An eCommerce company typically starts pretty hands on.
Oftentimes they’re started out of someone’s home, packing products and sending them off directly to customers or straight to Amazon FBA warehouses.
And this works, for a while.
Eventually, you’re going to want to start handing off tasks that are getting too hard to manage by yourself so you can more effectively manage and scale your business.
When the process of sending to FBA warehouses gets too cumbersome and expensive (especially if you’ve been sending everything to Amazon via UPS), it might be time to look into a Third Party Logistics (3PL) or Amazon FBA Prep Service company.
What is a Third Party Logistics company?
A Third Party Logistics company, or 3PL for short, is a third party company that provides logistics services for eCommerce businesses.
Some (but not all) of the services a 3PL provides include:
- Shipping and Receiving product
- Setting up FTL and LTL shipments
- Storing Inventory and Inventory Management
- Individual product order fulfillment
- Product inspection and other prep services
What is an Amazon FBA Prep Service?
An Amazon FBA Prep Service is similar to a 3PL in many regards, but their main focus is getting your freshly manufactured products prepared and shipped out to Amazon FBA Warehouses.
Services a typical FBA Prep Service may provide:
- Unloading containers into their warehouse
- Product inspection
- Labeling products with FBA Labels
- Prepping pallets for Amazon FBA Inventory shipments
The difference between a 3PL and Amazon FBA Prep Service
While Amazon FBA Prep Services and 3PL companies have a lot of overlap in services, they are not always the same thing. Some 3PLs will have FBA prep services included in their capabilities, some won’t.
Why Amazon Sellers use 3PLs / Amazon FBA Prep Services
In the not-so-distant pre-pandemic past, Amazon sellers who were selling at a decent rate could ship their manufactured products by the container directly from the factory into Amazon FBA warehouses.
Since 2019, however, a lot has changed:
- Sea freight rates have surged from 5x up to 10x their pre-pandemic prices
- Amazon has implemented a limit to the amount of products you can send to them at any given moment
With the rising rates, sellers have to fill their containers as much as possible now to not lose as much money on sea freight.
Also, combined with Amazon’s new product storage limits, sellers have to store their products somewhere other than Amazon’s warehouses.
These 2 issues led to the requirement of most Amazon sellers having to work with a 3PL or Amazon FBA Prep Service.
Should You Use a 3PL or Amazon Prep Service?
There are a few scenarios where you would start to consider using a 3PL if you aren’t already:
- You are managing all your logistics at home and sending products to Amazon is getting expensive, time consuming, and cumbersome.
- You are starting an Amazon business and want to keep everything hands-off from the beginning.
- You are a seller who used to send directly to Amazon warehouses from overseas but that is no longer a viable option.
If any of these scenarios sound familiar, then switching to a 3PL/Prep Service can be a big relief and make running your business a lot smoother.
How to find a 3PL / Amazon FBA Prep Service
I wish I could tell you that finding a 3PL that fits your business needs and does it at a reasonable price is as easy as a simple Google search, but sadly it is not.
To help you narrow down your search when finding a 3PL, knowing the answer to these questions to help your final decision:
Do you know which port you prefer products to be shipped to?
Your 3PL’s proximity to the port of your choice can help reduce a lot of costs and fees associated with running your business.
It’s a good idea to have a 3PL that’s close to your preferred port and also close to a nearby MAIN Amazon FBA Warehouse.
For Amazon warehouses, the price they charge for LTL shipments to their warehouses is based on the pickup location of your products and the proximity to the closest main FBA warehouse.
Therefore, having a short distance from port to 3PL to Amazon warehouse is a crucial factor for overall cost management.
There are popular ports in the US in states like California, Florida, Texas, Georgie, and New York.
One tip you can do is if you are considering a 3PL, you can create an account on Freightos, make a mock shipment coming from wherever your factory is (for example, Guangzhou in China), and then set the final destination to your 3PL, and look at the cost breakdown Freightos gives you to ship a container to any location in the US.
Here you can see the difference between a container going from Guangzhou to Port of Los Angeles and Port of Houston.
Are you selling exclusively on Amazon or going multi-channel?
If you are an exclusive Amazon seller, it might be cheaper (but not always) to go with an exclusive Amazon FBA Prep Service.
If you are multi-channel or plan to go that path in the future, a 3PL that can send to other warehouses and fulfill individual orders might be the best option.
Do you know the exact services you’ll need?
3PLs offer an absolute ton of services, but sadly each of them costs money.
Your goal as a seller is to get your 3PL / Prep Service to do as LITTLE as possible to get your product into an Amazon warehouse, thus reducing your costs as much as possible.
If you get your inspections, labeling, and individual product prep done in your product’s origin country, that amounts to huge savings overall.
So see what needs to be done by your potential 3PL and compare it with other companies you’re vetting.
Finding a 3PL / Amazon Prep Service
Now that you’ve narrowed down what you need, it’s time to find a 3PL.
Many exist, but it’s hard to find one that matches the current needs of your business and can do it at a reasonable price.
You basically have two options for finding a 3PL / Prep Service:
- Google search and looking on the web
- A referral from someone in your network
- The site Shiphype has a list of 200+ Amazon Prep Services
Once you find your top choices, compare all of their service prices and start reaching out to them.
Top Tips When Working with a 3PL / Amazon FBA Prep Service
That should give you the rundown of what a 3PL / Amazon FBA Prep Service does, what you should be looking for, and how to acquire one.
Before we end this post, we’ll list some top tips to summarize everything about prep services.
1 - Keep as many tasks in the country of origin as possible
Prep services will do it all… for a price. If you keep things like product prep, inspection, and labeling in the country of origin, you stand to save a lot of money.
2 - Ask your network about a 3PL / Prep Service
A lot of prep services don’t advertise or market, and only take on new clients through referrals. Ask everyone you know in the Amazon space who they use and if you can get in.
3 - Try and get a 3PL near a port AND a big Amazon warehouse
Reducing transportation costs can lead to huge savings, especially since they are constantly changing these days and fuel prices seem to only go up.
4 - Go over pricing sheets of 3PLs you’re vetting carefully
Every 3PL / Prep Service charges in different ways for different things. Some won’t charge a lot for unloading products off a container, some will charge a huge amount. Some will do carton forwarding, some won’t and will force individual product fees. Check how much they charge to store products and HOW they charge storing of products (by volume or pallet). Read carefully and choose wisely.
5 - Work with a 3PL that is great at communicating
There’s nothing worse than an unresponsive 3PL. You can judge their communication level by how quickly they respond to your initial email. Always go with a company that over-communicates.