3PL inefficiencies and scaling struggles

By Oleg Mikhailenko
Published in Solutions
August 02, 2022
4 min read
3PL inefficiencies and scaling struggles

The jury is in- an inefficient choice of 3PL provider can lead to hundreds of thousands of dollars in additional costs tacked onto your bottom line, leading to a situation where your business can struggle to scale. In this post-Amazon world where speedy, cost-effective shipping is not only a nice-to-have but rather the expected norm, long shipping distances not only translate to delays, but to extra costs. Read on to discover how deliveries in excess of 1000 miles can kill your efficiency- slowly, and then all at once.

The amount of shipping zones a parcel has to traverse directly affects the price that product costs to ship. Although some couriers offer flat-rate shipping options, meaning that you pay the exact same rate regardless of how far the package has to travel (so long as it’s a domestic destination), many delivery options remain zoned. USPS, for example, helpfully breaks down which offerings are zone-dependent and which are not. Priority Mail, Priority Mail Express, and Retail Ground are zoned, while First Class Mail is not. Other couriers offer flat-rate mailers where customers have the option to ship domestically for a single price so long as the product fits within the mailer or box.

Weight is another metric that sellers often have to contend with. USPS’s recent change to zoning prices as of January 2019 affected all businesses, but as a package gets heavier, differences in price between zoning distances grows starker as well. A box that’s twenty pounds, shipped by USPS, within the same zone would already warrant a cost of 16 dollars. An additional zone would increase the price by only 38 cents, and a zone after that would increase the cost by just under 3 dollars. As you approach zone 6, however, the price jumps to over 16 dollars over the base cost, effectively doubling the price. To deliver to zone 8, the furthest shipping zone, essentially a coast to coast move, demands just under 62 dollars. This quadruples the price of shipping in only a single zone, potentially adding hundreds or even thousands of dollars to a company’s outgoing costs over the course of weeks, months, and even years. When you account for overnight shipping, that’s even more of a price burden. How can you avoid funneling your hard-earned dollars away?

Physical distribution and proper management of the distribution chain is the best way to manage costs by preventing costly shipments to zones 6-8. Physical distribution, simply put, is the process where goods are distributed across warehouses in different locations across the country or even internationally, so that no matter where a customer places an order from, the product can be dispatched quickly and at low cost. Warehouses are strategically placed to maximize one and two-day delivery range, or at the very least ensure that no more than three or four shipping zones need to be crossed in order to deliver a product. Many sellers focus on the time it takes to ship to different zones. After all, we live in a post-Amazon world wherein customers expect their much-anticipated purchases within that crucial two-day timeframe. 73% of customers expect affordable, fast shipping as a matter of cost, and almost a quarter of buyers will cancel an order if it will take too long or cost too much to arrive. However, the sheer cost involved in shipping between zones is often overlooked. A two-day shipping window typically translates to fewer shipping zones that any given box has to move through before arriving safely at its destination.

Reducing shipping zones isn’t as difficult a task as you might expect. First of all, if you’re handling everything yourself through the in-house fulfillment model, you can already get more people on the ground by outsourcing your fulfillment operations. Although you maximize control by picking, packing, and shipping everything, boxes can quickly overwhelm your living quarters and have you struggling to keep up. What’s more, unless you live in an extremely central and well-connected locale, you’re far more likely to encounter situations where you have no choice but to ship to the costly and far-flung zones 6-8. The simple act of reaching out to a 3PL can go a long way towards reducing these unnecessary costs.

But let’s say you already partner with a 3PL, and you’re wondering if you’re getting the best bang for your buck. Ask your 3PL partner to take a deep dive into your carrier bills and quantify exactly how many parcels are being sent to the costly zones 6, 7, and 8. For reference’s sake, any delivery distance within a 1000 mile radius will be classified within zone 5 at the very least. Therefore, you ought to insist that your preferred logistics and fulfillment partner should have a warehousing facility within at least 1000 miles of any customer in the continental US. If they’re unable to hold to that standard, you ought to shop around and see if you can’t do better. This is the health and longevity of your business on the line, after all. It’s difficult to scale when you’re being smothered by excessive shipping costs which may have to be passed on to your customer.

P2Pseller can help. Our unique and thorough algorithm helps you choose the absolute best fulfillment partner for last-mile deliveries and for fulfillment in general, making sure you choose a company that has the chops to help you avoid those costly zone 6-8 deliveries. We require our warehousing partners to provide the locations of all their facilities so you can make sure to choose businesses with central, well-connected locations. Register a free account with us today on our website or app to see exactly what we can do for you and the efficiency and long-term health of your ecommerce business, one optimization at a time.


Tags

#3pl#efficiency#shipping#tips
Previous Article
Which shipping carrier is right for you?

Oleg Mikhailenko

Co-Founder, CEO P2Pseller

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