Does prepping your products take up so much of your time? Are you risking product and service quality by juggling multiple tasks to meet shipping quotas? Then, it's time to outsource product prepping and shipping to a prep center.
A prep center is a third-party logistics service provider (3PL) specializing in prepping, storing, and shipping products. You can hire them to receive your products from your manufacturer or supplier and ship them directly to your customers or to an Amazon fulfillment center.
Aren’t you using Amazon FBA already? Why should you send your products to a 3PL only to have them sent to an Amazon fulfillment center? Isn't that redundant and costlier?
That’s what we will find out in this article. In addition, we will identify situations where using 3PL makes sense and learn how to hire one for your Amazon FBA business.
When to Use 3PL Services
You don't always have to reroute your shipment to a 3PL facility, but there are instances when it's most efficient. The simplest litmus test to determine if you need to outsource tasks to a prep center is if product prepping wears down your production. Here are other situations where a prep center can make a difference.
- If you're doing arbitrage: You need to dedicate a lot of time each day to product research and sourcing. You won't have enough time to prep your products.
- If your IPI score is below 500: Amazon now limits storage volume for sellers who fail to drive sales by stocking popular products and managing on-hand inventory.
- If you need to resupply your Walmart inventory: You cannot use Amazon FBA to ship products to your Walmart store, but the reverse is possible.
- Shipping from abroad: Some overseas suppliers may not agree to prep your products for Amazon FBA, especially if you plan to private-label or white-label them. Either you direct the shipment to your address or to a prep center.
Advantages of Using 3PL Services for Amazon Fulfillment
When Amazon FBA came out years ago, the demand for 3PL services dwindled. But as Amazon updates its policies, making fulfillment too complicated for most sellers, 3PL services are slowly regaining popularity. Here are some of the reasons Amazon sellers are enlisting these services again.
- Storing products in a 3PL facility helps avoid long-term storage fees when Amazon's supply chain falls apart.
- Amazon can delist certain products and restrict accounts. With 3PL, you can continue shipping delisted products and don't have to place a removal order, which takes weeks.
- Depending on the number of units you're shipping and the available storage in Amazon's warehouses, Amazon may decide to send your products to multiple fulfillment centers at your expense. In comparison, 3PL service providers will ship to one fulfillment center each time.
- You can integrate your store with your website, Walmart, eBay, and other platforms. Amazon's multi-channel integration only includes some major competitors.
- If you're importing and your shipment gets stranded, Amazon won't be able to ship it back to your supplier. This isn't the case with 3PL service providers, and they rarely decline shipments.
- You can ship to a 3PL facility based in a sales-tax-free state.
- They take the hard work off online retail by prepping the products for you.
How to Use 3PL Prep Center Services
Here's a quick guide to incorporating the services of a 3PL prep center into your product fulfillment:
Step 1: Find a prep center.
There are thousands of 3PL service providers in the US. While they all offer logistics solutions, only some specialize in prepping products for Amazon FBA. Carefully scan their profile to ensure they provide the exact services you require.
Select a 3PL service provider in a sales-tax-free state like Oregon, Montana, New Hampshire, or Delaware. Alaska is also a sales-tax-free state, but you wouldn't want to send your products that far away. Select a 3PL service provider from the state nearest your location or your supplier's location.
I know what you're thinking—What's the point of avoiding sales tax if you pay more to use 3PL? Here's the thing: spending on something you need is not an expense but an investment because you expect it to pay off. In the case of hiring a prep center, it will pay off in the form of more time for you to focus on product sourcing, which is critical in arbitrage.
Why do you need to avoid sales tax? Well, you're not avoiding it just for the sake of avoiding it. You're trying to make the most of any opportunity to save money. It just so happens that some states offer that opportunity, and you're not about to pass it up.
Sales tax can be as high as 10% in some states. In California, for example, sales tax is 10%. This means for a $50 shipment, $5 goes to the government. Most 3PL service providers charge $2 to $3 per item. In short, you can save up to $5 on each item if you use a 3PL prep center in a sales-tax-free state.
Here's a tip: Hire a prep center with flat-rate pricing. Many 3PL service providers only show the price of their prep service and then shock you with a long list of additional fees, such as inspection, polybag, and bubble wrap, afterward. You can shave off these additional fees and avoid complex accounting with flat-rate pricing.
Step 2: Provide details.
Most 3PL service providers have a straightforward process. You contact them, get a quote, agree to their terms, send details, and your product is all set for prepping.
Unlike Amazon FBA, there usually isn't a system where you need to input information about your products. The prep center will only ask for a Google Sheet or an Excel file that organizes your items and label details. You need to provide information, such as product titles, UPC, ASIN, and the cost of goods.
You can share this prep sheet not just with the prep center but also with your supplier. Monitor this prep sheet regularly to ensure your supplier is shipping the correct type and amount of products.
Important: Like Amazon, 3PL service providers have a competitive rate for each of their services. For instance, most prep centers charge $40 a month for per-pallet storage, $15 for palletizing, $10 per prepping and labeling request, and $1 to $20 for forwarding a full pallet. You also have to pay a local shipping fee of around $700.
Step 3: Ship to an Amazon Fulfilment Center.
The final step is for your prep center to ship to an Amazon Fulfillment Center. But before shipping, meticulously inspect the products to ensure correct labeling, proper packaging, and accurate unit count. You're also responsible for the backend tasks, such as repricing, listing, and marketing.
The Cons of Using 3PL Services
Like any service, 3PL services have their downsides. They might not be suitable if you're shipping only a few units monthly or if your products don't need complex preparation. Additionally, outsourcing tasks means dealing with extra expenses. Plus, storage fees could be higher than Amazon FBA due to limited warehouse space.
Outsource to a 3PL Prep Center Today!
Don't hesitate to invest in services that can boost your Amazon business. If your research shows outsourcing to a 3PL prep center is a good idea, go for it. Just make sure you use the time and resources saved to focus on your main tasks. Let this article help you choose the right 3PL prep center.