How 3PLs help with Rising costs and Inflationary pressure

If a global pandemic wasn’t already enough to deal with – looks like it’s time for another worldwide disruption. You may have noticed that inflation has been on a steady rise over the last year – and it’s affecting people and businesses everywhere. The Bank of England predicts that inflation will be up to 11% within months, the highest rate for 40 years in the UK. Globally, prices are rising for everything from food to everyday products and energy costs. Now is the time to audit your accounts department and scrutinize your incomings and outgoings. The rising costs of inflation on eCommerce sellers are a huge burden. However, even though we are in a very volatile market, there are still many ways to remain profitable – and 3PLs can help alleviate the strain of rising costs and inflation levels.

Economic frugality requires making challenging decisions about where to axe costs – but it also means re-evaluating operations in general. Though seemingly negative, financial strain and deciding your operations moving forward can bring innovation and a surprising surplus of cash. In these challenging times, businesses tend to wait until the last minute to focus on the liabilities of their business. Conversely, some businesses simply prefer to hunker down and wait it out – keeping them treading water and remaining stagnant.

If you’re overspending on internal operations with your online retail business, then it may be time to make the switch to a 3pl. If you are a medium-level or large enterprise business with monthly orders between 2,500 – 10,000 or more, then this article is for you. Let’s discuss how 3PL fulfilment can cut your costs and help safeguard your operations against inflationary pressure and rising costs.

 

Table of contents

1) How does inflation affect my eCommerce business?

2) The rising costs of energy on internal operations

3) The rising costs of goods

4) How 3PLs save your eCommerce business money

5) Capped rates, variable pricing, and increases with 3PLs

6) Safeguard your eCommerce business to beat inflation & rising costs

 

How does inflation affect my eCommerce business?

One aspect of inflationary factors affecting eCommerce businesses everywhere is when there is an unhealthy balance of supply and demand. Currently, much of the inflation is due to a turbulent supply chain infrastructure. During inflation, the price of “stuff” naturally increases over a period of time. This includes commodities like the price of raw materials, goods, and production costs.

inflationary pressure, how to beat inflation, inflation in UK, inflation impact on businesses, inflationary effect, inflation in UK 2022, 3PLSWe saw this trend largely during Covid when online retail skyrocketed. Suddenly, businesses had to compensate for the new demand, but supply operations were still in limbo – plus, many factories were shut down or only operated on a limited capacity. We still see this trend today as fewer people occupy the logistics workforce worldwide. So, as inflation increases, companies need to find ways to cut their costs and increase productivity. You may be one of the online retail businesses still struggling to meet demand.

Some of the biggest issues for eCommerce businesses currently include:

  1. The rising costs of goods
  2. The rising costs of utility bills
  3. The rising costs of employees
  4. The rising costs of transportation

A thorough understanding of internal and external supply chain operations and the effects of inflation on them is particularly important for companies. A company that can understand the daily and long-term changes in its operating environment will be able to capitalize on opportunities and avoid potential problems. One way that companies can benefit from this knowledge is by using it to develop effective supply chain strategies, which can help minimize costs and maximize customer satisfaction.

The rising costs of energy on internal operations

From marketing to shipping, there are many costs to running your own business. Energy is one of those costs. When energy costs go up, so does the cost of doing business. When you’re developing a budget and trying to stay within your financial means, digging deep into the details of your strategy may give you some unexpected savings.

Warehouse costs

As energy costs rise for businesses, the cost of operating warehouses continues to increase. Rising energy costs for businesses with warehouses can affect more than just the bottom line. Electrical equipment, such as central air conditioning and refrigeration equipment may require special maintenance to ensure sustained function. Energy costs also determine the rental rates of warehouse space, which can skyrocket.

Employee costs

Sellers must protect themselves against escalating employee costs that come with inflation. Employee compensation is one of the main cost drivers for retailers, as it can account for between 40 to 80% of gross revenue. In a high-inflation environment, sellers can safeguard their profits by exercising control over employee costs. Inflation creates uncertainty for sellers because the price their customers pay does not keep pace with the cost of living. As a result, sellers must raise prices or reduce wages to prevent losses in profits and cover these increases out of their own pockets.

business costs, energy costs, 3pl cost, 3pl costs, 3pl pricing, employee costs, 3pl warehouse, reduce business costs, 3pl services

The rising costs of goods

Rising costs of inflation for goods can have a significant impact on your bottom line as an eCommerce seller. From soaring prices of materials and labour to rent, utilities, and more, covering the rising costs of inflation can be difficult if you’re not hitting sales goals. Fortunately, there are ways to mitigate these risks and keep your business moving forward.

You need to be thinking about contingency plans for running out of key inventory items, negotiating supplier contracts, monitoring key data points like inventory price rolls and shipping rates – as well as important new trends in customer value creation such as promotions and discounting.

To remain competitive in business, many sellers such as yourself will want to raise prices – passing on the cost to your consumers. There may be a better idea, however.

How about cutting your costs? There are two advantages to this.

  1. While your competitors are price-gouging customers, you will be at the front of the line for the preferred price point – increasing sales.
  2. Internal audits of wasteful spending can embolden your business – allowing easier scalability.

Ecommerce sellers should protect themselves from inflation and rising costs by measuring ROI and considering automation with third-party logistics. From saving money on warehouse space to utilities and employee costs, it’s an instant win.

How 3PLs save your eCommerce business money

Third-party logistics (3PL) are an increasingly popular solution for companies with complex supply chains. The number of 3PLs have increased significantly in the last decade, especially after Covid – since more consumers shopped online from home.

Selazar and similar companies provide services from warehousing and transportation to distribution and inventory management. 3PLs can also help save you money by taking over supply chain operations, freeing up time and money associated with running your own logistics. 3PLs have their own warehouses, their own employees, and their own efficient systems around inventory management.

3pls, 3pl, third party logistics, ecommerce warehouse, ecommerce fulfilment, order fulfilment, 3pl logistics

3PL warehouse costs

Suffice it to say that not all warehouses cost the same – however, with 3pls, there are no warehouse costs! With a 3pl, you are provided with the facility and a facility management team, freeing up valuable resources for you to serve your customers better. For medium to large enterprise-level brands, this could mean tens of thousands in savings to hundreds of thousands or more a year.

3PL energy costs

What are your energy costs with a 3pl? Well, none. Though these types of costs may seem lower on the priority list when it comes to paying for employees and marketing, it all adds up. If you’re a large company, then these costs could be astronomical. Energy costs for using your own warehouse or facility can range from thousands to tens of thousands a year. On top of that, you also have water bills for your facilities. There is also required insurance coverage.

One of the advantages of using third-party logistics is that you will immediately pocket these costs – because there are none! What could a few extra thousand or even tens of thousands do for your business? Could you bring on some more help, spend more on marketing, and invest in more products? 3pl services allow you instant savings on your energy bills and more.

3PL employee costs

How much money could you save by not having full-time employees that also need insurance and pensions? Picking, packing, and shipping are necessary for any online retail business. Why should most of your profit go towards paying internal employees to do that when you get the same service at a fraction of the price?

For example, the current picking and packing rate for Selazar is capped at 40p a minute. The average pick time for Selazars warehouses is currently 37 seconds on average. They are quicker than most because the warehouses are digitally mapped, with algorithms dictating the quickest, most efficient routes between pickings. The average picking with packaging cost is also currently at £2.03. Employees that you don’t pay for directly still fulfill orders on an ad hoc basis. No money is wasted on breaks or lunches or overtime. The supply system simply automates for you on-demand– at a fraction of your costs.

3PL courier costs

In line with worldwide inflation, couriers naturally have to raise prices. When oil and gas prices increase, that cost is passed along to clients along the supply chain. Because couriers have strong ties with 3pls and rely on them, we negotiate rates on your behalf. Our network works with multiple carriers both domestically and internationally. Courier costs can be difficult to predict if and when we see an upward trend in rising inflation, but as an organization, we help to mitigate such potential issues.

beat inflation, inflation impact on businesses, how inflation affects businesses, inflation fears, inflation news, inflationary, inflationary pressure, inflation data, automate fulfilment 3pl, reduce business costs, inflation on businesses

Capped rates, variable pricing, and increases with 3PLs

One of the goals and values for Selazar is to help businesses scale faster. This means keeping costs low and only paying for what is used. This means no signup fees or annual fees. There is no profit-sharing for products – unlike FBA. This also means a capped rate on picking and packing prices, meaning no increases during times of inflation.

With our bespoke pricing model, we also offer variable pricing, which allows for more cost savings rather than antiquated fixed pricing structures. As a consumption-based model, you only pay for the time for when services are rendered, rather than generic quotes based on industry average – a model ripe with inefficiencies.

When working with 3PLs, it’s important to solidify a pricing structure that benefits your business – especially in lean times. As a business owner, you have to pay particularly close attention to what you’re signing. It may feel like a daunting task, but it’s vital to ensure a deal that is fair for both you and your customers.

Rate increases can happen for many reasons, such as warehouse leases, shipping supply, payroll, couriers, etc. Rate increases over the years tend to compensate for the cost of living, which are perfectly natural and normal. After all, you do want warehouse workers to be compensated well enough to take care of your customers. However, you should still pay close attention to the frequency of increases so that you are getting a fair deal agreed upon by all parties.

Safeguard your online business to beat inflation & rising costs

While inflation will affect many aspects of business, the impact it has on supply chains can have a significant impact on sales and consumer decisions. If a business wants to grow, it will need to consider how inflation will affect its revenue and operations. This is why it’s important to know what causes inflation, how it affects businesses and consumers, and why it is so important to be aware of its effects on your operations. Should you be interested in our 3pl services, feel free to set up a free no-obligation discovery call with us today.

[/fusion_text][/fusion_builder_column][/fusion_builder_row][/fusion_builder_container][fusion_global id=”2142″]

3pl costs: Fixed vs Variable pricing for eCommerce fulfilment

Amid the crescendo of the eCommerce boom in 2020 more eCommerce businesses quickly sought out logistics solutions. Third-party logistics suddenly became more prevalent as demand catapulted for storage, pick and pack services, and final mile delivery. Dramatic shifts in buying behaviours brought with it shifts in delivery options too. More companies were desperate to find the best solutions to maintain customer expectations. With no stores open and fewer employees on staff there needed to be a way to get the work done despite these issues. Cue the 3pl’s.

Thankfully working with a 3pl is a common-sense approach for enterprises that want to grow quickly and outsource operations. It’s the logical step towards alleviating the common stresses and headaches of your internal packing and shipping operations. Contracting those services to another company immediately takes care of your storage and delivery needs, saving your business valuable time, effort, and money. Yes, please!

However, choosing to partner with a 3pl means that you are giving a lot of responsibility away, right? This can bring some hesitancy for companies that are historically content with controlling all aspects of their business. With the right partner however the capability of this new fulfilment frontier will not only grow your operations but improve your quality of service. Hiring experts in any industry, like in fulfilment, ensures the job is getting done right. With these fulfilment benefits, you can focus on other aspects of your business while you remain fully operational without any loss to service or sales. When you do finally decide to take the leap to outsource to an eCommerce warehouse, it’s essential to do your due diligence.

It’s critical to make sure you have a reliable partner with a reputable record of accomplishment and the right pricing options for your business. You must make sure you understand every aspect of your contract for your fiduciary responsibilities so your business can thrive in a new age of digital commerce. Price gouging and 3pl annual subscription models can quickly bloat costs and deflate your bottom line if you don’t fully understand what you’re paying for. 3pl costs differ greatly between providers.

Third-party logistics services have helped to innovate business distribution and fulfilment channels in the late 20th century. With improvements in technology over the last 30 years, we are now able to offer more innovative business pricing options as well. This is where variable pricing vs fixed pricing comes into play, and this is what we’re discussing today.

Today, I will be breaking down fixed pricing vs variable pricing for 3pl costs. Both structures are similar, but only one has the ability to save you money. I’ll be discussing these 3pl pricing methodologies as well and how they compare, so you can decide on the best option for your thriving business.

3pl costs, 3pl pricing, ecommerce warehouse, 3pl logistics

Table of contents

1) 3pl costs: Fixed & variable pricing options

2) Fixed pricing model

3) Variable pricing model

4) What 3pl costs are associated with eCommerce fulfilment?

5) Other non-related order fulfilment costs

6) Understanding bespoke models and flexible pricing

7) 3pl pricing examples

8) Advantage of courier partners for order fulfilment

9) Fixed pricing vs variable pricing: The big difference

3pl costs eCommerce fulfilment

3pl costs: Fixed & Variable pricing models

There are different pricing options when you deal with any 3pl provider. Not one pricing structure fits all companies, and sometimes you need a customised solution. This can vary depending on the size of your company, monthly order volume, or product offerings. It can also depend on the services you specifically require such as custom packaging. Understanding the pros and cons of each pricing structure will educate you to make the best decision. 3pl pricing models include:

Fixed pricing model

Most often you will deal with fixed costs, a pricing structure that is predictable and easier to understand. You maintain the same rate for warehouse storage, pick and pack services, etc., and it doesn’t change (£8, £9, etc.). Delivery costs still change depending on the courier & size and weight of your parcel, but the general 3pl warehouse costs don’t vary. What you’re quoted is what you get.

Variable pricing model

The next is a variable pricing structure, which solidifies caps in your spending limits, but allows you to have lower fulfilment rates based on your consumption. So, what you spend has the ability to be lowered. It’s more closely linked to your performance, directly keeping costs in line with efficiency.

3pl costs include:

  1. Storage and stock management costs
  2. Picking and packing costs
  3. Delivery costs
  4. Returns processing costs

* More detail on the various 3pl costs in a little bit

3PL Fixed pricing model example

A fixed pricing model is also known as a “flat rate” structure, meaning businesses pay a flat rate per order. You’ll pay fixed costs for storage, picking and packing, kitting, customer packaging (should you want it), and delivery. A fixed model is often preferred for companies that like easily predictable costs. This is considered an advantage for sellers as they can easily manage sales projections, but they do run the risk of paying higher margins without the ability to renegotiate their set contractual pricing obligations to the 3pl.

Let’s extrapolate this with a 3pl fixed pricing cost example: (Fictitious scenario)

£1.50 per order (before delivery cost) for your fulfilment needs with 2,000/month orders

= £3,000. Simple math.

The problem falls in this fixed cost – say you negotiate based on 2,000 orders per month but explode in Q4 and end up doing 10,000 orders. In this fixed scenario, your cost is stagnant at £1,500 even though processing volumes at that rate incurs benefits of scale and fractional cost savings across the operation. None of which are passed onto you the seller. It costs less to ship more on a per-unit basis typically.

When it’s time to plan, the certainty of a fixed price gives confidence to all members of the board. They look for optimisations and efficiencies in-house in other areas and just accept that 3pl’s cost money. If sales volumes are low – that’s a Sales & Marketing issue. If they’re consistently high, they can renegotiate rates to reflect the latest performance. It’s all a bit slow and wasteful but it gives a hard number for the bean-counters to work from.

3PL Variable pricing model example

A 3pl variable pricing model is a “consumption-based pricing model.” This is a hybrid approach to 3pl pricing, allowing more flexibility and scalability for businesses. You only pay for what you use and aren’t charged for services you don’t need.

So, instead of paying a “flat rate” per order which never changes, a “variable rate” per order can change. The costs decreases (based on warehouse efficiencies) and caps are in place to ensure that inefficiencies do not result in erroneous charges. Look at it this way:

If you want certainty, base the cost of cap price and be happy with the savings when your typical 3pl costs are much lower. This might present itself as an expensive option when looking at its face value from a perspective of certainty. Keep in mind there is only so much certainty you can have when predicting the future in eCommerce – generally based on earlier performance.

If you dig deeper though you’ll see that the average price is much lower than the cap and the variation from average across the year is closer to 4%. This variation is a direct reflection of the changing seasons and order volumes being processed. At Selazar we currently cap pick and pack to £1.20 for a standard single item order, but the average cost is a staggering 67p. If we add 4% to 67p we get 70p. So, trusting in the past performance of variable pricing structure we can do some simple math:

The perspective of Certainty: (Fixed price perspective)

£1.20 per order (before delivery cost) for your fulfilment needs with 2,000/month orders

= £2,400.

Trusting in variable structure: (My 3pl partner is striving for efficiencies)

£0.70 per order (before delivery cost) for your fulfilment needs with 2,000/month orders

= £1,400.

The big difference is the price you pay when your order volumes inevitably go up Your costs as a proportion of profits won’t change drastically if you’re doing 2,000 or 20,000 orders per month.

With this model, it can be more challenging to first understand your exact costs, or track them, because they vary, but the savings cost is more favourable for you over time. Balancing costs and services that meet your brand standards is a challenge but embracing the future of fulfilment will help you stay ahead of the curve.

*Note – Fixed and variable pricing structures aren’t just single entities that are completely independent. They can be mixed and matched depending on different service charges. A 3pl can adopt the fixed or the variable structure, but they can also use both (fixed variable) like we do. More on that as we progress.

Amazon FBA “fixed-pricing-profit sharing” pricing model

Another 3pl pricing model that should be mentioned is fulfilment by Amazon (FBA). If you’ve used FBA or are considering using their services, there are more costs associated with working with them because of their eCommerce platform. You will be charged for fulfilment with Amazon (Fulfilment + storage + optional services) as well as the “selling on Amazon fee,” which is 15% of your product profit margin.

This pricing model with profit-sharing is not recommended for businesses looking for ease of scalability, as increased costs can hinder your growth. You’ll also lose brand identity when selling via Amazon, but there can be a lot of sales so it’s not to be dismissed offhand.

What 3pl costs are associated with eCommerce fulfilment?

Depending on which 3pl you decide to partner with will depend on what you will pay. Prices will vary from storage to delivery, custom packaging to returns costs. Again, with our structure, you only pay for what you actually use. There are no extra charges such as profit sharing or annual fees.

Here are common 3pl costs associated with order fulfilment.

Warehouse intake cost

This is the cost associated with workers receiving your stock you send in and organising them into the warehouse. This is typically a flat rate charge.

*Selazar currently offers this at 40p per minute.

Warehousing stock storage

After you send your stock to the warehouse, you’re charged a monthly storage fee. This varies depending on which 3pl you use.

*Selazar stock storage cost:

35p per standard sized box per week/fixed

£2.50 per pallet per week/fixed

Picking and Packing

Pick and pack costs are associated with the warehouse workers physically travelling around the warehouse to pick your products from the shelf, and then pack them into boxes for delivery.

This is a key part of the process where the devil is in the details. Common 3pl mispicks can cause headaches and this is where some 3PL’s do better than others. Tech-first approaches are preferable today as they tend to circumnavigate common human error. Special scanners should be used that update in the cloud, so details like the SKU number confirm transactions all day with order numbers. This way the right product goes to the right station, with the right packaging, to the right customer. You need certainty that orders are dispatching with the right items inside.

Selazar smart technology optimizes the routes for pickers to find the most optimal route for cost savings. We time our operations down to the second, so there are no padding or hidden fees. Our average picking time currently is 24p, capped at 40p per minute. Our pick and pack accuracy rate is also 99% thanks to our smart storage technology. It ensures smooth operations and seamless product delivery.

Selazar pick and packing cost:

Picking

Capped at 40p per item– Current average is 24p (variable pricing)

Packing

Capped at 80p per order – Current average is 43p (variable pricing)

Kitting

Also known as pre-bundling, Kitting is the cost of packaging items that arrive separately that need to be organised into a single group. There is also de-kitting, which is the opposite of kitting – taking bundles and organizing them as single items for re-sale.

In normal warehouses, this can be a double charge on an unsuccessful experiment with bundling items. A great contrast is when using cloud-based technology. Bundles are combined virtually allowing one SKU to fulfil multiple items at once. Sellers can endlessly create new kits without cost until purchase and order processing takes place. Why guess at what works best when you can try it all?

Selazar kitting cost based on hourly timing fixed at 40p per minute. (Same as our picking charge)

Custom Packaging

Custom packaging means using your own custom boxes, inserts, paper, and gifts. If you’re a brand focused seller, then it’s important your parcels arrive the way you want them to. If you have a thank you card, coupon, or a gift inside, this can be added for an extra cost.

This fulfilment option is a service that is offered to clients who want to go the extra step in their marketing efforts and add some “wow factor.” Not every 3pl you work with will offer this. If you don’t want custom packaging as an option, however, then you don’t have to use it or pay for it.

The fee for custom packaging will vary for each 3pl. For example, Selazars custom packaging is based on a flat rate time used to create the custom order, at 40p per minute.

Amazon is an example of a 3pl service that does not offer custom packaging. Everything arrives in Amazon boxes, so the seller doesn’t have an opportunity to be showcased as the main brand ambassador upon delivery.

Parcel Delivery 3pl costs

This is the cost of delivering the actual parcel to the customer. This is completed with a courier network of providers including brands such as Royal Mail, Hermes, DPD, Yodel, and UPS.

3pl costs parcel delivery examples

Some couriers vary in where they deliver, such as locally, nationally, and internationally. This is why most 3PLs work with several couriers. The cost from the courier is passed onto you from the 3PL.

These are fixed costs. Variable factors include the size and weight of your parcel, your destination, and your preferred arrival time.

See some examples of 3pl delivery rates below.

3pl pricing example, 3pl courier rates, shipping rates 3pl, 3pl rates examples

Returns (Reverse Logistics)

Parcel returns or reverse logistics is the opposite of 3PL standard operations. Now, instead of the goods going to the end-user, the end-user needs the package to go back, for whatever reason. This could be a product defect, a wrong size item, colour, etc.

When parcel return management happens there is a cost associated with this process. If the parcel is sent back to the 3PL instead of the manufacturer or provider, someone needs to do a quality check on the item to see if it can be restocked for resale. This can be inspected and processed in under 2 minutes. This action of course will incur a small fee.

Returns can be a leading cause of frustration for any online retailer. Returns are not offered with every 3pl you work with. Make sure you check this detail before committing to any contracts. A good returns process will help you maintain customer loyalty and retention, and you don’t have to deal with the headaches!

92% of consumers will purchase again from a retailer if the returns process was easy.

*Selazar returns cost based on hourly timing cost/variable pricing or 40p per minute.

Selazars’ order fulfilment process broken down

You’ve seen the charges, now here is our order fulfilment process in a nutshell, a simple and straightforward process. When an order is received on your website, our warehouse gets the notification instantly in real-time (left-side below) and begins the entire packaging process and delivery (right side below).

order fulfilment, order to fulfillment process flow, what is the order fulfillment process, what does it mean when your order is in fulfillment, what does order status fulfillment mean
3pl Order fulfilment

From the moment the customer hits the buy button to the moment they receive their package, the system automates for you, customising your specific needs with intelligent AI. You’re charged for the time that is used to complete this process along with any extra costs of the packaging and delivery (courier charges). For simple understanding, the picture outlines the fulfilment process with the costs outlined above previously.

Other non-related order fulfilment costs

There are various other fees that some 3PL’s choose to add in with their services. Much like a bank or a gym with extra signing charges, they many times are just the cost of doing business with them. Well, how is that calculated? Do you know administrative fees are calculated? These seemingly random charges should be scrutinised by you. At the end of the day a variety of unexpected charges will add up and impact your profit margins. Sign up fees & subscription fees

When choosing to work with a 3pl it’s important to understand the total cost-benefit ratio. What are you being charged for and why? Selazar as a partner wants to help eCommerce businesses grow faster and cheaper, hence why we don’t bloat our costs. This is just one we reason why we offer no sign-up fees and no annual subscription fees. You should not be charged for this. If you see these with your 3pl, my advice, ask what you gain from this club membership?

Next is hidden fluctuating costs.

Seasonal adjustments

Not all services are the same. Some are designed to benefit the provider more than the seller. Amazon as an example has operational charges that vary for seasonal changes. See here.

This means during busy peak seasons when operations ramp up, you must foot the bill. Obviously, this is to cover their operating costs. But, why should you have to cover those extra costs?

This is an issue with fixed costs. Companies can bloat your costs as they please with seasonal changes. And those rates are already “fixed” into your contract. Make sure you keep an eye on non-related costs or hidden costs when signing any contract.

3PL Software

Every 3pl will need some sort of a warehouse management system (WMS) for stock storage and organisation. Now, not all 3PL’s will be equal in this area.

For example, we are what’s known as a “software with a service” (SWAS). We’ve already built the platform for you with our in-house tech team. With a single online platform, you control all your storage and shipping operations. This is not offered with every 3pl you use. It’s also offered as a free bonus when signing with Selazar. Now that’s service!

When working with a 3PL, you need to understand what software is being offered to you, and how good it is. This is because antiquated operations cause warehouse inefficiency, potentially deflating your bottom line. A survey of 250 supply chains revealed the average business loses over £280,000 a year due to warehouse inefficiencies like improper picking and packing.

34% of businesses also ship late because products are sold which are not actually in stock. This comes down to software and responsible inventory management. Good technology with two-way stock sync solves this issue.

Our proprietary API integrates with your Shopify or WooCommerce store for simple automation and fulfilment. This allows flexibility in our operations. Make sure your 3pl provider can offer you the proper tech you need for your business to thrive and compete in the digital marketplace.

Understanding bespoke price model

Bespoke pricing is both fixed and variable pricing. We offer both. Selazar’s bespoke pricing is “variable pricing” with fixed caps for certain services and fixed pricing for others. You could technically refer to this as fixed variable pricing. Sounds confusing, but it means designing a pricing structure service that is flexible and can save you a lot of money on processing your warehouse orders. This can all be answered by giving us a free call should you want to learn more about this now.

3PL bespoke pricing examples fixed & variable:

Stock processing & kitting – Fixed

Storage – Fixed

Pick – Variable

Pack – Variable

Packaging & shipping – Fixed*

*Depending on custom packaging use and the destination this price will vary.

 

Built-in caps and efficiency

So, let’s discuss caps. A cap on your pricing means that the price will never go above this. Well, you may ask then what is the difference between a capped price and a fixed price? Nothing, at first glance. A cap on your pricing is a fixed price. The difference is that a variable pricing structure allows changes to go down and fluctuate below your set capped agreed-upon price (for certain services). The difference is fixed price will ALWAYS stay the same no matter what the service is.

The variable pricing structure can fluctuate and go down, but it won’t ever go up.

 

Wait, why does the variable price structure vary again?

We have a consumption-based model. You get charged for what you USE. Let’s be more specific:

If a single pick and pack time for an order cost us £2 for the employee to complete this for you, why would we charge you £3? That extra £1 adds up in time. £1 x 50,000 orders in a year = £50,000 in extra costs!

These extra 3pl costs are built into outdated fixed pricing structures. This is where companies capitalise on your invoices. Their cost of labour & some profit may have only been at £2 for a single pick and pack, but you got charged £3. Why? Well, FIXED pricing structure.

With Selazar, when we save, you save. It’s that simple.

 

ecommerce warehouse, ecommerce warehouse costs, ecommerce warehouse pricing, automate orders fulfilment, third party logistics

3PL pricing examples fixed & variable (bespoke)

So, Selazar bespoke pricing is “variable pricing” with fixed caps and fixed costs. So, if your cap pricing is £5 per delivery, you know you will never go above £5. But would’ve it went below that threshold? Would’ve it varied less? Well, that means more money in your account! Yes, please.

Let’s extrapolate bespoke model pricing by 5,000 units a month with picking and packing costs (variable) and delivery costs (fixed).

FIXED picking & packing and parcel delivery

Assume pick & pack charged at £1.20 (fixed or capped price), packaging materials £0.60

5,000 units at £1.80 for pick, pack & packaging per order = £9,000

Add $3.30 for delivery/5,000 units = £16,500

Total = £25,500

 

VARIABLE picking & packing and parcel delivery

Assume pick & pack charged at £0.70 (Average cost + variation) , packaging materials £0.60

5,000 units at £1.30 per order for pick, pack & packaging per order = £6,500

Add $3.30 for delivery/5,000 units = £16,500

Total = £23,000

 

That is $2,500 in savings in a 30-day period for 5,000 units

That is £30,000 savings in a 1-year period for 60,000 units

 

This is a simplified straightforward example that clearly demonstrates savings with variable pricing. In reality, the average cost of picking and packing will shift more sporadically every day, all day. In a single day, the variable pricing structure can go from £4.23 to £3.68 to £2.50, up to £3.20 again, etc. It may be more challenging to understand, but a cap is set, so you know you won’t be overcharged.

You have options here to save more money.

 

Advantages of courier partners for order fulfilment

Lastly, it’s important to remember that we are not a single operation. We are two operations, both with separate costs. We have in house services as well as a partnership service with our courier companies. You don’t have to do anything because we’ve already taken care of the supply chain for you.

This is a mutually beneficial relationship which is another significant advantage of working with a 3PL. We are interconnected to a large network of national and international couriers. Wherever your target market is, we can fulfil it, and we work with our partners to keep your costs consistent. Any changes and you will be notified. You don’t have to do any work.

Working closely with the courier networks ensures we can offer you the best possible service when it comes to sending, tracking and delivering your customers’ parcels to their front door. We are also in a position to negotiate prices for our clients because of our working relationships and mutual business benefits. We manage the service offerings and negotiate the best costs for your convenience and savings.

3pl cost savings with Selazar

3pl costs, 3pl rates, ecommerce fulfilment uk, ecommerce fulfilment services, 3pl logistics costs, 3pl logistics ratesThe pay-as-you-go consumption model eliminates the need to tie up capital on warehouses, equipment, staff or software. There are no setup fees or monthly fees combined with an easy-to-use customer portal makes our automated end-to-end fulfilment solution the best choice for anyone looking to keep control of their brand as they grow.

For smaller businesses, this can mean a couple hundred in savings a year. For other larger companies, this can mean tens of thousands in savings, potentially even more.

3pl costs eCommerce fulfilment

Fixed vs Variable pricing: The big difference

To sum things up, you want to carefully consider your pricing options when working with a 3pl. Make sure you ask questions and don’t be afraid to embrace new variable options if they are a bit challenging to understand at first. What matters for your business and long-term relationship is that you’re getting the best return on your investment. Some purely fixed pricing options as traditional standards may be easier to understand, but the variable fixed pricing structure will save you more money and help grow your business. Simply chasing a flat price number when deciding on your fulfilment provider just may not be the best solution and may leave your business vulnerable.

As a partner in your business and essentially an extension of your brand it’s critical your 3pl provides you with the ultimate benefits to automate and scale effectively. From them, you should have flexible pricing options, convenient solutions, and superior technology to streamline your processes, along with a dedicated customer service team.

We can get your order fulfilment automation set up in days. Give us a call so that we can find out more about your business and streamline your operations.

[/fusion_text][/fusion_builder_column][/fusion_builder_row][/fusion_builder_container][fusion_global id=”2142″]