As Yet Unfulfilled: What 2017 Looks Like for the 3PF Industry

man scans package ready for shipment

By many accounts, 2016 was a real pain. An ugly political scene, sadness over the loss of legendary entertainers, violence abroad—you name it, we had it. But, 2016 is over. 

The future looks bright, at least within the 3PF industry, where we see rapid growth, category expansion, and considerable amounts of consolidation among service providers. Just in the past 2 years, there have been at least 5 mergers among prominent order fulfillment providers. This trend may continue, as Amazon continues to remove under-performers from its marketplace, sending sellers to the open markets of Shopify and Bigcommerce.

It's the overall performance of fulfillment providers that will continue to be tested in 2017. Meeting the growing demands of brands and sellers (and their consumers), is where 3PF's must prove their worth. Specific areas include On-Time Delivery, Time-in-transit, Pick Accuracy, and Value-added Services.


On-time Performance

Performance rates among order fulfillment providers, especially during the peak holiday season, were up. According to Kurt Salmon's 2016 Holiday Shipping Study, 

The majority of retailers were able to keep their shipping promises this season as 97% successfully processed and delivered orders on their last guaranteed shipping date before Christmas, according to Kurt Salmon’s annual holiday shipping study. This was up from 95% in 2015 and 87% in 2014.
— MultichannelMerchant.com

RF inventory scanner is aimed at a shipping label

Accuracy

Showing the ability to pick orders with high levels of accuracy is of as much importance as showing high speed. The challenge for fulfillment providers in 2017 and beyond will be to improve accuracy for the fast paced world of e-retail. This has been a challenge for many fulfillment companies. According to InternetRetailer.com: 

One out of every 20 orders shipped by e-retailers is either late, incomplete or both, research and advisory firm Aberdeen Group says in a new study. It also notes that 20% of retailers surveyed experience picking errors in one out of every 10 orders.
— InternetRetailer.com

Value-added Services

hands on cardboard boxes in assembly line

Handling raw product, assembling kits for easy picking, and applying branded labels, stickers, stamps or other creative touches to outbound shipments are all valuable additions to a basic pick-and-pack offering. 

Fulfillment providers are going to be expected to deliver on KPI's with consistency, but the ones who thrive will also be offering these value-added services, like kitting, product assembly and subscription models. In the last 18 months, alone, Google searches for value-added services among order fulfillment providers have increased 24%.

Online retailers are consolidating their product preparation efforts with fulfillment providers, whose warehousing infrastructure and labor management prowess offer savings and efficiency compared to alternatives.

 


Reducing Time-in-transit

blue digital map of world

Brands that are conscious of their audience's expectations for delivery speed may consider order fulfillment providers with multiple locations within their audience's delivery area. For a national audience with order volumes approaching 5,000 orders per month, it may be cost effective for brands to warehouse and ship from bi-coastal distribution centers. A networked warehouse management system will automatically determine which facility will fulfill the order, based on the proximity of the distribution center to the end recipient when cross-checked against inventory availability and shipping method selected.

3PF's with bi-coastal, or multiple fulfillment centers will be well-positioned to achieve quicker delivery speeds while maintaining accurate inventory automatically. Consumers whose expectations are built upon an Amazon-like response time will appreciate the consideration.


The Year to Come

For brands and online sellers interested in scaling up, third-party fulfillment is likely to become part of your business strategy. If the 3PF industry is to support those needs, the coming year will be a true test, as more businesses than ever are seeking online buyers for their products, and it will be up to service providers to achieve the goals of their clients' expanding eCommerce sales.

The 3PF industry has to manage these expectations well, and continue to adjust to the changing business needs of the online seller. At SP Express, we aim to protect the success our clients have achieved, and support growth with continued increases in our service quality, and infrastructure. Look for more activity and news from this provider. We expect 2017 to be our best year yet.