The Boss Club Podcast
The Boss Club Podcast
Ep. 14 - The Ins and Outs of Having a 3PL Ship Your Products For You
Tired of going to the post office to ship your products every time you get an online order? Eventually you might grow to the size where you can actually have another company store your inventory and fulfill (i.e. ship) your orders FOR YOU! David actually used to own his own shipping and fulfillment warehouse, so he's the perfect one to talk through the ins and outs of having someone store and ship your products.
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Some of you running your businesses might end up growing to the scale where you totally outgrow your home to where instead of just carrying a bunch of inventory in your room or in your garage and shipping it out manually, you might actually find a separate company to hold all of that inventory and ship it out on your behalf.
SPEAKER_00:Welcome to the Boss Club Podcast, a show dedicated to helping you grow your business faster, more profitably, and with fewer mistakes. And now your hosts, David Grubbs and Charlie Gassmeyer.
SPEAKER_01:Welcome back to the Boss Club Podcast. This is episode number 14. This is Charlie Gassmeyer, joined as always by my co-host and co-founder, David Grubbs. Something you might not know about David, you might know that he has started many different businesses, more than I have, but one of those businesses was actually a warehouse, a fulfillment center, a 3PL, sometimes what they're called, a third-party logistics provider. And the reason this is really important and relevant in today's episode is that some of you running your businesses might end up growing to the scale where you totally outgrow your home to where instead of just carrying a bunch of inventory in your room or in your garage and shipping it out manually, you might actually find a separate company company to hold all of that inventory and ship it out on your behalf. And so there is no one better to talk about that than David himself, because he owned one, he started one, he ran one, and then eventually even sold it to a larger company. And so he knows all of the ins and outs of this. And I really just wanted to kind of interview him here to answer some questions. And that way you can have kind of behind the scenes of exactly how these warehouses work and when it might be a good fit for you. So David, thank you for letting me pepper you with questions here. Let's start out by just kind of answering for our listeners So kind of what is a 3PL and what services do they typically provide?
SPEAKER_02:So a 3PL is a third-party logistics provider. Basically, what it is, is a company that's handling all of your logistics for you. And so there's two main services that they offer. One is warehousing, and the second is order fulfillment. So in warehousing, there's a variety of different services that they can offer there, whether you need room temperature or climate-controlled facility. Maybe you've got food items and other things that need to be stored at a particular temperature. Maybe you need to have FDA registration for your particular product. So those are just things to look out for on warehousing. Order fulfillment is literally where they go and pick your item off the shelf, put it in a box and ship it out the door. And so that is fulfilling an order. So order fulfillment. And so there's a variety of different ways they can do that. One thing I'll just add to this is that sometimes warehouses will also do kitting for you. And kitting is basically kind of light assembly. So if you need to do a variety of different things associated with putting things. parts or pieces of your product together to make it whole. That's called kitting and warehouses can do that for you as well.
SPEAKER_01:So you're saying basically everything associated with anytime you get an order, what happens to actually assemble it, put it together, ship it, that's no longer your responsibility. It's outsourced and super automated, which is awesome. I can say from experience, as I obviously know you can, that is a game changer when you no longer have to do work anytime an order comes in. Like, oh man, that is literally life-changing. But kind of the next question is kind of, well, when's the right time to move to 3PLs? Probably not when you first launch. You might have to work up So there are
SPEAKER_02:two different aspects you want to look at when you're trying to consider if now is the right time to go work with a 3PL. The first one is order volume. So you want to make sure you're shipping between 10 and 15 orders per day or 3 to 500 orders per month before you go talk to a 3PL. They want to make sure that you have enough business for them to be able to make money. It needs to be worth it for them. And so once you get to that point, you're probably going to the post office enough that it's starting to get annoying and you can start to hire other people to handle the more manual aspects of your business. And so again, 3 to 500 orders per month or 10 to 15 per day, you you're going to be in good shape and ready for one of these 3PLs. The other thing you want to take a look at is just the nature of your product. If you've got something that's light and small, that's something that's very easy to ship and store, you're a great candidate to use a 3PL. If you're building out custom furniture and shipping that out that's big, heavy, hard to store, that may be a little more tricky and also more expensive to hire someone else to do. And so if you've got a consumable good, great, or a consumer product, that's probably a good fit. If you've got something big and awkward, you might have to do that in-house or purchase your own warehouse at that point. So anyway, just something to think about when you're looking to go use a 3PL.
SPEAKER_01:All right. So at this point, sounds a little too good to be true where it's like, hey, let's have someone do all of this stuff for me. But what's it going to cost? Can you kind of give some parameters on what the pricing structure is to hire 3PL?
SPEAKER_02:Yeah. And unfortunately, a lot of warehouses handle this so differently. A lot of them have different pricing structures or ways that they charge you. Some of them are really friendly and they have some sort of flat rate where they'll just charge you a flat number, like two or three dollars per order shipped. Others kind of nickel and dime you. And so it's like working with a telephone company. It can get a little frustrating. But there's some general things you're going to look out for. The first thing is a pick pack fee. So this is basically your per order fee. It's what you pay anytime an order comes through. Typically, you're looking at something between 75 cents and$3, depending on how complicated your product is. The next thing you're going to be that makes up actually the bulk of your bill is shipping costs. So this probably makes up 60% of all costs. And this is usually directly from USPS or UPS or FedEx or whichever provider works out best for your particular product. Usually that's a flow-through cost, but again, it is quite expensive. Even though at this point you're going to be getting discounted rates by using a 3PL, just because they ship so much volume, you're going to get discount rates. It's still the most expensive aspect of storing and shipping a product. The third aspect is actually the cheapest part, which is actually called pallet storage. So this is just how much product you're storing per month. And it's usually some flat rate between$10 and$15 per month per pallet. And so you can kind of calculate that yourself. And then the fourth one is any monthly minimums. A lot of companies that we're going to recommend today don't have monthly minimums, but some of them will. And that just means that the minimum bill per month is X number of dollars. And so that might be$1,000 or$2,000 a month. But again, a lot of them won't have that. So if you find one that has a monthly minimum, I would move on. I would go find somebody else. Just as a new entrepreneur launching your business, getting started, you don't need to worry about that at this point.
SPEAKER_01:So it sounds like you're going to have to do a little bit of math to figure out, okay, what's the all in costs? It's not just like, oh, it's$500 a month or it's a thousand dollars a month. I mean, it's how many orders do you have? What's the shipping cost? Do they mark up those shipping costs? How many pallets do I have to store? Is it one pallet or is it 20 pallets? Cause I've got a lot of stuff and then figure out, okay, based on that and how many orders I have, how much does it cost me per order? That makes sense. And I think, you know, One other thing I'd encourage our listeners to think about, and also when we talk about too, is to not totally just view it as an expense because like you already kind of mentioned earlier, you're paying for this so that you no longer have to go to the post office every single day, which is worth a lot in terms of your own time, effort, energy, and opportunity costs, frankly. And so while it is an expense, I think there's probably a breakeven maybe even financial based off of what you're paying at the post office. But but certainly in terms of your own stress level and headache and time devoted to being the one shipping the order. So expenses got to do some math to figure it out. But hopefully there's a pretty good ROI on it.
SPEAKER_02:Well, and a lot of times these companies will actually have a quote calculator online. And if not, you can always contact them. So the best thing to do is just don't worry about it. Go contact them, call them, tell them, hey, here's my business. Here's what I've got. And, you know, here's my monthly order volume. And here's how much stuff I need to store. Those two items will get you a quote in most places. And you can probably get that in 15 minutes and it'll at least give you an idea so that you can start budgeting for that. Even if you're not quite to 10 or 15 orders per day, if you're starting to approach that, go ahead and reach out. And a lot of times it'll help you kind of think through the math. The other thing I'll mention here is that's why we always harp on this, but it's important to have good margins in your product. If you're only making a couple of bucks per item that you sell, that doesn't give you much room to be able to work with a 3PL in order to scale up. And so having good margins allow So I want to
SPEAKER_01:encourage some of our listeners also that might not yet be at those minimum order quantities, kind of the three to five hundred per month or so that David's mentioning. I don't definitely don't get discouraged because I think there's some real benefits to actually still fulfilling things yourself. So, David, what are some of the I mean, behind the scenes, you can say because you own one. What are some of the downsides of actually hiring someone to take care of all your warehousing and fulfillment for you?
SPEAKER_02:So I think there are a few downsides to working with 3PL. The first one right off the bat is just cost. Instead of doing that work yourself, you're handing it off to someone else. And so it's kind of cost you more, it's going to eat into your margin. And so it's one of those things that you really want to do after you start to reach a certain per month order volume for that to make sense. The second thing is quality control. And so before I actually launched my own warehouse, I was working with four other warehouses, one every couple of months because of all the issues we were having. I would keep having to switch to a new provider. And that's why I ended up starting my own warehouses. I couldn't stand how poorly they were actually handling some of our orders. And so I actually had one lose 20,000 units of skincare product up in the rafters of their warehouse. I So the bar is kind of low in the industry. And sometimes you're going to run into headaches. And so if you're working with the 3PL, maybe they don't pack your box right. Or maybe they put labels on the wrong boxes and they go off to the wrong customers. Or maybe they lose product, like in the case of me and I had to go find it for them. And so there are definitely headaches anytime you work with any third party. Warehousing is not the only thing, but it's certainly a challenge sometimes. And it just adds complexity to your business. And so as you grow, it becomes more complex and there's more things to worry about. And so those are just a few tips. downsides of using a 3PL. It's not all roses and all of a sudden you just hand it off to someone else and it gets done. A lot of times there are additional headaches that come up as a result of that. But in general, as you grow, it can be a really good thing for your business.
SPEAKER_01:Well, I think even when you're still small, when you're fulfilling all your products yourself, I think I would encourage listeners that if you're still fulfilling, and I think probably most, the vast majority probably still are, to use that to your advantage. Like I remember, you know, trying to be opportunistic with Boss Club. Like if you got an order from someone that you were talking to that had a really unique story and they were excited to buy this for their, you know, their student or whatever, you could include a little note or something or say, hey, really love your story. Hope this is an encouragement to Sarah or whatever the conversation is. was. And so as you're shipping things out and you're still doing it yourself, you can stand out in a way that a lot of these big companies just simply can't because they have a warehouse doing it and they just can't offer the same level of customization and just kind of, hey, you can tell that you're really invested in your customer. And so don't get discouraged if you're not yet able to outsource this stuff. Really try to use it to your own advantage. All right. So, David, let's say that a student wants to go find a 3PL. Where would they start looking?
SPEAKER_02:So that's a great question. A lot of times you can simply go look for this on Google. So you're looking for a 3PL provider in your area, or you can search for a warehouse in your area. But I'll just give you some that you can go take a look at right away. One is ShipBob. Another is Shipwire. Another is Fofilio. And then even Amazon FBA. So Amazon has their own fulfillment services. They're a little expensive. But you can certainly take a look at that and get a quote. But if you take a look at ShipBob or ShipWire, that'll probably get you a good start. They have some calculators on the website to give you an idea of price. And it's a good starting point. So anyway, I'd check those out.
SPEAKER_01:Yeah, you can only get so creative when it comes to shipping names. I like ShipBob. That's the best they came up with. Sure, there's a compelling story, but it sure doesn't seem like it. But that's helpful. Well, hey, seriously, thank you for kind of giving us the behind the scenes here. You know, listeners, I hope it's an encouragement to you to kind of try to look into the future a little bit and think, okay, gosh, if I'm just like drowning in sales right now, and I'm having to fill all these things, and it's taking up a bunch of time, I don't have, there is light on the horizon here, where you can eventually outsource that and hopefully be at a quantity where where it really pays for itself and gives you a ton of time back in your schedule to work on the rest of your business. So it can be a good option to you. So David, thanks for the info. And listeners also, don't forget that you can email us questions about this episode, ask questions to David, ask questions about your business by emailing us at podcast at bossclub.com. We might feature you in an upcoming episode. So thanks for listening and we'll see you guys next week.