Finding a Third Party Logistics Company (3PL) for Amazon Fulfillment

Episode 38

In today’s episode, we will be sharing our story with the audience on how Ken and I found a third-party logistics company to fulfill our Amazon orders (or expand into other marketplaces like Walmart).  The background of this episode comes from a conversation that Ken and I had a few weeks ago where we both admitted that finding a 3PL for our Amazon businesses had been on both of our to-do lists for a few months.  We decided that we would hold each other accountable for achieving this task by the beginning of Q4.  As we started this process, we decided to document our journey and make a podcast episode to share our stories. 

Let’s dive right into this episode and be sure to stay tuned for a strategy…

[00:01 – 12:00] The significance of finding the right 3PL 

  • We give some background on why we want a 3PL
  • What is 3PL and why is it important for eCommerce business owners 
  • The downside of Amazon Fulfilment 
    • The significant increase of storage fees in Q4
  • Two days shipping and the size of the warehouse 
  • We talk about the significance of shipping zones in 3PL companies
  • Steps on how we crowdsource the 3PL recommendation  list
    • Post questions on 3 related Facebook Groups 
    • Emailing all of our connections and colleagues for any recommendation 

[12:01 – 24:00] Questions to ask the 3PL company

  • How is the order being processed
  • What costs are involved 
  • Total packages 
  • What are my total fulfillment fees for products that stay for months
  • Numbers of the fulfillment centers
  • How quickly can they ship the orders
  • How will the order be packed 
  • Large order volumes
  • Shipping discounts 
  • How long does it take to receive and process products
  • Can they handle international shipping

[24:01 – 29:37] Finding the Best 3PL for Your Products

  • Finding the best 3PL will depends on what kind of product you sell 
    • Do your own due diligence, because what is best for other companies might not be the best for yours
  • Transparency on pricing is not on most of these companies website
  • We talk about the crowdsource of 3PL prospect funnel lists
    • See below for links mentioned
  • Find the downloadable pdf of questions and templates at  firingtheman.com/3plchecklist
  • Final words


Resources Mentioned:

——————————————————————————————

www.FiringTheMan.com

Facebook

YouTube

Instagram

Email us –> support@firingtheman.com

David 0:00
Since Amazon acquired Whole Foods, you know, they’re now selling perishables. If you order you know, lettuce or, you know, some of those perishable items, they can’t sit in the mail for two days. And so I think that Amazon probably is thinking about, you know, how can we facilitate efficient delivery for perishable goods? And if it works for lettuce, why? Why can’t it work for whiskey glasses or cell phone chargers or anything else? You know, in order to efficiently deliver your products, within one or two days, you’re going to need to have a lot of fulfillment centers, I am sending in a lot of inventory and that’s something as my company grows and scales. I’m going to want to know can you grow and scale with me?

Intro 0:45
Welcome, everyone to the Firing The Man podcast, a show for anyone who wants to be their own boss. Sit in a cubicle every day and know you were capable of more than join us. This show will help you build a business and grow your passive income. Straight up in just a few short hours per day. And now your host serial entrepreneurs David Schomer and Ken Wilson.

David 1:09
Welcome everyone to the Firing The Man podcast on today’s episode we will be discussing how to find a third party logistics company for Amazon fulfillment. The background for this episode is a conversation that Ken and I had a couple of weeks ago where we both admitted that we had finding a three PL on our to do list and it had been on our to do list for several months and we just hadn’t done it. We decided to hold each other accountable for achieving this task by the beginning of q4. As we started this process, we decided to document our journey and make a podcast episode to share our stories. So let’s dive in. Ken, let’s first start talking about what is your product

Ken 1:53
To kind of back it up a little bit. You know why? why we want a three PL just to give the audience kind of A vision of that is, you know, you’re selling on Walmart, I’m getting ready to sell on Walmart, with all the mess with Amazon’s warehousing lately, we’re adding just another warehouse where we can add another sales channel. So just reaching more customers and a little bit of diversity when Amazon decides, hey, I’m shutting my sending you off, I’m not not listing us prime, we can just flip listings over and fulfill with a 3PL. So it’s kind of crucial going to that next level.

David 2:31
Absolutely. So to discuss what a 3PL is. If you’re an e commerce business owner, order fulfillment is an integral part of your operations. as your business grows, you may find that fulfilling customer orders in house is no longer feasible. Can I know you and I have both done this at different parts of our journey and going to the post office every single day since working

Ken 2:54
in your office and not on your business.

David 2:57
Exactly. So you reach point where you need to expand your fulfillment strategy. And for many businesses, this means outsourcing fulfillment. And so in our businesses, we’ve done that through Amazon fulfillment, FBA. And that is great. They are, in my opinion, one of the best logistics companies in the world. But there are some downsides. And you know, one example, this comes up for me every year in q4. So on a standard size item storage is 69 cents per cubic foot for q1, q2 and q3. Now in q4, that goes from 69 cents up to $2 and 40 cents. And so they they do this, they get you in their system, and every q4 your your storage fees, you know, increased by a factor of four and that’s just, it’s really expensive and that is robbing your bottom line. And so Last year during q4, when I saw this come up, I thought to myself, I really need to get into a 3PL, just to avoid the these fees. I didn’t. And that was probably the first time getting into a 3PL company was on my to do list and, you know, nine months later I haven’t done it but we’ve gotten the ball rolling. And and we’re just going to kind of share with David as we’re exploring

Ken 4:26
this topic of a 3PL Can you explain some of the functions that they provide?

David 4:31
Yeah, absolutely. So, you know, first things first, they’re going to receive your inventory, you’re going to send them you know, 1000 units of your inventory, and they’re going to to receive them and then they’re going to warehouse them. So typically, you’re going to have a designated bin for each one of your skews. If you have an oversize item. You may have a pallet or certain area where all of your stock is held. So receiving warehousing. The next thing is picking up This would be when you receive an order on Amazon, somebody will go and grab that item. And then they will pack it. And then they will ship it to the end user. And some 3PLs handle returns. And some don’t. And this is this is something that I want to talk a little bit about because up until now, I have been receiving all of my returns to my house. Has that been the same thing for you? And that is, honestly it’s obnoxious. I get a package every single day with returns. And I’m on a first name basis with the UPS guy, he’s a hell of a great guy. But But, you know, once I get those returns, I put them in my basement and every three months I have to spend an entire day unpackaging them, re tagging them putting new barcodes on them and shipping them back to Amazon warehouse. Now some three pls. They offer this function where they’re going to receive your returns and they’re going to put them right back And your inventory and so that’s going to save you on shipping costs. And it’s just logistically an easier thing to do. And so as you grow and scale and sell more units, you’re going to have returns especially on Amazon where there’s free returns and so this is something that as we interview three PL providers, that’s going to be something that I ask every single one of them and honestly if they don’t handle returns that maybe

Ken 6:27
so David before we get into, you know some of the steps that you’ve outlined and interviewing through pls let’s back it up a little bit we did a an episode earlier on latest and greatest news now Amazon is what I’m calling putting the squeeze on seller fulfilled prime now they’re in there increasing or decreasing the timeframe because all customers want their packages the next day right so now what separates a 3PL so in my mind, you know you’ve covered all the functions of a 3PL receiving warehousing picking shipping returns, so am I Amazon in the US, I don’t even know how many warehouses they have. Now, it’s I think it’s well over 100 so they can they can spread out all of your inventory, let’s say you ship 1000 units in, they might, they might have, you know, 20 units at 60 warehouses or whatever, that’s horrible math, but you know what I’m saying? On a 3PL, is it one warehouse? Is it three? Is it 10? Like in your research? Like, what would you you know, can you talk talk to the audience about you know, 3PL and are there different levels of them?

David 7:32
Yeah, absolutely. And this is huge. I was just the other day I was working on some sales tax issues and one key there is, how many states do you have inventory in and at that time, I had inventory in 29 states. And so that that’s at least 29 warehouses. And so what that what that tells me is the way Amazon is able to do that today, shipping As they spread your inventory out all across the United States, and really, you know, all around the world, and, and they’re able, you know, I have a huge warehouse or a lot of my inventories in Joliet, Illinois. And so that inventory is probably only being sent to states that border Illinois, right, you know, you’re not traveling across the country. And I’m glad that you brought this point up because there are all kinds of 3PL’s out there. And you see some that are like mom and pop shops that have one warehouse. And, you know, just logistically, you’re not going to be able to ship from one warehouse and cover all your bases throughout the United States, you know, you would need to in order to do that you would need to, you know, do like next day air shipping, which is super expensive. And so this is something that as you’re looking for a 3PL company, you know, size does matter here, and that’s another question that I’m going to be asking every 3PL companies That I talked to is how many warehouses do you have? And today shipping is really important to me in my customers is that something that you can do and not only is it something that you can do but is it something that you can do 95 to 100% of the time because in order to do seller fulfilled prime you might have exactly and as we kind of share our journey into selecting 3PL you know we will bring on some some experts

Ken 9:26
on the show, interview them ask them questions and share with you guys. One thing I would like to mention is the shipping zones so I believe there’s five shipping zones in the US and depending on what shipping zones that 3PL is the timelines on how it gets there. Now obviously, Amazon doesn’t use shipping zones because they can reach everybody next day, but it is crucial for 3PL for the shipping zones. Now David, Can you discuss steps how you know how we identified Okay, you know, how did you make your list

David 10:00
Yeah, absolutely. So one thing I wanted to try to avoid is just starting with a Google search. And the reason for that is oftentimes whoever comes to the top of the page is the person that runs the best Google ad, and not necessarily the person with the best reputation. And so the first step that I took was, I posted this question to three Facebook groups. Does anyone have any recommendations for a 3PL to fulfill Amazon orders, and specifically, I posted that to Amazon FBA High Rollers that’s got 73,000 members. I also posted it to Amazon selling for beginners, which has 26,000 members. And lastly, I posted it in Amazon FBA domination for and they have 24,000 members. It’s a it’s a good place to start. And typically, if someone’s going to make a recommendation within one of these Facebook groups, it’s because they have experienced with them and that’s what I want. I want to talk to somebody who’s Use a 3PL, because a lot of these websites make really great promises. But until you talk to someone who’s a customer that 3PL you really don’t know. So that that’s kind of how I started this process. And my goal was to just come up with a list of say 10 to 15 companies that I could check out in vet myself, but I wanted to fill this funnel with recommendations. The second thing I did was anybody I’ve ever been in a mastermind with, or anyone that I’ve ever exchanged business cards with at a networking event, I sent them an email and ask them that same question is, Hey, I’m looking for a 3PL, I’m wondering if you work with anybody. And I got some good recommendations there. And again, just trying to fill this funnel with prospects. So I can go out and vet them in that that’s huge.

Ken 11:48
It’s a really good way to kind of scrape everything on the table in one big pile and start picking through it right. So what are some of the so now that you have your your bucket, you know, your funnel filled up your bucket? What are what are some of the questions that you’re going to ask them when you interview them?

David 12:08
Yeah, absolutely. And we’re gonna put every question that I go through, I’m gonna put this into a PDF document and we’re gonna load it on our website. So you can download this for free. But to go into the questions that that I’ll be asking these 3PL companies. The first is how are orders processed? Is it is it manual? Or does it sync up with your amazon seller central account. And this is really important because when you’re receiving several hundred orders per day, if you need to take that order information, name, shipping address, and manually put it into a 3PL software that’s going to be very time consuming. And in most of these 3PL companies, they sync up with WooCommerce they’ll sync up with your Etsy account, your eBay account, your amazon seller central account, and so that’s something that I that’s very important to me.

Ken 13:00
Yeah, absolutely. So, you know, we discussed recently I have put in sellbrite, which is a sales channel aggregation software, and 3PL would have to link into that to take orders from all the different channels. So that’s definitely, you know, high on my list.

David 13:18
Absolutely. The second question is, what costs are involved. And you know what I’m doing right now, I’ve got great fulfillment, I’m using Amazon fulfillment, and all of my customers get two day shipping. And so this at the end of the day is going to be a cost benefit analysis where I am, I am comparing the rates that Amazon is charging me and going to see if I can get better rates in the same type of service that I’m currently getting. And so I want to know everything in terms of costs. So packaging materials, like mailers or poly bags, is there an extra cost for that? storage fees? What about long term storage fees? How much per cubic foot are you going charge me Does that change throughout the year? You know, we’ve discussed that in q4, Amazon storage fees go up by a factor of four, they go up from 69 cents to $2 and 40 cents per cubic foot. That’s crazy. It is crazy. That is a big dent in your bottom line. And so that’s going to be something that I’m going to ask a lot of questions about is storage, return fees, you know, are you going to process my returns? And you know, is there an additional fee for that? And then, you know, lastly, pick and pack fees. And in anything else, I want to know the total package. And what I think I’m going to do is, in order to, you know, they will likely throw out a number of different statistics, but I’m going to give them the dimensions of one of my products. And I’m just going to we’re going to use that as an example I sell a product for $15. It is one inch wide, eight inches long and point seven inches thick. It comes in a polybag What are my total fulfillment fees if it sits in your warehouse for 90 days, if it sits in your warehouse for six months, and in that will give me an apples to apples comparison to what I’m currently being charged through Amazon. Sure. The next question I’m going to ask is, can you offer two day shipping so I can keep my seller fulfilled prime badge, or one day, you know, Amazon, they’ve talked a lot about one day shipping. And is that something that you’re going to be able to offer

Ken 15:28
one other thing to more of a joke, but yesterday, the FAA approved Amazon’s drone delivery. So I know it’s we’re kind of joking about it now but it’s not not too far off. So anyway, but one of the one of the throw that out there.

David 15:44
Yeah, I mean, that is something that would not shock me inside of five years. If if you’re going to see you know, drones doing doing deliveries. You know, when you compare that to paying somebody $15 an hour to drive a truck around, that sucks gasoline And depreciates or if you can just have a drone deliver that package. I think it’s, you know, it’s a more efficient way of delivering.

Ken 16:08
Yeah. Well, I mean, when the standard moves to one day delivery, what’s the next standard? You break it into hours? Right. So you would have what? 12 hour drone delivery for our drone delivery. That’s what we’re, that’s what we’re up against.

David 16:21
Yeah, in I think, especially since Amazon acquired Whole Foods, you know, they’re now selling perishables. If you order, you know, lettuce or, you know, some of those perishable items. They can’t sit in the mail for two days. And so I think that Amazon probably is thinking about, you know, how can we facilitate efficient delivery for perishable goods? And if it works for lettuce? Why Why can’t it work for whiskey glasses or cell phone chargers or anything else?

Ken 16:52
Yeah, yeah. You know what? We could be sitting in the podcast studio in three years, and we could order a cold beer and have it delivered here.

David 16:59
Yeah. I would not I, I’ve learned never to bet against Amazon. Right? So yeah, we’ll see what happens.

Ken 17:06
All right, sorry. We’re getting off track here. So David, moving along here. Next question. You’re gonna ask them about three PL fulfillment centers, how many they have and where are they located?

David 17:16
Absolutely. And I discussed that a little bit earlier. But you know, in order to efficiently deliver your products, within one or two days, you’re gonna need to have a lot of fulfillment centers. And, you know, currently, my inventory sits in 29 fulfillment centers throughout the United States. And you know, if they come back with we have two fulfillment centers and East Coast and West Coast, that’s probably a deal breaker for me. And so I really would like to see, you know, this be north of 20 warehouses that are evenly distributed throughout the United States. The next question I’m going to ask is, you know, how quickly can you ship my order, and again, this kind of goes back to the one or two day for filament that that we talked about. Another question I’m gonna ask is How will the order be packed? Most fulfillment houses will allow you to use your own branded packaging, but some may not. You know, for instance on Amazon, they’re shipping and Amazon boxes. And that’s something that I think if you’re going to do branded packaging, you might as well do it right. You know, I’ll use the example of like a shoe box. I have a shoe box that I bought a pair of Cohens in, and it’s really nice. And I don’t use it as a shoe box anymore. But I I put stuff in it and it’s in my garage. And I think if you have really nice brand packaging, you can have that be reuse, people will put that in their house. I’ve also seen people do packaging where it perfectly fits $1 bill, and so it can be like a little money box or something. And so, again, I’m getting off topic here, but branded packaging is a big deal here.

Ken 18:51
Absolutely. One thing I would definitely like to add in here is that Amazon just launched recently, within a few weeks, they have basically a note branded packaging offer or it’s called like a white label packaging or something clear packaging, I can’t remember the name of it, but they just recently offered that. Anyway, just thought I’d throw that out there as an option and, and they actually only offer it in certain fulfillment centers. So if you go into your seller central and you’ll come to your inventory, it’ll actually there’s another line item that says, however many units you have, that’s in this blank box inventory. So

David 19:27
definitely, so kind of kind of getting back to our our discussion about questions for the 3PL companies. Another thing I’m going to ask is, can you handle large order volumes, for instance, you know, in q4, ramping up for the Black Friday in Christmas season, I am sending in a lot of inventory, and that’s something as my company grows and scales. I’m gonna want to know, you know, can you grow and scale with me? I think kind of the opposite side of this is can you handle small order volumes. For instance, I’ve got a couple products that I sell, maybe two 10 a month, but they’re very profitable. And the supplier that I get them from doesn’t have a minimum order quantity. And so I’m fine with selling 10 a month that works for me. And so to the extent that, you know, those 10 units are going to have a dedicated bin, and there’s going to be, you know, a storage fee specifically for having that been, maybe that that doesn’t make sense for me is to outsource 3PL services for some of my lower volume products. You know, another question I’m going to ask is, how large are the shipping discounts? That’s one thing that I think really makes Amazon advantageous is they have contracts with all major delivery companies, and you can send things through Amazon for 50% less than you could if you were to just take that package to the post office and send it you know, first class mail and that’s something that you know, having those contracts in place is going to be really important.

Ken 20:54
Yeah, absolutely. I think the the larger the volume that you have the, you know, the better the disk Moving along. What’s the next question?

David 21:02
So one question and this is very important, very, very, very important to me is how long does it take to receive and process products? And, you know, I’m sure it can, you’ve been in this situation where you have an item, it’s running out of stock, you’ve done everything correctly, you know, you’ve ordered on time, you’ve got the correct number of units showing up to Amazon warehouses, and then they sit in receiving for weeks. And I currently have this situation going on where I have 1000 units sitting in receiving, and I’m out of stock. And it’s a frustrating way to start my day. But every morning, I wake up and I, I check that in every day that it’s still sitting in receiving, it just makes my blood boil. And so this is something you know, having some sort of guarantee on receiving and processing is is very important to me. And as I researched these companies, some of them highlighted the fact that No, we we processed everything that we received within two or three days. And that’s really important to me because Amazon doesn’t have that guarantee. And as a result, you see their warehouses getting backed up.

Ken 22:11
Yeah, absolutely. Yeah. You know, personally losing 10s of thousands of dollars, had shipment that’s been sitting on the dock for five weeks and been out of stock for three weeks. It’s it’s, it’s very frustrating. So I definitely agree this is fresh, and I’m pretty sure it’s fresh in everybody’s mind. But yeah, it would definitely it would high high priority, have an SLA on receiving products,

David 22:35
for sure, for sure. In the last question I’m going to ask is, can you handle international shipping, and again, I’m looking for a 3PL that’s going to grow and scale with my business. Right now. I’m focused primarily in the United States. However, I would like to go international that’s, you know, in part of my game plan for the next year, is to expand into Europe in the UK. And you know, this To me, it’s not going to necessarily be a deal breaker. But to the extent that the 3PL said, Oh, yeah, we’ve got, you know, we’re a global company. And we’ve got, you know, we’ve got a ton of warehouses over in Europe in the UK, that to me is going to be a huge plus. And so, again, as I have them on the phone, I’m gonna be asking these questions. And this answer is pretty important to me.

Ken 23:24
Yeah, absolutely. You know, I didn’t even think about that one until you said it and not to spoil anything, but we have a guest on the show pretty soon. That’s an expert in international market. So it’ll be awesome. But you’re right. Like, if you’re looking to expand internationally in the next few years. Why wouldn’t you look for that now, or at least make sure that’s compatible? Let’s say you narrow it down to two 3PL. And one has international capacity and one doesn’t. It might be a decision, you know, make for you. Absolutely.

David 23:55
Now, one thing one thing that I found as I was doing this research is At the end of this process, I don’t think that we’re going to be able to make a blanket recommendation on the best 3PL to go with, there are certain three pios that specialize in oversized items, there are certain 3PL that that focus on, you know, smaller items, some of them, you know, guarantee that two day shipping and that’s important. But I think depending on what type of product you sell, is going to determine where you go, you know, for 3PL and so Ken and I are going to be sharing at the end of this process, who we end up going with and the reasons for that. But I do think that doing your own due diligence is important here because you know what is best for for me and my company may not be the best for Ken and his company. And we’re gonna we’re going to share that process with you as we go through it. The second thing that I learned was transparency on pricing is not on these companies websites. For instance, I’m going to share a list of 10 here in a couple minutes. But as I looked at their websites, very few of them had a pricing page. The typical starting place is you schedule a call with a sales rep, and they talk to you about your business, how many orders you’re shipping out per month, how big they are, and then they will give you a price quote. And so one prospect that I found that did have pricing was shipbob. So I’ll just kind of read through their rates that they offer, but you know, one thing that they go to market with and really like to highlight is transparency in pricing, which is why they put it on their website. So for receiving, they’re going to charge you 25 bucks for the first two hours. And then after that, it’s going to be $35 per man per hour. After that, on storage, it’s going to be $40 per pallet per month. $10 per shelf per month, and $5 per bin per month, and on their website. They give you the size of a pack. At the size of a shelf, in the size of a bin on picking packing, this is going to be free for the first five picks in an order and 20 cents per pick. For the sixth pick in there after packaging is going to be free. They’re free plain boxes, mailers tape to pack your orders and shipping. They say this varies on destination weight dimensions, shipping service and more, which I understand you can’t can’t necessarily give a flat rate on shipping. A shipment to Hawaii is a lot different than than a shipment, you know, 30 miles down the road. So anyway, that’s pricing on shipbob

Ken 26:38
So David, you know, like you discussed earlier you you know you crowd sourced a whole funnel of prospects for three pls What did you come up with?

David 26:47
Yeah, so I’m gonna read through this list in in one thing that I want to make clear is I have not vetted these companies and I have I have scheduled couple calls with with a few of these. But I am just starting The vetting process and so we’re going to do another episode sharing with you the results of this vetting process. But in terms of companies that were recommended to me, that appear to to do solid three PL services for Amazon sellers. I’m just going to read through the list here. So FedEx fulfillment, e fulfillment service, ship my orders, warehousing and fulfillment, speed commerce, three Pl solutions.co.uk, direct outbound.com, new joysticks and deliver with two hours at the end. And so these are these are all prospects in my funnel. I’m going to be scheduling calls with these companies over the next couple of weeks. And hopefully, we’re going to have a couple representatives from these companies on the podcast to share more knowledge about the three PL service I think, as people continue to grow and scale, at least looking at a three PL service is something that’s very valuable. At the end of it you may realize that hey, for the size of products or for the type of products that I’m selling Amazon fulfillment is the best way to go and but right now I don’t know that there’s some uncertainty and I would like to eliminate that uncertainty through proper due diligence of these various three PL services.

Ken 28:18
Yeah, absolutely. And also one thing to add for listeners out there that are also looking for a three PL as well we’re gonna have a downloadable on the website with all of the questions that that David come up with firing a man.com slash three PL checklist. It’ll be a quick downloadable PDF with all of the questions in a template for you.

David 28:38
Perfect. Thank you everyone for tuning in to today’s Firing The Man Podcast. If you like this episode, head on over to www.firingtheman.com And check out our resource library for exclusive firing demand discounts on popular e commerce subscription services that is www.firingtheman.com/resource. You can also find a comprehensive library of over 50 books books that Ken and I have read in the last few years that have made a meaningful impact on our business, or that head on over to www.firingtheman.com/library. Lastly, check us out on social media at Firing The Man on YouTube at Firing The Man for exclusive content. This is David Schumer and Ken Wilson. We’re out

Transcribed by https://otter.ai