Starting a 3PL business is a challenging, exciting adventure. Get it right, and you can become a master of international shipping and travel, negotiating with companies around the world. Get it wrong, unfortunately, and you’ll quickly burn through revenue and reserves while dealing with frustrated partners and customers. The question, then, is: Is it right for you?
To start your answer, let’s look at precisely what a 3PL is, what they do at a high level, and why Red Stag Fulfillment started. Then, you may discover an opportunity or realize that a partner exists to address what you need.
TL;DR:
Starting a 3PL: what you need to know
3PLs provide essential services including inventory management, warehousing, and order fulfillment for ecommerce businesses.
Starting a 3PL requires significant capital investment in warehousing, technology, equipment, and skilled staff.
Consider partnering with an established 3PL like Red Stag Fulfillment instead of starting from scratch if your primary goal is solving fulfillment challenges.
Red Stag Fulfillment specializes in heavy (5+ pounds), high-value, and specialty items with industry-leading service guarantees.
What is a 3PL?
3PL definition: Third-party logistics companies that provide services to handle inventory management, warehousing, and order fulfillment for other businesses. They bridge the gap between manufacturers and end consumers, allowing ecommerce companies to predict expenses and scale operations without hitting physical space limitations.
Before starting a 3PL, you’ll want to learn what it is and how it operates. These third-party logistics companies offer the services that stores need to import and store inventory, protect it, and fill orders. They provide all the help companies need to get products from manufacturers to the end consumer. As the 3PL’s customers grow, a 3PL will also expand services to support imports and exports, either directly or by expanding their own partnerships.
A 3PL like Red Stag Fulfillment offers a core benefit: growing ecommerce companies can better predict their expenses and scale operations. The ecommerce store won’t hit inventory caps or physical space limitations when they have chosen the right 3PL partner, removing barriers to national or even international sales expansions.
3 core functions when starting a 3PL
The 3PL business model focuses on inventory control and management for other businesses. The exact service mix and capabilities of a 3PL may vary, but there are three core functions that most 3PLs provide. To start, let’s look at each of those a little closer.
Inbound inventory
01
A 3PL will help customers move their goods from manufacturers or wholesalers to the 3PL’s warehouses. The company must schedule inbound inventory and replenishment orders to ensure each customer has the appropriate amount of stock. Some 3PLs just receive inventory, while others will help you create orders and manage your inbound inventory.
Scheduling inbound shipments from manufacturers or wholesalers
Managing replenishment orders to prevent stockouts
Receiving, scanning, and processing inventory into warehouse management systems
Red Stag Fulfillment provides data and assistance to help our customers restock at the right time to minimize the chance of stockouts and lost revenue. Our inbound teams also quickly offload products and scan them into inventory software so that you know what’s available at each location. Our freight forwarding partnerships make it easier for you to import products into the U.S. too.
Warehousing and storage
02
Perhaps the most crucial function of a 3PL is to store your inventory. When inventory is stored incorrectly, it can become damaged and no longer useful. Poor storage also slows down fulfillment, frustrating customers.
Accurate inventory management with 24/7 visibility
Safe storage with specialized requirements (climate control, security, etc.)
Inventory shrinkage prevention and management
Strategic warehouse network for faster shipping and lower costs
The best 3PLs use scanning and automation tools to create accurate inventory counts available 24/7. The 3PL needs enough space to handle all client inventory now and for their future. Inventory must be stored safely, which can include refrigeration and other advanced requirements. Also, 3PLs will have to work to eliminate shrinkage to protect customers and their own operations.
Having a national fulfillment network also reduces shipping prices for customers while making last-mile fulfillment faster.
Order fulfillment
03
The final component of standard 3PL services is the fulfillment of customer orders. 3PLs will pick products from stored inventory, pack products together based on individual orders, and ship these packages to the end customer. These efforts are foundational to a 3PL and rely on the company’s relationships with carriers and local partners to distribute orders.
Picking products accurately from warehouse inventory
Packing orders with appropriate materials and care
Shipping via optimized carrier relationships
Managing returns and customer service issues
3PLs should work with multiple carriers and offer multiple locations to minimize their costs and costs for their customers. The 3PL is also responsible for ensuring orders are accurate. Red Stag Fulfillment believes that the 3PL should pay for any incorrect orders that go out the door, which is exactly what we do.
PRO TIP: See our order accuracy guarantees
Should I be starting a 3PL?
If managing inventory, transportation of goods, and fulfilling orders sound exciting to you, then it might be time to investigate working at or starting a 3PL business. Begin the same way you would with any business: research the current market, identify opportunities or niches, and learn about everything the business would require.
Significant capital investment: Warehouse space, shelving, racks, technology systems, industrial scales, forklifts, scanning devices, and computer workstations
Expert teams required: Legal, compliance, logistics experts, warehouse staff, management, HR, and support personnel
Revenue delay: Significant expenses before bringing in any revenue from customers
Typically, launching a 3PL comes with significant capital investment. You’ll need to lease or buy a warehouse space, plus all the shelving, racks, and infrastructure. Warehouses need significant amounts of technology to process orders, scan barcodes, connect to customer and carrier software, and ensure order accuracy. Industrial scales, forklifts, hand carts, scanning devices, computer workstations, and other tools are also standard requirements.
Warehouse locations, hiring teams, buying equipment, and marketing to start landing customers can easily cost you millions of dollars before you bring in any revenue. The capital requirements make it difficult for many to start a 3PL. Beyond that, there are other scaling requirements. You’ll also want various legal, compliance, and logistics experts to flesh out your management team. Beyond that, 3PLs have extensive warehouse teams who can process inbound inventory quickly and fill orders accurately. These hires come with managerial, HR, and support needs outside of their wages.
Key Takeaway: Starting a 3PL requires substantial investment and expertise. If you’re not sure it’s right for you, consider partnering with an existing 3PL or joining a team like Red Stag Fulfillment to learn the business before launching your own.
It can be an intense process. Sometimes, that’s right for you. If you’re not sure, you may want to look into partnerships with existing 3PLs or even join a great time like ours to learn the business, master the fundamentals, and explore future possibilities.
Why did Red Stag Fulfillment start?
Red Stag Fulfillment was founded in 2013 by ecommerce entrepreneurs who experienced poor-quality fulfillment from existing providers. They created RSF to provide the level of care and attention that their own products demanded. Starting with just a few employees, the company has grown into a top-rated 3PL specializing in heavy (5+ pounds), high-value, and specialty products.
Red Stag Fulfillment is an ecommerce 3PL provider specializing in shipping products heavier than 5 pounds, high-value, or need other types of specialized handling. We offer service guarantees to safeguard customer operations, including a zero-shrinkage allowance and paying our customers when an order is not shipped on time, as well as our same-day shipping services.
That’s how we believe 3PL fulfillment should be.
RSF starting a 3PL
Our leaders founded Red Stag Fulfillment in 2013 because of a poor-quality experience with existing fulfillment options. They are ecommerce entrepreneurs and needed a company that would provide the level of detail and care that their products demanded. The vendors were not performing as promised, orders were not shipped quickly, and customers were understandably unhappy. Sensing an opportunity and industry need, they formed Red Stag.
We started with just a few employees who managed operations, stocked shelves, and packed boxes.
Since then, we’ve continued to grow to provide customers with high-quality service and support. Not only have we been named a top 3PL, but we offer some of the best guarantees and order accuracy rates in the fulfillment industry. While some may think that’s largely due to our technology and processes, the people are the real heart of our success. We’re committed to our team members and the communities where we live and work, guiding our expansion efforts.
Thankfully, our customers agree with our focus and capabilities. The results speak for themselves.
Red Stag Fulfillment has plans to expand further and bring our national fulfillment services to more ecommerce companies. If you were thinking about starting a 3PL business because of fulfillment frustrations, we get it. We’ve been in the same position and took that action. If fulfillment is in your blood, we wish you great luck and success. If you’re more focused on getting rid of a headache, it might be best to speak with a fulfillment company that’s been there and solved that concern.
Can Red Stag solve my needs?
The big question for people looking at starting a 3PL is if that’s the best way to solve your concerns and work with your budget. It takes significant time and resources to get started, then to find customers and start negotiating with carriers. Running a 3PL is a full-time operation, and that isn’t always an option for owners of existing businesses.
Key Takeaway: Before starting your own 3PL, consider if partnering with an established provider like Red Stag Fulfillment would better solve your challenges with less capital investment, risk, and time commitment.
It’s time to ask if Red Stag Fulfillment can address your business needs and remove the pain you’re experiencing. The best way to figure that out is to start a conversation and explain the problems in front of you. Our experts are here to listen.
