Fulfilling customer orders efficiently and cost-effectively can be a complicated challenge, especially as your business scales. This is where fulfillment services come in. Two prominent options for e-commerce’s are 3PL vs Amazon FBA.

Customers have come to expect fast, reliable delivery, often with free shipping options, which puts pressure on businesses to manage inventory effectively, process orders efficiently, and deliver products quickly and affordably. However, fulfilling these expectations in-house can be a significant undertaking, requiring investment in warehouse space, labor, packaging materials, and shipping solutions. 

Understanding 3PL and Amazon Storage

There’s a differentiation between the two main fulfillment options, 3PL for FBA and Amazon storage solutions. 

Third-Party Logistics Provider (3PL)

A 3PL Fulfillment provider is a company that offers a wide range of outsourced logistics and fulfillment services to businesses. These services can include warehousing, inventory management, order fulfillment, packaging, shipping, and returns processing. 

3PL for Amazon sellers cater to businesses of all sizes, offering a flexible and scalable solution. They typically have a network of warehouses across different geographical locations, allowing them to optimize storage and delivery for your business needs.

• Warehousing: Secure storage of inventory in 3PL warehouses, often with features like temperature control for specific products. 
• Inventory Management: Tracking inventory levels, managing stock rotations, and providing real-time inventory visibility to clients. 
• Order Fulfillment: Receiving orders from multiple channels (e.g., online store, marketplace), picking, packing, and shipping orders to customers. 
• Transportation: Using their relationships with various carriers (trucking, air, sea) to negotiate competitive shipping rates and ensure timely delivery. 
• Customs Clearance: Handling import/export documentation and customs clearance procedures for international shipments. 
• Returns Processing: Managing returns, processing refunds, and managing reverse logistics. 
• Value-Added Services (VAS): Offering additional services such as product assembly, kitting, labeling, and customized packaging.    

Fulfillment By Amazon (FBA)  

Fulfillment by Amazon (FBA) is a service offered by Amazon that allows sellers to outsource the entire fulfillment process to Amazon. When enrolled in FBA, sellers ship their products to Amazon fulfillment centers. 

Amazon takes on the responsibility of: 

• Storing Inventory: Amazon securely stores your products within its wide network of fulfillment centers, ensuring safe and efficient storage. 
• Order Fulfillment: Upon receiving an order, Amazon efficiently picks, packs, and ships the product(s) directly to the customer. 
• Customer Service: Amazon handles all customer inquiries, returns, and exchange related to FBA orders, providing excellent customer service and resolving issues promptly. 
• Shipping: Amazon uses its extensive shipping network, including Amazon Prime, to ensure fast and reliable delivery to customers, which often includes options like free two-day shipping for Prime members, enhancing customer satisfaction and driving sales

Amazon Warehousing & Distribution (AWD)

Amazon Warehousing and Distribution AWD is a storage and fulfillment service offered by Amazon that provides businesses with access to their extensive network of fulfillment centers. 

Unlike Amazon FBA vs 3PL, where Amazon handles the entire fulfillment process, AWD allows businesses to store their inventory within Amazon’s warehouses while retaining greater control over order fulfillment. 

With AWD, businesses ship their products to designated Amazon Fulfillment centers. Amazon then stores the inventory securely and efficiently. However, businesses remain responsible for picking, packing, and shipping orders to customers. 

While Amazon can provide these fulfillment services for an additional fee, businesses have the flexibility to choose the level of fulfillment support that best suits their needs. 

Pros and Cons of 3PL and Amazon Storage

Both 3PL providers and Amazon storage solutions offer distinct advantages and disadvantages: 

3PL

3PLs offer high scalability and flexibility, allowing businesses to easily adapt to changing business needs, such as seasonal fluctuations in demand or expanding into new markets. 

They provide a comprehensive suite of services and not simply basic fulfillment, including inventory management, transportation, customs clearance, and value-added services like product assembly and kitting. 

3PLs can often negotiate competitive shipping rates with carriers due to their high shipping volumes, potentially leading to cost savings for businesses. 

Many 3PLs provide robust technology platforms that offer real-time visibility into inventory levels, order status, and key performance indicators. 

Cons of 3PL

Selecting the right 3PL partner requires careful research and due diligence. Finding a provider that aligns with your business needs, offers competitive pricing, and has a proven track record of success is important. 

Maintaining clear communication and coordination with the 3PL is important for seamless operations. 

Issues such as order discrepancies, shipping delays, and customer service concerns need to be addressed promptly and effectively. 

Amazon Storage 

FBA provides access to Amazon’s wide fulfillment network, including Prime delivery, which can significantly boost sales and improve customer satisfaction. 

FBA significantly reduces the operational burden by handling many aspects of fulfillment, allowing businesses to focus on other areas of their business, such as product development, marketing, and customer acquisition. 

FBA products are eligible for Prime benefits, making them more visible to Prime members and increasing their chances of being purchased. 

Amazon’s focus on customer satisfaction and its efficient delivery network contributes to a positive customer experience.

Cons of Amazon Storage

FBA involves multiple fees, including storage fees, fulfillment fees, and long-term storage fees, which can significantly impact profitability, especially for low-margin products. 

FBA offers limited control over the fulfillment process. Sellers have limited control over pricing, promotions, and packaging. 

Amazon might impose inventory storage limits, especially during peak seasons, which can restrict sales and potentially lead to lost revenue. Long-term storage fees can also be significant for inventory that remains in Amazon fulfillment centers for extended periods.  

Overview of Amazon Storage Fees

Fulfillment fees cover the costs associated with picking, packing, and shipping orders. Fees depend on product size and weight, as well as the delivery speed selected and chosen by the customer. 

Amazon charges monthly storage fees for inventory stored in its fulfillment centers. Fees depend on the size and weight of the product and the time of year (higher fees during peak seasons). 

Higher fees are generally charged for inventory stored in fulfillment centers for more than 365 days. 

Fees are also charged for removing inventory from fulfillment centers. 

Factors to consider when deciding between 3PL and FBA 

Choosing the right fulfillment solution depends on a couple factors: 

If you anticipate high sales volumes and rapid growth, FBA’s scalability and access to Amazon’s resources can be highly beneficial. 

The size, weight, and fragility of your products will influence the choice of fulfillment provider. Some products may be better suited for FBA’s specialized handling, while others may be more cost-effectively handled by a 3PL for FBA sellers. 

Carefully evaluate the costs associated with each option, including fulfillment fees, storage costs, transportation costs, and potential integration costs. 

If you require high levels of control over your fulfillment process, such as specific packaging requirements or unique shipping arrangements, a 3PL may offer greater flexibility. 

If meeting customer expectations for fast and reliable delivery is important, FBA’s Prime eligibility can be a significant advantage. 

If you sell on multiple platforms, a 3PL may offer more flexibility in fulfilling order from various channels.