Exit Strategy: Why Companies Look for New eCommerce Fulfillment Partners

June 16, 2020 by Amware Fulfillment

Have you moved lately? Join the club. More than 30 million Americans change residences every year. 

eRetailers don’t change eCommerce fulfillment partners quite so often, but many such relationships are surprisingly short-lived.

The question is, why? And how valid are these reasons?

ecommerce fulfillment partnerAt Amware, we see a lot of RFPs from companies who are looking for new third-party logistics partners (3PLs), and we’ve heard war stories about what prompted the decision to change. Many bear a striking resemblance to the reasons people seek out new residences. 

Here’s five of the “moving” statements that we hear most often. Any sound familiar?

 

1. “We need something bigger.”

To most of us, the concept of a starter home needs no introduction. Many of us purchased one when we were just getting on our feet even though we knew we’d eventually need something larger.

In a sense, many young companies who select a single-location, ‘mom-and-pop’ business as their first eCommerce fulfillment partner are engaging in the same practice.

Such “starter 3PL relationships” can work well during the initial years of operation. But once sales begin to take off, it’s not uncommon for these eTailers to outgrow their 3PLs’ capacity – and to need considerably more space, automation, or personnel than their small-scale 3PLs can provide.

 

2. “We’ve been priced out of the market.”

We’ve all heard about people who have been forced to relocate because their once-economical neighborhood has become the hip, new place to be, complete with the astronomical new rents, HOA dues, or property taxes to prove it.

These economic shifts can occasionally happen to companies’ eCommerce fulfillment partnerships, too. Perhaps it’s because the initial order fulfillment pricing didn’t adequately account for all of the expenses or touches required. Or maybe the 3PL’s long-term lease on a facility has just come up for renewal and the new rent has gone through the roof. It could even be because the fulfillment partner in question is so large that it can pretty much change the agreement terms when it pleases. 

Either way, it can leave an eTailer feeling like it’s behind the financial eight ball – and ready to explore new-and-different (read: less expensive) 3PL options.

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3. “We’re moving to a new area.”

In today’s transient society, real estate changes hands often because people get transferred or switch jobs.   

An expansion into a new region can have a similar effect on companies’ 3PL relationships, especially if their current 3PLs don’t have a presence in their new region of choice.

While some eTailers will elect to find another eCommerce fulfillment partner in that new area and manage multiple 3PL relationships, others will decide they prefer to work with a single fulfillment partner. As a result, they’ll ultimately make the switch to a larger 3PL with a national fulfillment network.   

 

4. “Our house developed problems

Some real estate investments hold their value. Others go downhill fast, like houses that pass inspection but, over time, require costly renovations to repair leaky basements, change out electrical systems and fix shifting foundations.

In a similar vein, some eCommerce fulfillment partnerships can start off with the 3PL outperforming on important operational metrics but then backsliding into mediocre performance where inventory accuracy is off and inaccurate and late shipments are out of hand.  

Sometimes these service lapses are correctable, especially if the eTailer is working with a 3PL that’s constantly tracking and reporting fulfillment warehouse KPIs. However, if problems persist – and no corrective action seems to be working – eTailers have no choice but to move on and look for a new 3PL. In fact, they’re jeopardizing future sales if they don’t.

 

5. “We’re not fond of our new neighbors.”

As anyone who’s lived in the same place for a while knows, the kind of people who live around you can make or break how much you enjoy living there. If you have great neighbors, things can be peachy. By contrast, if one of your neighbors sells to buyers who have really annoying habits – like letting their five dogs roam the streets or mowing the lawn at midnight – things can get ugly fast. 

Companies that have signed a contract with a 3PL that then gets acquired can probably relate. While such acquisitions don’t necessarily have to be the beginning of the end, they do have the potential to upset the apple cart if the acquiring company has a completely different kind of corporate culture and approach to doing business. For instance, acquiring companies tend to be larger firms that, because of their size, may be slower and less flexible. For dynamic online retailers that value agility and having direct communication with their 3PL’s top executives, such a change may prompt them to look elsewhere.

It’s your move.

If you’re in the market for a new 3PL fulfillment partner for these or any other reasons, contact Amware today. We offer scalable fulfillment to fast-growing B2C companies.    

 

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Filed Under: Fulfillment Operations, Fulfillment Services