E-COMMERCE brands & 3PLs: A TALE OF TWO GRAVITIES

ADVENTURES IN THE LOGISTICS TRADE: A BLOG SERIES

This is the first in a series of articles about life in third-party logistics. Our economy and our culture encourage certain kinds of businesses towards continuous self-promotion. Whole platforms like LinkedIn are devoted to it. (If I read another post that starts with the phrase “I am beyond excited to…,” I think I’ll puke.)

Because the logistics industry is quiet, invisible, inescapably physical, and permanently “behind the scenes,” its practitioners are conditioned to be silent and unobtrusive.

That’s too bad. You learn a lot doing background work on behalf of others. So we decided why not just share a slice of life from a sometimes ruthless realm. Ruthless, not because of cutthroat competitiveness or dishonest practice. But because of the nature of the realm itself. Because of, for lack of a better word, the sheer gravity.

Operating in Earth Gravity: The Self-Fulfillment E-commerce Business

Just like living and moving on Earth, a self-fulfillment e-commerce business operates within a familiar, manageable environment. They deal directly with their customers, have complete control over their inventory, and manage their own order fulfillment process.

Their margin profile might be relatively stable, but they also shoulder all the responsibilities and costs of fulfillment, including warehousing, labor, packaging, and shipping. These costs, akin to the force of Earth's gravity, exert a constant pull on the business's bottom line. However, the business has grown accustomed to these pressures and has learned to operate effectively within them.

Operating in Jupiter Gravity: The Third-Party Fulfillment Company

Now, let's consider a third-party fulfillment company operating under Jupiter's gravity. Just like Jupiter's strong gravitational pull, these companies face more substantial operational and financial pressures. They handle inventory and order fulfillment for multiple clients, each with potentially different product types, packaging requirements, and shipping preferences.

In terms of margins, third-party fulfillment companies can benefit from economies of scale, potentially offsetting the 'heavier gravity' of more complex operations. However, they also need to invest more heavily in robust warehouse management systems, advanced logistics technology, and a larger labor force. The increased operational complexity and overhead costs, akin to Jupiter's stronger gravity, require these companies to be more efficient and adaptable to maintain profitability.

TRAVERSING Different GravitATION REGIMES

While both types of companies might be shipping the exact same products, their operational environments and margin profiles are significantly different, much like operating under Earth's gravity versus Jupiter's. The self-fulfillment e-commerce business, with its direct control and simpler operations, is like working in a familiar, manageable gravitational field. On the other hand, the third-party fulfillment company, with its more complex operations and substantial overhead, operates in a much 'heavier' environment.

Successful operation in either 'gravity field' requires understanding and adapting to the unique pressures of each. Just as you'd need different strategies and equipment to survive on Earth versus Jupiter, these two types of businesses need different business models, operational strategies, and financial management tactics to thrive in their respective environments.

So let's talk about how excellence in self-fulfillment doesn't translate into automatic competence as a 3PL. Continue to extend the analogy of different gravitational regimes by looking at the metaphorical musculature developed in the "earth" gravity.

Increased Scale and Complexity

A third-party logistics provider (3PL) has to juggle multiple clients, each with their own unique set of requirements. This heightened complexity is like the increased gravitational force on Jupiter. The simple systems and processes that a self-fulfillment business uses on Earth might be inadequate to handle this complexity. As such, the 3PL would need to develop new "muscles" or skills to handle the increased workload and meet diverse client needs.

Investment in Technology and Infrastructure

While a self-fulfillment business might excel with a basic inventory management system and a modest warehouse, a 3PL would need to invest in robust warehouse management systems, advanced logistics technology, and larger or even multiple warehouses. They might also need to implement automated systems for efficient picking, packing, and shipping processes. These requirements are analogous to the need for stronger infrastructure to survive Jupiter's stronger gravity.

Managing Multiple Stakeholders

While a self-fulfillment e-commerce business primarily deals with customers, a 3PL has to manage relationships with numerous stakeholders – clients, customers, carriers, suppliers, and regulatory bodies. This requires a different set of communication and management skills, much like needing different survival skills to thrive on Jupiter.

Regulatory Compliance

A 3PL might have to navigate more complex regulatory landscapes, especially when handling products in sectors like food, pharmaceuticals, and cosmetics. Compliance with these regulations is crucial to avoid legal complications and ensure smooth operations, similar to how one would need to understand and adapt to Jupiter's atmospheric conditions to survive.

In conclusion, while a self-fulfillment e-commerce business might thrive under Earth's gravity, moving to Jupiter's gravity as a 3PL requires a whole new set of skills, investments, and strategies. It's not a mere step up but a quantum leap – one that necessitates careful planning, strategic investments, and a keen understanding of the new environment. Just as an Earthling would need to undergo rigorous training to survive on Jupiter, a self-fulfillment business would need to transform its operations to thrive as a 3PL.

WHY NOT GET THE BEST OF BOTH WORLDS?

Why even burden your young growing ecommerce business with the cost and time sink of self-fulfillment? If you’ve ever wanted freedom from the burdens of running your internal distribution, give us a call. We completely get it and you’d be surprised at how much we can make it still feel like you shipped it!