As online sales and ecommerce continue to grow in Canada, products and services offering to support that growth have also popped up across the country. Third party logistics (3PL) companies have recognized the challenges that come with the exponential growth of online sales, and jumped on the opportunity to help meet the fulfillment demands of a global market. In Canada, these order fulfillment and distribution services are a critical part of efficiently serving our widespread population.
Third Party Logistics for Online Sales & Ecommerce
What is Third Party Logistics (3PL)?
“Logistics is the process of planning, implementing and controlling the flow and storage of goods and services and related information from the point of origin to the point of consumption,” explains the Government of Canada. “Supply chain management provides supervision and direction for the various parts of the distribution system, including production scheduling and inventory control, transportation, warehousing, wholesaling, retailing and brokerage.”
When you outsource the management of your supply chain logistics, it’s known as third party logistics. You can immediately utilize expert operations and technology, resulting in peak performance right out of the gate and less stress for you.
The right 3PL company can streamline your operations, reduce your operating costs and help you serve your customers. Typically, the 3PL company will manage inbound shipments, distribution, warehousing, order fulfillment and shipping to customers.
When your customer places an order, the information is sent to the 3PL fulfillment company. They process and prepare the order for shipment, ship it and track it. Most 3PL companies provide a customized supply chain and quality assurance solutions that are suitable for ecommerce and online product sales. Many do much more than that. 3PL companies have been customizing their services with online sales in mind.
“Innovative logistics providers can now offer customized solutions to meet a business’s precise needs,” says Supply Chain 24/7. “This is especially important for ecommerce retailers, which tend to ship a multitude of smaller packages, each containing a small number of items.”
For a monthly fee, a 3rd party logistics company may provide basic warehousing and fulfillment, or offer extended services that include product labeling, bundling, kitting, online store management, returns and customer support, freight forwarding, or FBA prep & ship.
For the purpose of ecommerce and general online sales, at a minimum you’ll need a company that provides warehousing and shipping/receiving. You may ship your products to the 3PL company, or have the wholesaler/distributor/manufacturer ship products directly to them. Ideally, you won’t have to handle your products at all.
The Benefits of Using a Third Party Logistics Company
The benefits of using a 3PL company for ecommerce include:
- Improved customer service
- Increased flexibility and scalability
- International fulfillment and lower shipping rates
- Save time & money
- Access to more resources
- Reduce the need for working capital
- Efficient management of product returns
- Competitive advantage through faster, cheaper shipping
How Does it Work?
Everything should run in the background so there are no disruptions or delays in the customer journey.
- SELLER buys products from wholesaler or manufacturer or ships their own products.
- Products received by the THIRD PARTY FULFILLMENT/LOGISTICS PROVIDER
- SELLER adds products to their online store
- CUSTOMER orders a product from the SELLER
- Order is relayed from your online store to the THIRD PARTY FULFILLMENT PROVIDER
- THIRD PARTY FULFILLMENT PROVIDER packs and ships order to the customer.
Third Party Logistics in Canada
Canada has been painfully slow to utilize the internet for sales and marketing, but that has changed in the past couple of years. Businesses large and small have ventured into the digital world of opportunity. Still, almost half of small-medium businesses don’t have a website. Only a small portion of those that do have a website, also have ecommerce functionality. One of the biggest obstacles between them and the profits awaiting them online, is order fulfillment.
Many small businesses and solopreneurs are intimidated by logistics and the services designed to make order fulfillment easier. It may look complicated at first glance, but it’s really very straightforward: You make the sales and the 3PL company fulfills them. Larger businesses also take advantage of third party logistics to reduce their real estate footprint, simplify order fulfillment, reduce shipping costs, slash staffing requirements, and basically wash their hands of everything manual.
In 2012, Fulfillment by Amazon (FBA) became available to Canadians selling on the marketplace. For many, it was their introduction to order fulfillment by a third party. Their fees are high as they combine the marketplace listing and management with fulfillment. That said, the set-up fees charged by the 3PL company may also leave you waiting to see any ROI.
Canadian ecommerce platform, Shopify, is opening its own fulfillment warehouses to improve the order process for small businesses. They recently introduced the Shopify Fulfillment Network and acquired 6 River Systems to enhance their warehouse operations.
eBay will launch its Managed Delivery fulfillment services here in Canada next year. Sellers will have access to national warehousing, packing and shipping services for a more seamless experience.
If you’re thinking a third party logistics or prep & ship business would be a promising investment, you’re right. As startups, Canadian 3PL companies are some of the fastest growing businesses in Canada. Related products and services are growing right along with them. For example, the 2019 Report on Business ranking of Canada’s Top Growing Companies named Fleet Optics as the fastest growing Canadian company. They provide last-mile delivery in Ontario, using their own optimized tracking software.
Clearly, fulfillment options for Canadian businesses are growing in both number and diversity. If that’s what has been holding you back from selling online, it’s time to take another look at it.
How to Choose the Right 3PL Provider
Before you approach 3PL companies, you should identify and outline your requirements.
- Analyze your current performance
- Outline your current supply chain costs
- Examine your existing shipping relationships
Following are some questions to ask potential 3PL providers:
- Are they located near your business? Do they have a centrally-located warehouse?
- Are there numerous transportation and warehousing options available to choose from?
- Do they specialize in your industry or vertical?
- Do they have a modern technology platform that works with your ecommerce platform, and syncs with your inventory management system?
- If required, do they offer integrated solutions for Amazon and other marketplaces or retailers? Do they offer Amazon prep & ship?
- Can they meet the specific needs of your customers?
- Can they scale their operations to fit your changing business needs?
- Do they offer direct-to-customer and direct-to-retail fulfillment and distribution services?
- How fast can they get orders out and into the hands of your customers?
- Do the shipments appear to come from you? Can you include branded packing slips, information, coupons, etc.?
- Are shipments insured? Is your stored inventory insured?
- What is their track record and reputation? Can they provide high-quality industry references? How do they rank on rating sites and the BBB?
- If they will manage returns, how will they do so?
- How much will it cost in total, including set-up fees, shipping/receiving costs, pick-and-pack fees and warehousing fees?
Third Party Logistics Companies in Canada
Following are a few third party logistics companies in Canada, to give you an idea of what services are available for ecommerce order fulfillment.
Takes you into all key markets in Canada with 27 distribution centers, 35+ field stocking locations, 8 specialized transportation centres, 13 configuration centres, and access to the widest final mile delivery network.
Omni-channel, ecommerce and retail logistics
Warehousing and distribution
Retail drop shipping
Lean Supply Solutions
Warehousing with facilities on the West and East Coast of the US and Canada (Ontario and BC)
Online order fulfillment and ecommerce distribution
Pick & pack and repackaging services
Integrated solutions with Amazon, Shopify, Costco, Walmart and other retailers.
McKenna Logistics Centres
Short or long term warehousing services. Warehouses in Ontario and BC.
Internet and ecommerce fulfillment
Compatible with major ecommerce platforms
Warehousing in Mississauga, Ontario And Quebec
Ecommerce platform and shopping cart integration
Online order fulfillment and ecommerce distribution
Kitting, light assembly services, repackaging and other value-added services
Fulfillment by Amazon (FBA) prep and delivery
Import/export and US Section 321 Fulfillment
Warehousing in Vancouver and Toronto
Direct ecommerce platform integration
Pick & pack, project fulfillment and kit assembly
Inventory receipt and management
Reverse logistics / managed returns
Kendrew Distribution Services
Warehousing and distribution from Ontario
Warehouse in Toronto, Ontario
Pick & Pack
Inventory management software
Shopping cart integration
Located in Surrey, BC
E-Commerce Fulfillment. Specializes in branded footwear, apparel and accessories.
Direct to consumer and wholesale fulfillment
Compatible with major ecommerce platforms
Returns, warranty & repairs
One of the biggest mistakes new entrepreneurs make is waiting too long to begin using a fulfillment service. If you’re filling as little as 25 orders per day, it’s time to start researching your warehousing and fulfillment options. You won’t have to worry about storage, you can spend your time more effectively elsewhere, and you won’t have to hire someone in-house to do your processing and shipping for you. When that viral video causes a spike in orders, you’ll be ready!
But Take Your Time and Do It Right
As you’ve undoubtedly guessed, choosing the wrong third party logistics company can be disastrous. Before you trust a company with your products, customers, information and access to your business, perform thorough due diligence.
??? Have you used a third party logistics company for ecommerce fulfillment in Canada? Please share your experience or questions in the comments below or discuss this and other online business topics in the Online Business Canada Facebook group!
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Melody McKinnon's formal education is in business management, which she enhanced with more than 60 certifications revolving around business, marketing, health, general sciences and writing. In over 20 years of working online, she has owned or managed both educational and eCommerce websites.
Melody has worked with many businesses & brands in a multitude of capacities. She can often be found on CanadiansInternet.com, CanadianFamily.net and AllNaturalPetCare.com, as well as other quality digital publications. Her content has earned reference links from highly-respected websites, magazines and university textbooks.