Matthew Hertz, Founder of Second Marathon Consulting, is a leading matchmaker between eRetailers and order fulfillment services providers. He recently chatted with Amware’s EVP of Strategy & Operations, Chad Warzecha, for an episode of Unboxing Fulfillment – the modern B2C fulfillment podcast.
Matthew shared advice for eRetailers in how to choose the right 3PL fulfillment services provider and maintain a healthy relationship. His advice for start-ups and small-to-midsized eCommerce companies is based on his years of experience running order fulfillment operations for the likes of Birchbox and Rent the Runway – as well as consulting for dozens of up-and-coming brands.
Listen to the full podcast, or get right to five essential tips for finding and managing order fulfillment providers below.
1. Surround Yourself with the Smartest People
Matthew admits to not knowing everything when he started out in operations with Rent the Runway. He credits much of his success to knowing who to partner with.
“You know, back in 2010 when I joined Birchbox, I was I was 24 or 25. I was two years into my operating career. I couldn't possibly have helped the business get to where it did four years later, operationally, just through my own know-how. It was surrounding myself with folks who were smarter than me,” he said.
External partners also played a big role. He stressed the importance of finding the right 3PL fulfillment partners, shipping carriers and packaging vendors “who could really raise us up and give us an edge,” he explained.
A key takeaway from Matthew is that a good 3PL can fill experience and knowledge gaps at nascent brands. Matthew learned early on about the important intangibles outside the pricing sheet.
“The goodwill and the relationships are far more important than trying to nickel and dime a partner,” he added. “Supply chain and fulfillment is the business of exceptions management. So you need to have the right folks around to support you.”
2. Work with People Who Believe in Your Mission
Passion drives start-ups. It makes truly great brands. There’s just something about building a business on a great mission and then working in unison as an organization to achieve it.
With that kind of passion, you can fuel – and fulfill – explosive volume such as that experienced by many of the companies Matthew has worked and with.
Matthew’s advice, learned through success and failure on this point, is to make sure you have a core team – internally and among your outside strategic partners – who believe in the company’s mission. They need to be in the C-suite, managing the warehouse, in engineering and everywhere else. His point is to make sure key people are on the same page strategically and driven by the same purpose.
“One of the lessons that I'm always telling start-up founders, CEOs and functional leaders is to make sure that a good subset of the employee base has an inherent understanding of the challenges and problems that you're looking to solve.”
Maintaining a powerful mission-driven culture is challenging when outsourcing order fulfillment services. That’s why it’s so important for a brand’s culture and its 3PL partner’s culture to align.
3. Culture Matters with 3PL Order Fulfillment Services Partners
Look beyond cost and “ideal KPIs and SLAs” when considering prospective 3PL order fulfillment services providers. That bit of advice from Matthew comes with the caveat that no eRetailer he has ever worked with has dismissed those two criteria. Nor should they, he says.
However, the culture of a 3PL matters a great deal to a brand’s success, Matthew believes. “Entrepreneurs and start-up founders often overlook order fulfillment. But this downstream function really is the lifeblood of a business.”
Matthew counsels brands to take the time to select a 3PL with the right culture. In fact, he’s built his current business upon the mission of helping brands do just that.
What’s the secret to finding the correct cultural alchemy? It starts with looking beyond cost and KPIs to finding someone with whom you can achieve true strategic and operational alignment.
“We encourage brands through our process to not cut corners. Take the time to truly get to know your potential partners. Visit their facilities, talk to the folks doing the work – the inventory manager, the receiving manager and others. Get to know your account management team,” he advised
A close relationship with your 3PL can be an incredibly rewarding one based on shared mission. “Really treat your partner as an extension of your team that you want to work with every single day for years to come,” he said.
4. Communicate Openly and Often with Your Order Fulfillment Services Provider
“Communication is probably the top contributor to the demise of 3PL-customer relationships,” Matthew said.
Third-party logistics is a “low customer satisfaction” industry to begin with, Matthew shared. “And, you know, in the 3PLs’ defense, it's not all their fault.”
You can’t just talk to your 3PL once a quarter for a review and expect everything is hunky dory, he pointed out.
Both parties need to talk regularly, confirm alignment on key operational priorities and address any issues that come up so they don’t fester. The more a brand’s logistics leaders know about the challenges a 3PL faces in serving the account, they better they can adjust, and vice-versa.
What’s a healthy cadence? Matthew says companies and their 3PLs should communicate several times a week, even if it’s just for a few minutes.
5. Take Full Advantage of Providers’ Attractive Parcel Contracts
We’ve talked a lot about the importance of 3PL relationships so far in this article. But one of the most beneficial relationships for a small to mid-sized brand is that between its 3PL and major parcel carriers. Parcel shipping is the largest order fulfillment expense, by far. Growing brands simply can’t negotiate the same rate discounts as 3PLs who negotiate based on the aggregate spend across their customers.
Matthew advises brands to piggyback on a 3PL’s bulk contracts with the big shippers. And lean on them for advice and expertise on strategies that can save you money while serving customers well.
Shipping is an order fulfillment services provider’s strong suit. Many can devise parcel shipping cost-saving strategies you’d never think of yourself.
These Best Practices Transcend Company Size
Start-ups and large established brands face the same eCommerce realities: fierce competition and increasing customer expectations for order delivery speed and accuracy. More than product and price, brands differentiate today based on customer experience. A great customer experience doesn’t happen without great order fulfillment.
The right 3PL order fulfillment services partner is not just a nice to have, it’s a business imperative for brands that want to succeed and scale. In addition to helping brands fix fulfillment if challenges exist, a 3PL can help a brand grow rapidly while maintaining operational excellence.
To see what this looks like in reality, check out these fulfillment outsourcing case studies from a children’s educational brand and an apparel company.
Then learn more about the 3PL culture that makes it happen by talking to the 3PL fulfillment services specialists at Amware.