Third Party Logistics (3PL)

[MikeLiv]

Hi all,

Hope you're keeping well.

I wanted to ask for some advice hopefully from you, I am in the process of bringing out my own supplements brand in the UK. I am trying to understand whether it's best to outsource my fulfilment or whether I should manage this myself at the beginning of the start up (I am in the very early stages, so I haven't got a final product yet). I'll briefly explain my situation:

I am still working full time, which pays very well (benchmarked against average UK earnings), and so leaving this job to dedicate more time to fulfilment doesn't make monetary sense at this moment, therefore I was thinking that to be able to run the business whilst sustaining my job at the beginning I could follow the below steps:

- Have the product manufactured
- Shipped to a 3PL (i.e Amazon multi channel or another third party company)
- Invest my time in marketing and other business areas while I have my job

Therefore I can manage the business 'remotely' without having to be too hands on in the nitty gritty (i.e packing and shipping) but I am aware this will eat in to my margins.

From research it looks like it'll cost circa £3.50 per item for a 3PL + shipping + storage fees, my product will sell for circa £30 + P&P and there will be manufacturing/ other associated costs.

May I ask, am I crazy in thinking it will be best to outsource the order fulfilment at the beginning, or based on my circumstances does this make sense and it isn't too crazy to look to outsource this and include the cost against your margins?

Any advice etc. would be very helpful!

Kind regards
Mike

 

[LanceUk]

Hi Mike,

Fair warning - I have no idea of the supplements or health/fitness industry (my rotundness will vouch for that) and I have only scant experience using 3PLs for a contract I blagged my way into for 6 months and then for a dot bomb.. er.. com startup... Handling volatile goods... sort of...

Form your post, you will be running/building the business, effectively part time because of your earnings (many congrats).. and you don't want to surrender that before your business makes a good enough income stream (and/or profit). But, for what is a consumer product, that approach to me is already sounding alarm bells. I haven't run a B2C business and am in the process of starting one up. And from my research so far, it ins't for the faint (or feint) hearted. Inquiries, complaints, charge-backs, returns (remember the Distance Selling Regulations), shipments not going as well as planned, etc.. they will all take your time, as well as managing the marketing, manufactuer as their runs run late, etc.. And I am sure there are many on here will have all sorts of other things to think about. You could earn yourself a pretty poor name if you don't have the time (or other people) to manage all of this...

There are very few businesses that are profitable day 1 - or at least to a point where the directors can draw a salary/dividends to sustain their current lifestyle. Infact, if you include the time to plan and execute to market, there are none profitable (or income producing) day 1 (no doubt someome will correct me).

So my first question is, if your research tells you this is a winner, why not surrender your income - or what is the USP that is so urgent you have to do it before you have enoughpersonal capital to tide you over while you build a business that overtakes your current income?

On the 3PL question - well, unless you are going to the expense of a warehouse, trucks, drivers, logistics software, etc etc.. I guess it is the best option day 1.. The total 3PL is c. 10% of the price - if it was something I wanted and was competitive with alternate products, that would not be the issue for me.. You would probably fidn through economies of scale, etc, that bringing it inhouse would be a lot more expensive and you would run a loss to be competitive... Again, others here are better placed than me to put in a useful opinion.

Best of luck..

 

[Mr D]

Using a company for the fulfilment can work out very well - they can be busy when you cannot.

I would suggest spread your risk around - use amazon for amazon stuff, use someone else for other sites sales. Very important to not have all your eggs in one basket - amazon is nice and all but somewhat volatile, they suspend almost on a whim and getting stock back or money out can be a fight.
But for amazon sales, amazon fulfilment will tend to be cost effective. Don't send all your stock to amazon - besides the cost of storing it there the problem is getting stuff stuck and weeks to get it back.

Hopefully you will be automating as much as you can? Or at least doing an hour or two of an evening manually entering details to get orders processed by your fulfilment service.

You will get returns. You will get stuff people tell you hasn't arrived. If you sell internationally you will get delays at the other end (Italy can be slower than walking the product to your customer there by hand).

Packaging and shipping products manually is more for those of us with time on our hands and a willing post office able to take the parcels / sacks. If you are full time in external employment that would be difficult to impossible.

 

[Francesca Vergani]

Hi all,

Hope you're keeping well.

I wanted to ask for some advice hopefully from you, I am in the process of bringing out my own supplements brand in the UK. I am trying to understand whether it's best to outsource my fulfilment or whether I should manage this myself at the beginning of the start up (I am in the very early stages, so I haven't got a final product yet). I'll briefly explain my situation:

I am still working full time, which pays very well (benchmarked against average UK earnings), and so leaving this job to dedicate more time to fulfilment doesn't make monetary sense at this moment, therefore I was thinking that to be able to run the business whilst sustaining my job at the beginning I could follow the below steps:

- Have the product manufactured
- Shipped to a 3PL (i.e Amazon multi channel or another third party company)
- Invest my time in marketing and other business areas while I have my job

Therefore I can manage the business 'remotely' without having to be too hands on in the nitty gritty (i.e packing and shipping) but I am aware this will eat in to my margins.

From research it looks like it'll cost circa £3.50 per item for a 3PL + shipping + storage fees, my product will sell for circa £30 + P&P and there will be manufacturing/ other associated costs.

May I ask, am I crazy in thinking it will be best to outsource the order fulfilment at the beginning, or based on my circumstances does this make sense and it isn't too crazy to look to outsource this and include the cost against your margins?

Any advice etc. would be very helpful!

Kind regards
Mike

Hi Mike, if you are in the very beginning I do not think outsourcing the fulfilment could be useful. I believe is better to try first and see the demand for your products, when the situation will not be manageable anymore you can start thinking about 3Pl. I am currently using Huboo Fulfilment which offers a very competitive price and it is very convenient. I wish you all the best with your startup.

Regards, Francesca

 

[owas]

Just a couple of points to add to this. If you plan to sell to Amazon for these types of products (food supplements) they have super strict requirements which quite often change, and they will stop the listing of your product. We are a 3pl company and see this quite often with this type of product. Also which I am sure you have already had taken into account, the expiry date vs how much stock you can shift. You'd be surprised by the waste we see despite stock rotation, due to overstock at Amazon. The prices you seem to have in mind for 3pl are nowhere near our prices, if you do go down this road feel free to get in touch.

 

[Martin Patfield]

Hi Mike,

I come from a 3PL background from having 50,000 sq ft of space in the past.

Amazon have strict labelling and palletising requirements. When we were in business they were only accepting blue chep pallets. Not sure if this has changed over the years at all? Probably not. Google for more information about what they are....
Their form filling is tedious too.

For shipment costs from 3pl warehouse to customer it would be beneficial to piggy back the courier rates that they can attract vs what you would get going direct with your own volumes. It's also beneficial that if your customer complains to you then you can get on the 3pl to chase down the courier
Do you have the time to chase up couriers when customers complain of damages or not delivered items?

Then paying for storage costs.


Personally, I would start out myself, maybe get a part time employee to help label, pack orders.


We dealt with major customers 1000+ orders a day, to a couple on their travels setting up a food subscription service because they needed more money to continue travelling. They got the healthy food delivered to us and we shipped it all out. Their business model on a subscription wasn't all that well thought out. By the 3rd/4th month they were down to 25% or less of their original starting point.

 

[MikeJ]

Thread is two years old...

 

[Martin Patfield]

Bloody hell. Didn't pick up on that. It was near the top of the forum due to a reply above me.

 

[MikeJ]

Bloody hell. Didn't pick up on that. It was near the top of the forum due to a reply above me.

Yeah, someone picked up an old thread to promote a website. Those posts have been deleted now for spam. Not your fault, it happens from time to time.