boxes, and bundles see a lot of demand during the holidays, so you may want to consider adding these to your holiday inventory selection.
However, you first need to make sure that your 3PL provider can manage order fulfillment for these SKUs. Kitting and custom packaging are considered value-added services because they aren’t normally included in standard fulfillment pricing, so this will likely come at an additional cost.
The holiday season is when consumers are primed to expect offerings such as free gift wrapping or promotional packaging. This is a significant value-add that helps your brand to stand out during a competitive time of year – if your 3PL provider can enable you to offer these services. Bringing custom packaging into the order fulfillment process may lengthen the time it takes to fulfill each order, which could be a problem during periods of high demand. It’s important to check with your partner whether they have the right processes in place to manage a custom fulfillment strategy.
Grouping multiple products together as a single offering is a very popular strategy during the holidays, as it allows ecommerce brands to repurpose excess inventory and increase convenience for customers. However, kitting adds an additional step to the fulfillment process, as product kits need to be assembled and packaged manually if they aren’t produced as a set. Given the additional labor this involves, kitting can be an expensive additional fulfillment service that needs to commence way in advance of holiday sales.
Return label insertion
Return rates are much higher during the holidays than at any other time of year, thanks to gift-gifting activities and a high proportion of online sales. This can quickly develop into a massive backlog in your 3PL provider doesn’t have a streamlined process for managing returns.
One way that an ecommerce business can speed up this process is by including return paperwork or shipping labels within the package. This means consumers don’t have to get authorization from a customer support person first, which can cause significant delays during the post-holiday returns crunch. Check with your third-party logistics provider on whether you can add this to the packing process.
Smart inventory management by your 3PL provider is vital at any time of the year, but especially during peak periods when inventory turnover is faster and stockouts are much more likely to occur. The holiday season also sees a higher rate of inventory replenishment, which puts pressure on third-party logistics providers’ receiving capabilities. As the holidays get closer, brands need to be certain that their fulfillment company can manage this increase in activity.
Most 3PLs will have a shrinkage allowance built into their SLAs, which allows them to write off up to a certain percentage of stock due to damage, loss, or theft. However, shrinkage rates often increase during the holiday season due to a range of factors, such as:
Check with your 3PL provider to see whether they have a plan for how to keep shrinkage down over the holidays. This could include additional staff training or extra manual inventory counts.
Your 3PL provider should offer an inventory management system that integrates with your online store, meaning your inventory levels can be updated in real-time to reflect the latest sales or returns activity. This enables you to keep track of order volumes and ensure you have sufficient inventory to fulfill outstanding orders. If your partner doesn’t have an in-house system, ask whether they have any integration partners who could offer a solution.
Now is the time to begin pruning SKUs from your database that aren’t offering a good return. This improves accuracy, frees up more storage space for better-performing inventory during the holidays, and reduces the percentage of dead stock that make up your SKU base. Your 3PL provider should be able to assist you in determining which SKUs should be discontinued or retained with some adjustments via metrics such as inventory and storage costs, supplier fees, and historical sales data.
Your 3PL’s lead time (how long it takes for a completed order to reach your customer after its first received) is an important metric that helps to measure the efficiency of their supply chain and logistics operations. Lead time frequently lengthens during the holidays due to increased sales activity, so it’s important to clarify with your 3PL provider whether they can maintain their current output once your order volume rises.
Dock to Stock
Lead time doesn’t just include items that are already in inventory, but how long it takes for new stock to be processed and reach its intended picking location. Dock to stock KPIs often suffers during the holidays, as higher levels of inventory replenishment can result in processing backlogs. Any delay in inventory arriving on the warehouse shelves can result in backlogs in dispatching orders, especially for popular products.
In the lead-up to the holidays, your customers are going to expect rapid delivery options, such as two-day shipping and even same-day delivery. To meet such quick turnarounds, there is very little room for errors or delays in the fulfillment process. Ecommerce businesses should be working closely with their 3PL in advance of the holiday season to make sure that their partner can meet these timeframes.
Service Level Agreements (SLAs) are signed with your 3PL partner at the beginning of the relationship to outline what your expectations are for the fulfillment services you’re paying for. This includes shrinkage allowance, time to ship, Perfect Order Rate, inventory accuracy shipping timeframes, and more. If your 3PL doesn’t meet these KPIs, they could be liable for financial penalties.
Sometimes, 3PLs have different service requirements in effect during peak season due to higher order volumes and pressure on parcel networks. Be sure to consult your SLA carefully to see what holiday fulfillment KPIs you can hold your partner to – and what is out of their control.
With decades of omnichannel expertise across multiple industries and a full suite of value-added services, Ryder E-commerce by Whiplash is the ideal fulfillment partner for both emerging and established e-commerce brands during the holiday season. With 28 fulfillment centers totaling more than 10 million square feet of warehouse space, Ryder E-commerce by Whiplash is ready to scale alongside your business and provide your customers with memorable holiday fulfillment.