A comprehensive guide to building strong relationships with your 3PLs, according to 4 experts in the fulfillment space.
Fulfillment is the last stop before a customer physically interacts with your DTC brand. And the quality of that experience plays a huge part in whether or not someone shops with you again.
Roughly 66% of consumers will leave a bad review when a package appears damaged (or never arrives). And 40% will do the same when shipping takes longer than promised. Get enough of these reviews, and they can detrimentally impact your brand's sales.
But how can you control your brand's fulfillment quality – especially if you're outsourcing that part of your business? Well, you improve the relationship with your fulfillment center, of course!
Do that, and your 3rd-party partners are wildly more likely to meet your needs (and your customer's expectations) on time, every time.
But admittedly, "improving the relationship" is easier said than done.
So, we asked 4 leading fulfillment experts from Capabl, ShipBob, and more to share their best advice for strengthening your fulfillment center relationships. Here are their top 12 tips (organized by expert):
(Psst – most of these tips can also be used to improve your manufacturing and supplier relationships.)
What is a fulfillment partner?
A fulfillment partner is a 3rd-party logistics provider (3PL) that stores inventory, processes orders, and ships products to customers on behalf of ecommerce companies. These fulfillment programs can help retailers improve and simplify their post-checkout process by taking care of it for you.
How to choose a fulfillment partner
Just as every retail business is unique, the same is true for fulfillment partners and order fulfillment services. Here’s how to set yourself up for success by choosing the right one.
Define your fulfillment needs
It takes complete transparency to ensure a win-win relationship with your fulfillment partner. But without a clear definition of your needs, it’s impossible to get on the same page. That’s why it’s critical to lay out your forecasted demand and compare it with prospective partners’ capabilities.
For example, you’ll want to check that they can keep up with your expected order volume. Or, if you have smaller orders, ensure you meet the partner’s minimum requirements. That way, you and your fulfillment center are on the same page — and set up for effective fulfillment solutions.
Look for a partner with multiple shipping options
When fulfillment partners have multiple warehouse locations, they can offer various shipping options (which is especially helpful if you have geographically-diverse customers). This increases your shipping speeds, delights customers, and saves on shipping rates.
For example, instead of having 1 giant warehouse, a 3PL might have smaller warehouse locations in several of the most densely populated cities. This way, you can keep inventory closer to where most sales are placed and get products to customers more quickly.
Find a partner who offers inventory tracking
Inventory visibility is key to optimizing your inventory levels and maximizing revenue. But if your partner doesn’t offer inventory tracking, it’s impossible to know what your products are doing. That’s why finding a partner who offers real-time data and inventory tracking is pivotal.
For example, a fulfillment partner should at least provide the following data:
- Real-time inventory levels of your products
- Real-time customer order tracking for all deliveries
- Inventory order tracking for product availability
- Access to analytics for better insight into product trends
Evaluate their customer support
Your brand will need to contact a 3PL for help and updates when order problems pop up. That’s why it’s critical to evaluate their customer support abilities (and understand their track record). To do this, ask potential fulfillment partners to run you through their process and ask for any client references.
For example, ensure they have plenty of communication options (like phone, chat, or email assistance). And ask for past instances when the 3PL messed up and how they fixed it. These questions will help provide a better sense of how the relationship will unfold — and forgo overly-idealistic hypotheticals.
Look into their integration options
As we mentioned, having access to precise data is critical to your partnership's success (and your brand's scalability). That's why growth-centric brands look for a fulfillment center that can easily integrate their technology with your ecommerce platform.
For example, when you integrate your data with the 3PL's data, customer orders are sent to the fulfillment center without needing human intervention. In addition, inventory levels (for the warehouse and your online store) adjust automatically and keep inventory data accurate.
Check their pricing tiers and special fees
Like most service providers nowadays, fulfillment partners typically use pricing tiers and charge additional fees for add-on services.
So, ensure you understand what's provided by each tier — and how those offerings align with your specific needs. And if there's something out of scope that you need done, expect special fees for that service.
For example, do they provide kitting at a particular pricing tier? Or is that a special fee on top of the monthly cost? Answering these types of questions can help keep costs at a minimum.
How to measure fulfillment partner performance
Once you’ve chosen a fulfillment partner, there are metrics and key performance indicators (KPIs) to measure their performance and improve efficiency. Here are the best ones to track.
Order shipping time
Order shipping time is how long it takes for an order to reach its destination once it's shipped from the warehouse. This metric shows store owners how quickly customers receive orders after they've left the fulfillment center, making it one of the most critical fulfillment KPIs to track.
Why? Because fast delivery time was the top consideration for 42% of global shoppers while buying online. And when offered free shipping, 62% of customers expect it to arrive in 3 business days. That means the faster your order shipping time, the better.
To calculate order shipping time, use the following formula:
order shipping time = (delivery date – order date) / total orders shipped
Delivery lead time
Delivery lead time is how long it takes to get orders to customers once they've been placed. This metric gauges your fulfillment team's efficiency and staffing levels. And it ensures you're promising customers delivery times that you can actually deliver on.
For example, if it takes 3 days to process an order and 2 days to ship, you might promise the customer standard 5-7 day shipping. This gives you plenty of time to adjust if something goes wrong, hit the target window, and prevent the problem from happening again.
For instance, if orders are constantly going out the door (but each one barely makes it to customers in the promised window), you might need more warehouse staffing.
To calculate delivery lead time, use the following formula:
order lead time = [delivery date - order entry date]
Return rate is the percentage of online orders that customers return. This KPI highlights your customer satisfaction and potential revenue lost due to returns.
For example, when you have a fulfillment partner, this metric is likely high from inaccurate orders, damaged orders, or even dirty packaging. But, if none of these factors apply, it might indicate bigger issues with the product quality or customer expectations based on your marketing.
To calculate the return rate, use the following formula:
return rate = (total returns / total orders) x 100
Cost per order
Cost per order is how much you (as the retailer) spend when a customer makes a purchase. This metric helps brands understand their cost of goods sold (COGS), total expenses, and true profitability.
For example, when you sell a $50 product, there are costs incurred from fulfillment, packaging, shipping, and marketing that eat away at your profit margins. Brands that add up these costs determine the average total revenue from those orders. Then, they can work with 3PLs to reduce costs and improve profitability.
To calculate the cost per order, use the following formula:
cost per order = (customer acquisition costs + packaging costs + fulfillment costs + shipping costs + COGS + holding costs) / number of orders in the same time period
Retention rate is the percentage of customers who continue buying from your brand over a specific period. This metric shows whether or not your customers are satisfied with their orders.
For example, a high retention rate means many customers return for another purchase. This helps improve your customer lifetime value (LTV) and provides more sustainable revenue (since existing customers are 5x more profitable than acquiring new ones).
For fulfillment partners, this metric shows whether customers are happy with the shipping time, the quality of packaging when it arrives, and whether or not items come undamaged. A low retention rate raises red flags for these issues, while a high rate means fulfillment is running smoothly.
To calculate the retention rate, use the following formula:
retention rate = (customers at the end of the period - customer acquired during the same period) / (customers at the start of the period) × 100
Fulfillment accuracy measures the number of orders that arrive to customers accurately. This metric shows stores whether or not their fulfillment operations are successfully filling orders and satisfying customers.
Unfortunately, it's super hard to track fulfillment accuracy. Because most customers don't reach out when they get more than what they ordered — only if they receive less than what they paid for.
However, both scenarios mess up your inventory record's accuracy (and have a downwind effect when reordering). This means you want to do your best to track any accuracy issues and report them as quickly as possible to your 3PL.
To calculate the fulfillment accuracy rate, use the following formula:
fulfillment accuracy = number of accurate orders / total orders × 100
Experts’ tips on how to strengthen your fulfillment partner relationships
We asked fulfillment experts from several growing companies to give their best tips for strengthening fulfillment partnerships. Here’s what they had to say.
Aaron Alpeter, Founder of Capabl
Aaron Alpeter is the founder of the fulfillment-tracking software Capabl. And in his experience, the most significant contributor to rocky fulfillment relationships is a lack of transparency.
"Everybody signs a contract and negotiates SLA with their fulfillment center. But there's visually no easy way to [see if which of the partners is complying with the agreement]," Aaron said.
And that's where his first tip comes in:
1. Understand your SLA
SLA is short for service-level agreements. These are the terms that (should) guarantee a specific compliance rate for accurately shipping out your orders. For instance, your SLA might state that if you give the vendor an order by 2:00 pm, they'll ship those orders that same day 98% of the time or more.
But without someone keeping score, there's no way to know if fulfillment centers are actually meeting their goal. That is until you get an unhappy customer email saying their order still hasn't shipped. And at that point, emotions run high because the customer experience has already been negatively affected.
"You end up finding these [issues] in the heat of the moment, and it's always emotionally charged," Aaron explained. "But scorecards allow you to get ahead of the problem."
However, here's the catch: You can only keep score if you know the rules. So, familiarize yourself with what your SLA expects from you and your 3PL.
2. Create an internal scorecard for transparency
Once you know the rules outlined by your SLA, build a scorecard. One that outlines the success criteria for your fulfillment partners and clarifies how you measure compliance.
According to Aaron, your scorecard should rely on data from both sides of the partnership to accurately show the percentage of shipments the fulfillment center gets out on time and correctly. And it should be shared with everyone who has stakes in your brand's order fulfillment game.
Minimum, this scorecard should track:
- When orders were placed with your brand via Shopify, Amazon, or another ecommerce channel.
- According to the fulfillment contract, the latest date that each of those orders should've shipped.
- Whether or not the item shipped by that date (this can be a binary yes or no).
This way, brands can visually see how shipments are going with a real-time compliance rate. And they can avoid any fulfillment problems before the customer notices, keeping emotions at bay.
"[If you can] see that an order didn't ship before the customer recognizes it, you can correct it accordingly," Aaron told us. This keeps small, human mistakes from turning into massive ones and saves ecommerce companies from that nagging feeling that they should switch 3PL providers.
- Improve your relationship before you jump ship
"[Creating] happier customers is an important piece," Aaron insisted, recognizing that sometimes that means switching fulfillment providers when it starts to impact your brand's reputation.
"But there's also a real cost to changing your fulfillment center," he called out. So, while your first reaction might be to switch partners when things go wrong, it's not always the best idea.
It can take roughly 6 months to find a fulfillment center, vet them properly, and make the transition. With growing ad costs and supply chain issues, staying with someone who knows your SKUs (versus switching every 9 months) might make more sense financially.
But say you're really fed up with your current fulfillment partner and have a scorecard to prove that they consistently miss the mark. Then, Aaron suggests one last-ditch effort before officially switching: visit your current fulfillment provider (you can also do this virtually).
This experience can provide transparency on the people and processes behind their work. "Nothing replaces putting names with faces and observing how things actually work," he told us.
And who knows, you might realize that an important process (like how you communicate incoming orders or set up a new product launch) is broken. And fixing it could save the relationship and optimize your fulfillment operations.
Kristina Lopienski, Director of Marketing Communications at ShipBob
Kristina Lopienski is the director of marketing communications at ShipBob, a leading global fulfillment provider.
Her overarching advice? Your relationship with your fulfillment centers is a partnership. And that partnership goes both ways and requires clear communication from each party.
4. Regularly provide feedback to your fulfillment partners
Any good 3PL wants to hear customer feedback (especially regarding fulfillment) because it impacts what they work on next. "Your input often shapes the product roadmap, prioritizes new feature requests, and even [informs] new fulfillment center locations," Kristina explained.
Meaning, don't be afraid to raise your hand and share what works and what doesn't with your fulfillment center.
If you have never provided feedback to this partner before, ask your account manager how you can provide suggestions. This will naturally open a line of communication. Then, make it a habit to share your thoughts and feedback.
"You may find that [the 3PL] has already launched something for your needs or has it in the works," Kristina told us. But if you never raise your hand with feedback, you might not learn about the new feature for months.
5. Ask what your 3PL’s other customers do better
Kristina also suggests asking your 3PL what other customers are doing. This way, you can proactively learn when better options are available and implement them yourself.
"[Brands can and should] ask what features other customers have adopted, so they can further streamline and optimize their fulfillment strategy," she shared. But you can also ask more generally about other ecommerce businesses' best practices.
For instance, you might discover a way to reduce your dimensional weight through custom product packaging while improving the unboxing experience. Or maybe there's a better warehouse location you could use based on where your customers are.
6. Inform fulfillment centers about any upcoming events
According to Kristina, "fulfillment centers [need a] heads up on big events to be ready to process and ship the order increase on time."
A strong partnership depends on transparent, 2-way communication. And the more data and information you share upfront, the better equipped a 3PL is to help you. Similarly, when your 3PL offers insights and updates, you can streamline your warehousing processes long term. It's a win-win.
Pranay Srinivasan, CEO of Manufactured.com
CEO of Manufactured.com, Pranay Srinivasan, has been in the manufacturing business for nearly 30 years. And he strongly believes that providing convenience and value will improve your fulfillment relationships.
7. Make your relationship convenient
"Retail brands with 10k+ shipments a year should focus on convenience by doing everything [the fulfillment partner] needs and paying by the service," he explained. That way, the fulfillment partner doesn't feel taken advantage of, and the brand gets everything they pay for.
For instance, this might mean having a dedicated account manager or negotiating menu-based a-la-carte pricing for each fulfillment service.
You can even ensure that every service meets your brand's expectations by creating robust standard operating procedures (SOPs) for your fulfillment partners.
These SOPs should outline exactly how you expect these partners to intake purchase orders and ship out customer orders, for example. That way, everyone is aligned, and everything is done consistently.
"Make [the SOP] simple but not easy," Pranay advises. "Easy would be 'just call us.' But simple means providing steps 1 through 5 and onboarding with Zoom." The latter ensures you free up your team's time by empowering your fulfillment partners to work autonomously.
8. Proactively solve potential fulfillment challenges
Your brand can also improve your fulfillment center relationships by proactively thinking through what challenges your 3PL might face and providing possible solutions.
For instance, 3PLs need to operate within your costs and their margins. So, you might want to bundle products to reduce shipping costs. Or maybe unkitting bundled items if they don't ship well together.
Another common challenge is finding the most cost-effective shipping packaging. So, Pranay suggests that you "match products to suggested packaging upfront. This will help you assess packaging and shipping costs beforehand."
In other words, don't leave how you want each product shipped up to your 3PL. Instead, if you sell soft t-shirts, and a customer buys less than 3 of them, create an SOP that says to ship that order in your branded large envelopes.
When brands underestimate their shipping by volume, it can cause both partners infinite pain (like not getting the product there safely or at cost).
By thinking through all these variables up front, you ensure that resources aren't unnecessarily and repeatedly dedicated to making the same decision. And there are no surprises about how much it'll cost.
9. Be transparent about your inventory levels
Like your business, 3rd-party logistics providers want to optimize operations for their long-term viability. So, being a convenient and valuable client makes you a crucial part of their future success. And it ensures a strong, mutually-beneficial relationship long-term.
And you can support your 3PL in this mission by providing transparency around your inventory levels. How so? Because staying in stock without rushing to process intakes directly impacts your fulfillment center's success and profitability.
Pranay suggests you do this by "showing intake and keeping sell-thru dates current based on historical benchmarks from data across your customer base for similar products." You can even track all this in a single source of truth like Cogsy. That way, this information is available for all parties at a glance.
For instance, via the Cogsy + ShipBob integration, you can track the physical location of inventory, when it was shipped, and whether the customer received it.
And when your stock levels start running low, replenish inventory with plenty of time for your fulfillment partner to receive and process the shipment.
Cogsy will even send you a restock alert. That way, you always place your purchase order in time to avoid a stockout.
Just make sure you tell your distribution center that the replenishment is on its way and when it'll arrive so they can prepare accordingly.
Alex McNealey, COO of Thuma
Alex McNealey is the COO of the DTC furniture brand Thuma. But he's been pioneering ecommerce fulfillment and supply chain management best practices since his time at JCrew in the '90s.
And according to Alex, your 3PL relationship is only as good as the accuracy and frequency of the information you share.
10. Provide weekly forecasts to respect your 3PLs viability
"3PLs are constantly managing space utilization and staffing considerations to ensure profitability and viability as a company," Alex explained. "And the key inputs are your inventory levels and shipment volumes." But the problem is these numbers constantly change.
So, Alex suggests sharing weekly forecasts with your 3PL provider. This can happen manually via spreadsheets or automatically with Cogsy. These reports should cover:
- Projected demand for the next month (or more)
- Incoming purchase orders (what's in them and when they'll arrive)
- Any unfulfilled sales receipts
The earlier you get this information (especially the forecast and incoming POs) to your fulfillment centers, the healthier the partnership. That's because – as many of the experts have pointed out – your 3PL can better support your needs the more information they have.
11. Consider your long-term plans with 3PLs
In addition to current data, Alex suggests considering your long-term plans with a 3PL to choose the right one before you outgrow it.
"In terms of capabilities and geographic footprint, think about where you want to be 5 years from the start of the partnership," Alex explained. "Consolidating to 1 provider with global views can help drive process consistency, data reliability, and reduced overhead."
Plus, aligning all involved parties can ensure the partnership meets your needs – now and in the future. And if it's not the right partnership (like if they can't scale with your brand), it's better to know now.
12. Know your fulfillment center’s strengths and weaknesses
No 3PL partner is perfect. So, by understanding your fulfillment center's limitations (especially around scaling, postponement, kitting, or specialized add-on work), you can work together to overcome them. This ultimately keeps your operations efficient and alleviates potential frustration.
You can do this by auditing your fulfillment partners' processes. This way, you can streamline certain steps and remove others to drive quality results. And you can see where your end-all customer experience might start falling short.
After all, "3PLs are storing and moving material experts. Alex reminded us that they're not experts in systems, data management, or complex order-routing capabilities for a multi-footprint solution."
But to preserve the relationship, Alex recommends using a 3rd party tool for these audits, like an order management system (OMS) or enterprise resource planning (ERP) solution.
Ideally, whichever you choose should integrate with your 3PL's warehouse management system (WMS). That way, this auditing process happens constantly and as seamlessly as possible.
🤿 Dive deeper: Thuma's Alex McNealey on people, process, and planning.
Getting customers to the fulfillment part of their journey takes a lot of work. And if you don't invest in your fulfillment center relationships, it could be the piece that's hurting your retention. But if you take these experts' advice, you can start improving your partnership today!
Integrate Cogsy & ShipBob to scale retail growth
With unpredictable supply chains (and ever-changing customer demands), it’s more critical than ever for retailers to choose the right partners for their fulfillment.
That’s why Cogsy and ShipBob have collaborated to help modern brands improve their inventory management.
Cogsy’s real-time inventory dashboard makes it easy to see how much stock you actually have on hand to meet demand (along with planning tools to keep optimized stock levels).
Meanwhile, ShipBob’s real-time fulfillment metrics show brands exactly what their orders are doing.
By integrating ShipBob and Cogsy, businesses can centralize the most important inventory data and gain insight into product trends, replenishment alerts, and backorder visibility. As a result, retailers can improve their forecasting and demand planning for maximum results.
Fulfillment partner FAQs
Get answers to the most common fulfillment partner questions.
What is a fulfillment company?
A fulfillment company works with retail brands to complete the fulfillment process. This includes storing inventory, order processing, shipping to customers, and handling returns.
How do fulfillment services work?
Fulfillment services eliminate the need for retail brands to pick, pack, and ship each ecommerce order to customers. Instead, your fulfillment partner will handle all logistics, from processing orders to shipping orders to customers’ doorsteps.
What are the benefits of using a fulfillment partner?
When brands use a fulfillment partner, they lower expenses and improve revenue by leveraging an existing network of warehouses and fulfillment teams. These advantages lower holding costs by eliminating in-house inventory, improve fulfillment operations by speeding up shipping, and boost revenue by increasing customer satisfaction.