What is Third Party Shipping and Why Would You Use It?

Third Party Shipping, despite what is sounds is not the end of the Party Shipping Trilogy. Rather, Third Party Shipping is a third party that ships your packages, usually for a fee. Many companies who cannot or do not want to invest in the assets or processes related to in-house operations use Third Party Shipping as a way to reduce their capital and cost expenditures while benefiting experience the benefits of the expertise and processes from their Third Party Shipping partnership.

How Does Third Party Shipping Work?

Typically, Third Party Shipping is combined with Third Party Warehousing and Third Party Fulfillment. Once a company has found their preferred Third Party Shipping vendor (usually referred to as a “3PL”) rates are negotiated and contracts are signed, the company sends their product to one or multiple of the Third Party Shipper’s warehouse(s). From there, that product is stored until orders come in and those orders are fulfilled then shipped.

Pros

Here are some perks of using a Third Party for your shipping:

Scalability – Very few businesses experience consistent demand throughout the year. There are typically peaks and slower seasons. It can be hard to find and maintain the correct levels of space and staffing needed to ensure maximum profitability. Third Party Shippers should work to understand the seasonality of your business to prepare for your business cycles. They have even ask for projections and information on upcoming sales so that they have the necessary resources.

Expertise – Just like anything else, the more you do something, the better you get at it. This is especially true for logistics. There are a lot of variables that can lead to or detract from success and profit in shipping. While most who get to the point of using a 3PL have experience in logistics, there are often areas that can be optimized. Whether it be box sizes, packaging weight, labels or one of dozens of other things, 3PLs have experience addressing these issues.

Reduce Risk – Building a warehouse, buying assets such as forklifts, racks and conveyor belts and investing in processes can cost millions. Not to mention the cost of labor. When working with a 3PL, they have multiple clients and years to split these costs over, allowing you to pay fees per actions (receiving, storage, picking, shipping etc…) rather than putting these on your balance sheet.

Cons

Here are some areas commonly though to be viewed as cons working with a Third Party for your shipping:

Control – Horror stories of bad 3PLs across the globe have led to a perception that when you work with a third party shipper, you lose all control of your business, as it all runs through them. Working with inexperienced 3PLs, this may continue to be true. But if you choose a partner with experience, proven processes and insights, this is far from the truth. Instead they act as expert hands to guide your actions, allowing you to continue to be able to access your processes and inventory whenever and however you would like.

Ownership/ Rates – Even though this is the same as listed above in the pros section, it can still be viewed as a con. Rather than doing all things in house, you pay a fee for the assets, processes and expertise of your third party shipping partner. This fee includes their profit. So while you may not be getting a service at cost, you must compare total in-house costs vs outsourcing costs.

Approach – Some third party shippers treat their book of business like a book of trading cards. Trying to collect them all. This can lead to not having enough or the right resources for their clients. Some third party shippers expect businesses to conform to their format. Sad, but true. But this is not standard for all third party shippers. if you are able to find a 3PL that values your business, is willing to integrate with your processes and knows where they work best you should be able to skip all these pain points and more.

How do I Know If I Need a Third Party Shipper?

There is no one right answer to that question. Instead, it depends on the needs of your business and the 3PL. Some are able to expand their operations in-house for quite a while. Others look to outsource from the beginning. Some 3PLs have minimums that must be met and others are open to operations as small as eBay or Etsy sellers. For IDS, we find we are best able to help companies who ship 300+ orders a day, have a large SKU base, need Value Added Services and more.

Looking for your next Third Party Shipping partner? Look no further than IDS! With 60+ years of experience working with a wide range of companies through a variety of situations, IDS offers the same level of processes and expertise as the big guys with the communication and attention to your business as a start up. Think we may be a good fit for one another? Contact us today!