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7 signs it’s time to fire your 3PL

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[Update post from January 14, 2021]

Let’s face it: the always-on, always-open shopping experience demands seamless interaction across all shopping channels. As an online retailer, your brand and your order fulfillment partner, or third-party logistics partner (3PL), needs to be responsive and move quickly. This means your direct-to-consumer (D2C) fulfillment strategy has to be impeccable. 

For the consumer, the expectation for a seamless customer experience translates to self-service capabilities, making order fulfillment automation a key requirement for online brands and their 3PLs. 

For the fulfillment provider, the use of automation is evolving rapidly—from plain old EDI, software, and automatic integration to the more disruptive technologies such as robotics, AI, machine learning, and advanced analytics. 

Bottom line: a higher level of order automation and transparency is required today from your logistics partners to keep up with your customer’s expectations for a seamless experience, not to mention the efficiency and profitability of your brand. 

However, outsourcing order fulfillment to a third-party provider doesn’t always go according to plan. Even if everything starts off strong, rapid growth and/or external events can result in even the best partnerships going sour over time.

Here are 7 clear signs that the time has come to fire your 3PL:

1. Your 3PL provider falls behind during sales peaks

Are you aggravating and losing customers that took so much time to earn due to missed and late orders? Does your fulfillment partner fall behind during peak sales periods? Is your inventory processed fast enough? These are just a few symptoms of greater fulfillment inefficiencies. 

Your fulfillment provider may lag on processing inbound shipments and getting inventory on warehouse shelves. Slow stock replenishment rates can easily erode your bottom line. Returns can stack up and go unprocessed and fail to get timely resale, further bogging down cash cycles. Your critical cash conversion cycle could be suffering, in part, due to inattentive receiving and fulfillment processes which make for unhappy customers.  

Once received, new inventory and quantity counts should be available electronically on a timely basis. A modern order fulfillment provider will immediately scan each inbound item to capture appropriate inventory counts from the start and apply accurate weights and dimensions upon receipt. 

They will also make processing returns a priority. Services such as Returnly, Happy Returns, and Loop are raising the bar on consumer expectations for returns, offering instant refund processing, store credit, or seamless exchanges.

What to ask your provider:

  • What is your promised timeline for processing inbound products?
  • What are your procedures for processing inventory?
  • Can you provide the full history of each order from creation to shipment, through returns?
  • What is your on-time rate for Black Friday sales?
  • What are your dock-to-stock times during peak periods?

2. Cost-effective shipping strategies are hit and miss

Does your order fulfillment provider choose the most cost-effective shipping strategy to meet your customers’ demands? Your provider may be using expedited shipping when ground shipping could reach half of your customers in 2 days. Without automated rate-shopping services and carrier integration, you are leaving money on the table. 

You should be able to use multiple small-parcel carriers to balance cost with delivery expectations. A modern fulfillment company will offer you flexible carrier rate selection. Many online retailers find they can reach most of their U.S. customer base within 2-day delivery timelines at an economical price. Some online brands will also automatically upgrade ground and deferred shipping to express shipping on orders involving social media influencers or high-value shipments.

What to ask your provider:

  • Do you offer carrier rate shopping?
  • Do you analyze order history to optimize for shipping cost?
  • Do you position inventory to reflect population spreads?
  • For international shipping, do you offer clean customs documents?

3. You are manually uploading files to your 3PL

Is the lack of data automation at your 3PL causing you death by a thousand little things? Your provider’s lack of automation becomes your problem if your only options are to manually upload a .csv file or access an FTP interface. The ability to sync data in real-time between your systems and your provider’s systems is an essential element of modern e-commerce fulfillment—not rocket science. 

The automatic syncing of data in real-time should also give you visibility into orders and inventory. The ability to connect your online storefront with third-party e-commerce platform providers such as Shopify, Magento, Stitchlabs, or other systems should be a given with your fulfillment provider. A modern fulfillment provider will also offer seamless integrations to your core systems, such as inventory systems, order management systems (OMS), and returns management platforms.

What to ask your provider:

  • Do you offer automatic shopping cart integration with third-party providers?
  • Do you offer automatic order integration? 
  • Do you have online order integration?

4. We can’t trust our inventory numbers

Does it take you 60 to 90 days to solve an inventory issue or find missing inventory? The accuracy and integrity of your inventory can make or break your brand’s reputation and your bottom line. But without adequate software automation, meeting order fill rates and order accuracy targets are where many 3PLs fall down fast. The real cost of poor inventory management is spread over inventory carrying costs, lost customers, and lost productivity. Doing inventory counts is time-consuming and costly.

Inventory management takes constant care with real-time numbers at your fingertips to avoid stock-outs and stay ahead of trends. For example, cosmetics is one such product category that requires a lot of advanced control support due to the necessity of First Expired First Out (FEFO) or First In First Out (FIFO) fulfillment strategies — meaning that visibility of your inventory is paramount. 

Real-time, 24/7 visibility into your inventory is the hallmark of a modern fulfillment provider. The ability to view, query, and export data with full reporting capabilities is invaluable to any growing online brand. You have the opportunity to get powerful business insights when you can review and browse inventory and other operational data from your entire account database.

What to ask your provider:

  • What are your systems and processes for tracking inventory?
  • Do you offer real-time visibility into on-hand inventory?
  • Do you offer real-time inventory updates?
  • Are item histories transparent? 
  • Do you offer transparent order status reporting? 

5. We have no visibility and control over our operational data

Data trapped in silos is a sure-fire way to slow down your fulfillment and cause problems. Do you have to send an email to change an order? You’ve sent an email to your provider with an address change. Hours later, they write back telling you the order has already shipped.

If your 3PL has to go into their order system to make changes to an order, you and your customers are losing out. 

This is why brands and retailers, especially those selling apparel and footwear, need visibility into real-time inventory data; this allows for robust returns and exchange capabilities, including self-service returns, SKU matching, and custom packing slips. With this in mind, it’s hardly surprising that merchants list the visibility of inventory and supply chain data as top technological capabilities sought in their 3PL – behind only transportation planning and warehouse management.

Your 3PL should be providing transparent, real-time access to your operational data. You should be able to query the system to check current and historical order status and other metrics, 24/7. Open APIs enable seamless end-to-end management of complex digital services. For omnichannel, this means real-time order management and communication between the 3PL’s WMS and your core systems such as an online store and order management system (OMS).

What to ask your provider:

  • How can we do analytics on our operations? 
  • Do you have an API?
  • How can I access my data?

6. Our brand gets pummelled on social media because of bad fulfillment

Customer expectations for a satisfying post-click experience are ratcheting up every year as brand interactions become more digital and include numerous touchpoints.

You can’t leave the critical order delivery experience to chance. Missed or late deliveries, the wrong product, or lack of customer communications about delivery timing or back-orders are all fodder for consumer complaints on social media. 

If your 3PL or the parcel carrier is off their game, you may be one of the last to know it – until it’s too late. You may have already lost a customer who is eager to tell everyone about it by word of mouth and social media. According to a 2018 study from Convey, 84% of consumers are unlikely to shop with a brand again after a poor delivery experience.

A good fulfillment provider will provide you with transparent, proactive exception management tools. You should expect your 3PL to make it easy for you to solve your end customer’s issues. 

System automation is important to stay timely and proactive in customer service. This means systems are in place to automatically inform you of missed or late customer deliveries, inaccurate orders, or other customer service issues – and what the 3PL is doing about it when there are order problems or shipping issues.

What to ask your provider:

  • Are you proactive in reporting problems?
  • What are the methods you use to report issues with an order?
  • How do you help us manage customer service issues?

7. Our returns process is a big hassle

Do your customers have a hassle-free returns experience? The consumer is demanding an easy returns process and shouldn’t have to make a phone call to figure out a return. Amid high return rates for online purchases (as high as 30% for some product categories!), you need to keep your return-related costs down and preserve as much of the original revenue of the returned product as you can. If you have to email your 3PL to tell them about a return, you may want to rethink your returns provider.

Why is this so critical? Because according to the 2019 UPS Pulse of the Online Shopper study, 73% of online shoppers said the returns experience affected whether they would continue shopping with a retailer. If the experience is positive, you’ve hit on a strong customer retention strategy – but this all hinges on the capabilities of your 3PL provider.

A number of elements go into hassle-free returns for your end customers, including return forms and ideally the automatic generation of exchange labels with every order. Moreover, consumers want to receive credit for their returns – fast. 

A modern 3PL will integrate its WMS or other systems with third-party return services such as Returnly or other platforms to trigger a refund by updating the order status, thus getting the product back into inventory in a timely manner so it can be resold.

Merchants should be able to easily configure returns workflow with their 3PL on behalf of their customers, including creating exchange shipments and directing processes such as returning the item to inventory or setting it aside, following an inspection. Additional capabilities include the ability to check the status of your customer’s returns in real-time or send your 3PL an alert to expect a return tied to an order.  

What to ask your provider:

  • Do you have systems that allow us to access returns and exchanges, and guide returns workflow?
  • What tools can you provide us to generate RMAs (return merchandise authorization) for our customers? 
  • What tools can you provide us to distribute to customers for more information on how to do a return or exchange? 
  • Can you supply return labels to the customer?
    Do you have reconditioning services?

Wanted: a better e-commerce fulfillment solution

As an online merchant, you need to keep up with your end of the customer’s fluid expectations for a seamless customer experience. Your 3PL can’t leave your brand in the dust. Brand reputation, loss of customers, and lost opportunity—not to mention revenues—are all at stake if your e-commerce fulfillment processes are less than perfect. 

Transparency, visibility, and smart use of automation technologies are the baseline requirements of modern fulfillment. If your fulfillment provider has lackluster results, you may need to seek out a provider that specializes in D2C fulfillment and can handle today’s expanding expectations for a seamless customer experience.

Switching 3PLs might seem like a headache, but it’s well worth it to achieve a more efficient, streamlined fulfillment operation that can actually save you money in the long run. With customer loyalty in e-commerce resting more and more on seamless, end-to-end shopping experiences, it’s never been more important to ensure that your fulfillment strategy embraces the latest technologies and best practices for advanced D2C fulfillment.

Want to learn more? Find all of these recommendations and more within our full ebook “7 Signs it’s Time to Fire your Fulfillment Provider”.

Ready to start looking for a new 3PL partner? Check out our list of 21 questions to help you find the right 3PL provider for your needs.

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