Powerful Strategies to Grow Your eCommerce 3PL Business

The supply chain and logistics industry is poised to double its size from $15 billion in 2020 to nearly $31 billion in 2026. Although the market is growing, so are the challenges. 

From accelerating growth to dealing with disruptions, 3PL companies have a surmounting list of challenges to overcome every day. According to a 2021 report, 78% of 3PL companies across the globe reported managing growth and capacity to be their topmost challenges. 

During such times, when customers are ready to switch 3PL service providers due to service failures, inventory issues, technology problems, communication issues, and billing discrepancies (top reasons per Fulfillment IQ consulting engagements) and competitors are edging closer on your heels, it is important to pause and consider your 3PL eCommerce fulfillment growth strategy. 

If you too are wondering how to improve the performance of your 3PL warehouse and kickstart the growth of your eCommerce 3PL business, then you have landed in the right place! Read on to learn about the supply chain and logistics strategies you can implement to get the results you desire.        

Grow Your eCommerce 3PL Business #1: Turn Key Resources & Capabilities into Your Core Competencies

The stairway to growth for any company begins with making improvements in the internal environment, i.e., with the company’s resources (human capital – talent) and capabilities (technology-driven features of service). 

As a 3PL warehouse leader or a service provider, you can leverage your key resources – talent and technology – to grow your business. Improvements in these two functional areas will subsequently have a positive impact on your key capabilities, which is, the ability to increase throughput efficiency, reduce costs, and offer more aggressive service level agreements (SLAs) in the market. 

1.1) Choose the Right Talent

Talent is one of the primary growth drivers in any organization. A McKinsey survey of more than 600,000 respondents across various fields found that high performers are 400% more productive than average ones. Thus, we can’t overemphasize the importance of bringing the “A-team” on board and keeping them there!

During the hiring process, you should look for candidates who are multifaceted (we like to call them to supply chain unicorns), possess a diverse skillset, and whose vision and goals align with your company’s. Candidates who possess not only operational excellence but also high people management skills are the right fit.   

1.2) Implement Technology as an Enabler

Implementing technology and automating warehouse processes aligned to the 3PL eCommerce fulfillment services you provide and the market segment you cater to is one path to enable sustainable growth.  Today’s outsourced eCommerce fulfillment merchant demands real-time visibility, faster turnaround time (receiving, fulfillment, returns, communication, and work orders). Suffice to say, these two goals can be attained through technology that has been properly scoped to align with business strategy. 

To jump on the bandwagon of same-day and 2-day delivery, you can implement technology solutions such as OMS, WMS, TMS, WCS robotics (like Locus), ARS (like AutoStore), and custom platforms to automate inventory management, picking, packing, shipping, and tracking across channels. Simply stated but not hard to implement with the right expertise supporting strategy and implementation.  

Ninaad Acharya, CEO, and Founder of Fulfillment IQ added, “3PLs are facing significant pressures from rising costs that are driven by increasing wages, coupled with outside investment in tech-enabled 3PL warehousing solutions. Technology that creates greater efficiencies in warehouse operations eases onboarding, and has actionable customer data visibility is the differentiating factor. The choice for the 3PLs is either to be the disrupter or be disrupted.”

Moreover, technology as an enabler relieves you from both the pressures of the labor market, i.e., the increasing cost as well as the scarcity of labor. What’s more, a technology-enabled 3PL warehouse is less prone to human error thus creating the perfect win-win solution. In a recent implementation, we saw direct-to-consumer picking accuracy increase by 12% which increased SLA performance and decreased labor costs by 7%.    

1.3) Increase Throughput Efficiency

Within the four walls of the warehouse operations, success boils down to throughput. Increasing your throughput efficiency will set you on the growth trajectory. And as mentioned earlier, the right talent coupled with technology will set you on the path of increasing your throughput efficiency. 

However, technology and automation are not the only determinants of your throughput efficiency. Mapping your workflow, identifying bottlenecks, mitigating them, and making continuous improvements to your warehouse management system contribute to a higher throughput.    

Lastly, don’t just aim to increase your throughput, ensure it is accurate too! In a recent implementation, we saw direct-to-consumer picking accuracy increase by 12% which increased SLA performance and decreased labor costs by 7%.

Grow Your eCommerce 3PL Business #2: Find Hypergrowth Merchants & Customers

Finding perfect hypergrowth merchants and brands that require the solutions and services that your 3PL warehouse is providing today is another way of growing your customer base. To do so, look for organizations that are currently in the hockey stick growth cycle. As these merchants and customers grow, so will their needs and in turn you’ll have opportunities to grow your business by association. 

There is a possibility that the hockey stick growth cycle might not materialize for some of your chosen customers. However, even if the growth cycle of one of them accelerates, it will take your business to the next level.  For example, the three Shopify merchants that participated in their recent Commerce + conference, Gym+Coffee, Mented Cosmetics, and Lounge Underwear were named top growth merchants on the Shopify platform.  Imagine being on the journey with them from the beginning and what the volume, revenue, and marketing value of their logo would mean to your business. 

“The most valuable places to spend time are in the spaces that are most meaningful to your target customers.  LinkedIn is great for B2B connections but if you’re looking to attract hypergrowth brands they are most likely giving their mindshare to other social platforms like Instagram, Facebook, Snapchat, and Twitter.  Be where they are instead of expecting them to meet you in your circles.  Most importantly, be a customer!  You should be making purchases from all your target accounts so you can understand their current processes and learn if you have solutions that can help them grow” shared Dan Coll, Partner at Fulfillment IQ.

Grow Your eCommerce 3PL Business #3: Adopt the “Hypergrowth Mindset”

To attain growth in any business or industry, you need to have the right mindset. Similarly, to grow your 3PL business, you need to have the “Hypergrowth Mindset”. 

But what exactly is the Hypergrowth Mindset and how can you achieve it? 

Hypergrowth companies are defined as companies with an annual growth rate (CAGR) of 40% or more. For the purpose of growing your business, we will be focusing on the mindset behind the success of hypergrowth companies – marrying talent, technology, and data with scalability and a can-do organizational culture for a more customer-centric approach.    

In the 3PL business, here’s how you can instill the hypergrowth mindset:

3.1) Scale Operations by Offering Value-added Services

Venturing into new product and service areas may seem scary, but more often than not, the payoff is worth it. In case you are a traditional 3PL warehouse (meaning most activity is moving cases and pallets) player, consider offering value-added services such as e-commerce, retail distribution, branded packaging, kitting, relabeling, repairs and refurbishments, or offering custom white label products (QuickBox Fulfillment does a great job of this in the nutraceutical space). 

By providing additional products and services, you’ll be able to expand your business into new markets while simultaneously growing your 3PL customer base.  Additionally, value-added services typically capture higher-margin revenue that helps grow both the top and bottom line. 

3.2) Play the High-Risk/ High-Reward Game

Traditional warehouse owners opt for growing their business stability with existing merchants as they are risk-averse. They chase after 8%-15% year-over-year (YoY) growth through organic customer expansion or new business acquisition.

On the other hand, especially in e-commerce, hypergrowth calls for playing the high-risk/ high-reward game of entering into new markets and spaces. It’s similar to the long-term mindset that venture capitalists adopt – of the fifty start-ups that you bring on board, the one that succeeds will push you forward on the growth trajectory. So engage with the small player and take that slight risk to keep your business growing.   

3.3) Embrace a Customer-centric Approach

It goes without saying, hypergrowth requires being responsive to your customers’ needs. After all, it’s the governing principle in all industries. Customer-centricity requires achieving high service level agreements through optimizing your talent, tech, and warehouse infrastructure. 

Cultivating an organizational culture focused on customer success thus becomes extremely important. And this involves encouraging your employees to align with the common vision of customer success. Building technology and infrastructure to deliver customer goals, facilitating the exchange of data, and maintaining transparency will lead you towards customer-centricity. 

Navigating the eCommerce 3PL growth landscape is a difficult task. If you need help in building a 3PL growth strategy tailored to your company’s needs, schedule a free supply chain strategy session with Fulfillment IQ’s team of supply chain growth and marketing experts. Our team can help you achieve hypergrowth despite challenging times.  

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