Amazon FBA VS 3PL: Which Fulfilment Option is Right for You?

Introduction

Selecting the right fulfilment solution is very important for the growth of any ecommerce business. Due to the increasing popularity of online shopping, companies require effective order fulfillment to satisfy the clients. The two most common methods of order fulfilment are FBA (Fulfilment by Amazon) and 3PL (Third-Party Logistics).

FBA helps businesses sell products by letting Amazon store, pick, pack, and ship products on behalf of the sellers through Amazon’s network of fulfillment centers. On the other hand there is 3PL in which the actual fulfilment is outsourced to a third party logistics provider who handles the warehousing, inventory and order fulfilment.

Choosing the right option for fulfilment is critical because it influences parameters like cost, control, flexibility, and customer satisfaction. In this article, I will explain the advantages and disadvantages of Amazon FBA and 3PL so that you can decide what is the best option for you.

What is Amazon FBA?

Fulfilment by Amazon is a service offered directly by Amazon. Through the use of the Amazon fulfilment centres, the sellers are able to stock up their products in these centres and when an order is made, Amazon handles the picking, packing, shipping and even the customer service. This means the sellers can concentrate on other areas of their business as Amazon takes care of the shipping.

What is 3PL?

Third party logistics means outsourcing your logistics function to a third party provider. These providers major in storage, picking, packing and delivering of the products. They have their own buildings and employees to handle the stocks, order selection, and packaging, as well as dispatching. When such tasks are outsourced to a 3PL company, sellers will have to spend less time and money.

Advantages and Disadvantages: Amazon FBA

Advantages of Amazon FBA

Access to Amazon’s Fulfilment Network: One of the advantages of choosing Amazon FBA is that your products will be shipped by the company’s centres for order fulfilment across the globe. This implies that your products can be stocked nearer to your customers, hence, cutting down on transport time and costs.

Prime Eligibility and Enhanced Visibility: Amazon Products are qualified to be Amazon Prime which makes your product so much more appealing to the consumer. They get the benefit of fast and reliable shipping since they are prime members.

Customer Trust and Satisfaction: Amazon has particularly been known to offer its customers the best services that they can get in the market. When you use Amazon FBA, you increase customers’ confidence and satisfaction due to proper order fulfilment.

Time and Cost Savings: Amazon FBA deals with the following aspects of the fulfilment process; storage, packing, shipping, and customer relations. This saves you time to attend to other strategic areas of your business as Amazon handles the complicated aspects of the business.

Multi-Channel Fulfilment: Amazon FBA enables one to meet customers’ orders from not only the Amazon platform but other platforms as well. This integration makes your fulfillment process easy and you are able to reach out to more customers.

Disadvantages of Amazon FBA

Cost Structure: On the same note, using Amazon FBA is convenient, but it is not free of charge. Be prepared to pay for FBA fees that include storage, picking and packing fees and the fees for long term storage for your slow moving stock. This cost structure may affect your profit margin particularly for products with low profit margins.

Less Control Over the Fulfilment Process: What you have to understand about Amazon FBA is that you give up some control over the fulfilment process. This implies that you are dependent on Amazon in areas such as stocking, packing and even delivering of the products. It is important that any problems or slow response in the fulfilment process are not a representation of your business.

Storage Constraints: There is a possibility that available storage space in the fulfilment centres may be restricted, especially during the festive seasons. This can lead to less availability of new products or force you to pay extra charges to get adequate space for your products.

Product Prep Requirements: Amazon has strict policies when it comes to packaging and labeling of products in a way that they can easily go through the channel and the fulfillment centers. Breaches of these guidelines may lead to some form of delay or incurring extra charges.

Advantages and Disadvantages: 3PL

Advantages of 3PL

Expertise and Resources: 3PL providers are involved in logistics and supply chain management hence they come with the wealth of experience and knowledge in the sector. They have networks, structures, and tools that can help to simplify your fulfilment operations. Scalability: When your e-commerce business expands, a 3PL can handle more orders and adjust to the fluctuations in the business. Their solutions can be adjusted to your operations and do not require extra space or equipment to be invested in.

 Cost Savings: One of the largest benefits of using a 3PL for your fulfilment is that the cost of beginning and running your own warehouse is eliminated. Also, 3PLs can take advantage of the existing relationship with shipping carriers to negotiate for better rates which can be cheaper for your business. 

Focus on Core Competencies: Outsourcing with a 3PL brings about the advantage of outsourcing the functions that are not central to your business, for instance, marketing and product development. Thus, with fulfillment off your list, you can focus on the key activities that add value to your business.

Disadvantages of 3PL

Less Control: The major disadvantage of outsourcing your order fulfilment to a 3PL is that you will be surrendering some of the control. This may lead to lower exposure and possible difficulties in enforcing standardization and quality of brands and customer relations. 

Communication Challenges: Outsourcing means that there is a third-party provider in between the client and the provider, and this could sometimes cause a problem because of the extra layer of communication. The communication between both parties should be well defined and all the issues that are related to the partnership should be well explained. 

Limited Customisation: 3PL services are established on processes that are standard and this means that you may not have the kind of services that you want for your business. Your business may have special needs or if your products are packaged in a special way, a 3PL may not be the best for you.

Higher Costs for Small Volumes: However, if your ecommerce business is not very large, the cost of each unit through 3PL services may be a little high as compared to if you were to handle the fulfillment yourself. This is something to consider when assessing the value for money of 3PL providers.

Conclusion

There are benefits that Amazon FBA and 3PL services provide to the e-commerce businesses distinctively. Amazon FBA is a very efficient system of fulfilment through Amazon’s network which makes it suitable for those who want to take advantage of Amazon’s reputation. Conversely, 3PL logistics is more flexible and can be tailored to meet the needs of the business, which is why it is preferred by companies with unique requirements.

In conclusion, the decision whether to use Amazon FBA or 3PL is based on the business needs, future expansion strategies, and costs. Assess your requirements and goals in order to decide on the most suitable fulfilment solution for your online business.