Let’s be real.
Everyone, literally everyone, knows about Amazon. They are the leading eCommerce retailer in North America with over $386 billion in sales in 2020 alone. Amazon is growing by the day, enlarging its expansion across multiple industries including entertainment, space, and even food retail!
It’s very clear that Amazon is a giant, and they are here to stay.
BONUS: at the end, I’m going to share over a template to help reach out to fulfillment partners.
Fact: Amazon is one of the largest third-party logistics providers (3PL) in the world.
What is Amazon FBA?
To summarize what Amazon FBA is in case you’re curious. You ship over your eCommerce products to Amazon, they store them within their own facilities, ship them over to your customers once an order comes in, and they also handle returns plus customer service in exchange for a cut of your profits (the full pick, pack and ship suite of services!)
It’s not a bad deal if you’re looking to be more hands-off with your business, and can afford to give Amazon their fulfillment cut.
What is a third-party logistics company (3PL)?
Third-party logistics refers to the outsourcing of the logistics of eCommerce to a third-party business to handle the inventory, warehousing, and fulfillment of orders. The main purpose a 3PL serves is to help reduce the costs of warehousing as well as the shipping and handling of products. Certain 3PL companies even offer after-sale customer service that can certainly be appealing to certain businesses.
- What is an Amazon focused third-party logistics warehouse (Amazon 3PL)? An Amazon 3PL warehouse is different from your average 3PL company that handles warehousing as they focus, like us, on primarily Amazon FBA order preparation. Sometimes, known as Amazon FBA prep center.
- What’s the difference between a 3PL and Amazon Prep Center? Aren’t they the same thing? NO. We (as in an Amazon-focused 3PL) hire Amazon experienced individuals who are trained on Seller Central and go through rigorous compliance training to ensure products are handled for Amazon’s strict regulations and guidelines.
What is a 3PL vs. 4PL?
Think of it like this; you’re a farmer with some corn, and you want to sell them at the local grocery store. Through the use of a 3PL, the company would handle the packaging of your corn, store it in their warehouse and finally deliver it to the grocery store.
A 4PL however, would take the corn from you, handle all the logistics on their own end, in terms of how and when the supply is given to the grocery store, and may even handle the communication between you as the farmer, and the grocery store to let you know if supply is running low and more production is needed.
A 4PL focuses on optimizing the entire supply chain from start to finish whereas a 3PL will only handle the logistics of getting the product from the supplier to the seller.
3PL For Amazon Seller Central & Amazon Vendor Central
When it comes to picking an Amazon 3PL provider for your business, it’s important to keep in mind that more fulfillment warehouses, prep centers, and 3PLs only support seller central on Amazon and don’t have the means as of yet to support Amazon Vendor central.
In simple terms, Amazon seller central focuses on you, as a seller, selling directly to your customers with the freedom to make your own retail pricing and post-sale customer service.
Almost anyone can sell on here. Amazon vendor central on the other hand is an exclusive, invite-only option that Amazon offers to select businesses to allow them to take on the role themselves as a manufacturer, wholesaler, and distributor by selling your products to Amazon and letting them take care of the rest.
Do you know when you see that phrase “Ships from and sold by Amazon” under a product? That means it’s being sold through Amazon’s vendor central.
A select few in North America offer the management of Amazon vendor central goods due to their complex guidelines as set out by Amazon, and AMZ Prep is the only one in Canada to do so.
So what are some valuable services Amazon-experienced 3PL would offer?
You want to know how much you have and how much you’ve been selling right?
Amazon Expertise, Compliance & Experience
Because the last thing you want is to sell a product, only to find out it doesn’t meet Amazon guidelines and compliances.
Distributed inventory across multiple warehouses based on product demand to inject into Amazon warehouse
Who doesn’t want faster shipping times?
Ability to do FBM & FBA at the same time to diversify and ensure you’re always in stock
Whether you’re the one fulfilling the order or Amazon, no buyer likes to see that “Currently Unavailable” or “Out of Stock” sign. Amazon FBA prep services are crucial for those orders Amazon fulfillment services are going to take care of.
Ability to drip-feed into Amazon based on inventory restrictions
Due to its inventory restrictions, your products can’t just sit in Amazon warehouses indefinitely, waiting to be bought. This is where an Amazon 3PL or one with experience would be able to drip-feed it to the Amazon fulfillment centers directly or take care of shipping small containers of your product to their warehouses that would only be enough to fulfill the demand current buyers have.
Ability to manage Amazon alongside other eCommerce fulfillment
Amazon, being THE most compliant heavy eCommerce platform there is, allows for easier management of other platforms like Shopify, Walmart, WooCommerce, etc.
We told you what they offer. Now let’s go through now work with an Amazon FBA Prep Center / Amazon 3PL.
- Save time and money. Need we say more?
- Leverage industry expertise. Nothing worse than being uneducated and wanting to dive head-first into your business without the proper knowledge. So why not leverage experts?
- Expand your Amazon reach for Amazon.com, Amazon.ca, Amazon.UK, Amazon EU if they have multiple warehouses as AMZ does. Going International has never been easier!
- Amazon-Shipping Partners – preferred VIP access into Amazon’s FC’s instead of trying to book 1 pallet yourself. We ship hundreds of pallets a week so we can roll out the red carpet.
Now, What types of sellers should use Amazon third-party logistics providers?
If you’re anyone preparing over 100 units per month to be sent out to Amazon, or you’re anyone running out of space for storing your inventory, if you’re someone getting hit with compliance issues, rejected shipments, or any other issues simply because your 3PL provider isn’t Amazon experienced.
Maybe you’re someone that wants to enable other marketplaces or their own online store to push through sales.
Finally, you might be someone looking to expand internationally, to sell on more than just the Canadian Amazon store, Amazon 3PL (Amazon fulfillment) can help you push those boundaries and expand into Europe and the Americas.
So you’ve decided to utilize a 3PL, now you wonder “What questions do I have to ask to choose the best 3PL company?”
- What’s your experience with Amazon? You want someone with Amazon fulfillment center experience.
- Ask about their compliance requirements, their turnaround time on shipments, and how their tech integrates your products directly to Amazon.
- Ask what carriers do you partner with or utilize?
- Amazon has strict requirements for who is able to get appointments and bookings within their warehouses, especially during the busy season. You want to make sure their partners have this priority access when the holiday season rolls around.
- How does your technology work? You want to know exactly how their technology works its way into your orders.
- What happens once your product has left the 3PL Warehouse? How are the orders tracked?
- Where are your A3PL fulfillment centers and your warehouses located? You want to expand and have inventory in as wide of an area as possible, to ensure that your orders are being fulfilled with the fastest times.
In Canada, each city has lots of options for you. 3PL Vancouver, 3PL Toronto, 3PL Montreal, these are all booming searches especially from the rise in the number of online shoppers since the pandemic.
Expansion requires the utilization of all these resources, so look into the possibilities these 3PL companies offer and their Amazon Canada fulfillment services.
To help you in your search, here are the Top 4 Amazon 3PL and shipping companies. These companies are all Amazon 3PL partners.
- Canada: AMZ Prep, Canada Pro Prep Fulfillment, Stalco, SCI Logistics, Rapid Prep
- USA: Swan Packaging, FBA In & Out, AMZ Prep, Deliverr
These two companies are also worth looking into if you’re not looking for the whole package just yet:
eShipper – focus on shipping only
We’ve told you all the what, where, why; now it’s the how much? So, how does Amazon 3PL pricing work?
3PL pricing, especially Amazon 3PL pricing, depends on the 3PL’s pricing model as well as your business’s specific needs.
Below we’ve given you some of the most common 3PL costs:
1. Onboarding costs:
Costs to get 3PL fulfillment services and their tech up and running. Pretty simple.
2. Inventory receiving costs:
The acceptance and storage of your incoming inventory. Different 3PLs charge for receiving in different ways. These can be per unit, per pallet, flat rates, or per hour.
3. Inventory storage costs:
When you store your inventory at a 3PL’s fulfillment center or their warehouse, you will be charged for storage space. 3PL warehousing fees can range from per-SKU or per-unit storage to a fixed fee for each bin, shelf, or pallet used. Amazon 3PLs warehouses will normally charge per cubic foot taken up from your storage, as well as whether they will be stored for up to a year or longer.
4. Prep & pack costs:
This is the major fee in comparison to the rest. Some prep and fulfillment centers charge a flat fee for labeling, poly-bagging (bagging in polyethylene/polypropylene plastic bags), and shipping to Amazon. Others charge “per touch”, a way of cost calculation done best by IKEA for example, where every “touch” is another step in the supply chain of the fulfillment service and is charged accordingly.
This flat fee usually goes down as orders go up and depend on the model you’re using for fulfillment such as arbitrage, case forwarding, wholesale, private label, etc.
5. Packaging costs:
Some 3PLs will charge for packing materials such as boxes and air fill as separate line items, while others include them as part of their fulfillment services. The major supplies used in an Amazon Prep Center / 3PL are FNSKU labeling (basically barcoding your items), poly-bagging, suffocation labels, bubble wrap, and the final boxing.
6. Kitting costs:
Kitting and assembly refer to any unique accommodations for the way in which items are arranged, or packed before shipping. Because this service is so specific to each client, kitting fees can vary.
7. Shipping costs:
This is the cost to ship to Amazon’s Fulfillment Centers where your orders can be fulfilled and sent out to the buyer. If you use Amazon’s preferred partners, Amazon will normally sell the shipping label to you themselves. If that is not the case, it will be managed with an in-house carrier.
8. Product bundling:
If the 3PL company has to bundle items together, they charge a per bundle fee or a flat fee for a certain number of items in a poly-bag. This applies to cases such as bath and spa sets that are usually presented together in a bundle.
9. Monthly fees:
Most 3PLs also have some sort of monthly minimum spend which is the amount you need to spend to be able to stay with the company.
Which of these costs you’ll have to take into account is more dependent on the type of business you want to run, how much you’re willing to spend, how much you want to outsource, and of course what product you’re selling and to whom, to begin with.
9 Questions We Get Asked Often
- What is the difference between 3PL and a freight forwarder?
Think of 3PLs as freight forwarders on steroids. Freight forwarders help move a company’s products from Point A to B by arranging the transportation whether it be by air, rail, truck, or ocean. 3PLs on the other hand, do all of that PLUS manage the supply chain tasks from end-to-end including the packaging, labeling, storage, and shipping.
- Can an Amazon-enabled 3PL still do eCommerce fulfillment?
100% they can. Their expertise, like ours, will be in Amazon; but they can handle Omni-channel or multi-channel fulfillment on other platforms for sure.
- When should you use a 3PL?
There’s no set boundary we could give you as to when, but if you see yourself looking to expand and scale in terms of your space, labor, sales, outreach, and even faster shipping speeds; then it may be time to look into 3PL. If you’re looking to sell on Amazon, it’s even more important that you use an Amazon 3PL as their expertise and experience is the one you’re going to need.
- How do you measure 3PL performance? (Amazon compliances and approval)
- On-Time Shipping Percentage: Delivery times can make or break your business, so making sure the percentage of on-time deliveries is as high as possible is crucial.
- Shipping Accuracy: Occasionally a package may go to the wrong address or be misplaced, no big deal. But if this is happening anywhere more than 1% of the time, you have a problem on your hands.
- Order Accuracy: Making sure the right items go to the right customer is critical, and if this percentage slips anywhere below 99.8%, it’s time to invest in a new 3PL company with higher order accuracy.
- Inbound Receiving Time: If you don’t have inventory when people are ordering to you, there’s a problem. If a large shipment shows up to your 3PL company, they need to be able to move it from the docks and into stock as fast as possible, otherwise you’re losing money and sales. This is where an Amazon 3PL warehouse could be a second option to look into as well, as it can guarantee a lot of your stock through their own warehouses making sure you never go out of stock.
- Order Time-to-Fill: Directly related to shipping on time, this part of the process focuses on the time it takes for your order to actually be “processed” and be ready for pick up by the carrier company.
- Inventory Accuracy: This is crucial because if the 3PL company you’re using doesn’t have an accurate inventory management system, it leaves you unable to predict your supply to buyers and may even encounter orders that would ultimately need to be canceled due to an error in inventory.
- Time to Process Returns: Returns are pretty common in the eCommerce industry, unnecessary complications shouldn’t be. In 95% of cases, your 3PL company should be able to process the returns within 48-72 hours, otherwise, they have an issue in their reverse logistics processes.
- Return Rate Due to Shipment Damage or Error: Some packages will inevitably be damaged in the shipping process but if packages are routinely being returned because of damage, that may indicate a problem with the 3PL’s packaging. They may be packing with not enough padding or using boxes that are too big for the item, thereby increasing the risk of damage.
- Cost Per Unit Shipped: You should periodically review the performance of your 3PL choice by taking the total cost to ship and dividing it by the number of packages shipped in that period. The appropriate cost per unit shipped differs based on what you’re shipping and where your customers live (obviously), but if the number seems way too high or if you see it going higher over time, that may indicate a problem that you should take care of earlier than later.
- Do you use one 3PL in Canada and one in the USA?
There is no short answer to this other than it depends. If your items are light in weight, and your sales to the US are still not the highest in numbers, then it may still make sense to keep your 3PL in Canada with the downside of more expensive shipping and slightly longer wait times due to customs.
If your items are on the heavier side or if your sales numbers in the US are going higher, then it may be time to invest in a 3PL or 3PL warehouse in the US as well, helping you ship domestically instead, therefore cutting down your wait times with customs as well as potentially saving you a lot of money to ship a heavy item across the border. Keep in mind that using an Amazon 3PL warehouse would help solve this issue as Amazon takes care of the logistics of inventory in both countries should you need it.
- Can you use a 3PL for Shopify?
As we’ve been saying all along, of course! You can use 3PL for almost any eCommerce platform, you just need to find the one best suited to your needs.
3PL vs 4PL
A 3PL focuses on logistics, while a 4PL cares about the entire supply chain.
Benefits of using an Amazon 3PL Partner
- Inventory management
- Amazon Expertise, Compliance & Experience
- Distributed inventory across multiple warehouses based off product demand to inject into Amazon warehouse
- Ability to do FBM & FBA at the same time to diversify and ensure you’re always in stock.
Questions To Ask When Finding The Right 3PL
What’s your experience with Amazon? You want someone with Amazon fulfillment center experience.
Ask what carriers do you partner with or utilize?
How does your technology work? You want to know exactly how their technology works its way into your orders. What happens once your product has left the 3PL Warehouse? How are the orders tracked?
Where are your A3PL fulfillment centers and your warehouses located? You want to expand and have inventory in as wide of an area as possible, to ensure that your orders are being fulfilled with the fastest times.
We are here to help you prep your eCommerce business for success.