How to ship your orders as a clothing brand (3PL vs storage unit)

Summary

In this video, Dave Nash discusses the logistics of using a third-party logistics provider (3PL) versus handling orders with a storage unit for a clothing brand. He explains the different stages of order fulfillment, starting from DIY packing and shipping to eventually using a 3PL and even moving back in-house. Dave provides insights on the cost implications, the benefits of knowing your product, and when it makes economic sense to switch to a 3PL. The video offers a comprehensive framework for deciding the best logistics strategy as your business scales.

Highlights

• Dave introduces 3PL and its role in streamlining order fulfillment. 🚚
• For early-stage businesses, DIY order management helps in understanding product quality firsthand. 🛠️
• Handling orders personally allows for personalized customer engagement, boosting loyalty. 👥
• A storage unit enables partial delegation when order volumes reach 200-600 monthly. 🏬
• Transitioning to a 3PL at 600+ orders monthly can ease logistical burdens. 🔄
• Returning to an internal warehouse is an option at higher order volumes, providing cost benefits but with added complexity. 🔧

Key Takeaways

• Understanding when to switch to a 3PL can save time and optimize business logistics. 📦
• Managing logistics in-house helps in understanding products better, potentially improving quality. 👗
• Personalized customer interactions can boost long-term value and affinity. 💌
• A storage unit is a good intermediate step as order volumes increase. 📈
• 3PLs prove cost-effective and practical beyond 600 monthly orders for sustainable periods. 💡
• An office/warehouse hybrid offers cost savings but demands management skills. 🏢

Overview

Dave Nash provides a detailed guide on how clothing brands can effectively handle their order shipments. He starts by explaining what a 3PL is and how it can benefit businesses by managing warehousing, order fulfillment, and returns. Moving product handling from home to a professional setting can alleviate stress and free up time for business focus.

He discusses the three-stage framework for deciding when to switch logistics strategies: doing it yourself, using a storage unit, and eventually partnering with a 3PL. This decision depends primarily on order volumes and economic feasibility. Employing a storage unit is a good middle-ground, allowing some delegation without the significant costs of a 3PL.

The video emphasizes the importance of knowing the product and maintaining a personal touch with customers. While a 3PL can handle larger volumes, it also introduces fixed costs that must be justified by consistent sales figures. For brands achieving over 600 orders per month sustainably, 3PL can be invaluable, but lower volumes might not warrant the expense.

Chapters

• 00:00 - 00:30: Introduction to 3PL This chapter introduces the concept of 3PL (third-party logistics) and discusses its implementation in business. It explains that 3PL providers assist with product warehousing, order fulfillment, and handling customer returns. The chapter sets the stage to explore whether using 3PL is the right choice for a business, also comparing other available options.
• 00:30 - 01:00: Traditional Shipping Process The chapter 'Traditional Shipping Process' describes the conventional method of receiving and sending products. It explains how a delivery service like UPS, DHL, or FedEx delivers products to a customer's home. Once received, the customer unboxes the items and stores them. When they need to ship products, they pack them into separate boxes using their own shipping supplies and take them to the post office for delivery to their customers. The text suggests that using a third-party logistics provider (3PL) can streamline this process by taking over the complex and time-consuming tasks involved. The cost of utilizing a 3PL service is introduced as a topic of discussion.
• 01:00 - 01:30: 3PL Costs In the chapter titled '3PL Costs,' the text discusses the various fees associated with third-party logistics (3PL). These include fixed and variable fees, with variable fees depending on the volume of packages shipped monthly. Receiving fees are charged each time a 3PL receives a box from a manufacturer, which involves time-consuming tasks such as intake, quality control, and organizing the items into their warehouse bins. Additionally, storage fees are charged to cover the costs of maintaining warehouse space.
• 01:30 - 02:30: Types of 3PL Fees This chapter explains various types of fees associated with Third-Party Logistics (3PL) services. These fees include storage fees, where businesses are charged based on the amount of warehouse space they use, such as $500 for 30 boxes or over $2,000 for 200-400 boxes. Additionally, it highlights Pick and Pack fees, which constitute a significant portion of the 3PL expenses, especially for high order volumes like thousands of orders per month.
• 02:30 - 03:00: Returns and Processing Fees The chapter 'Returns and Processing Fees' discusses the costs associated with third-party logistics (3PL) services. A typical 3PL provider charges between $2 and $3 per order, with additional fees for adding extra items to an order, ranging from 50 to 75 cents per item. For example, a typical charge might be $2 for an initial order with subsequent items costing an additional 50 cents each, leading to a total of $3 or $4 for orders of three to five items, before shipping with carriers like USPS.
• 03:00 - 04:00: Stage 1: DIY Fulfillment This chapter focuses on the initial phase of Do-It-Yourself (DIY) fulfillment and delves into the intricacies of processing returns. It explains the roles of shipping companies like FedEx and UPS in this process. A significant point covered is the handling of return packages by third-party logistics (3PL) providers, who charge a fee for returns processing. This fee, typically ranging from 50 cents to a dollar, is for receiving and inspecting returned items to ensure they are unworn and undamaged, allowing them to be restocked and sent out again. This practice helps in effective management of inventory and minimizes waste.
• 04:00 - 05:00: Stage 2: Use of Storage Unit In this chapter, the focus is on determining when it is appropriate to use a third-party logistics provider (3PL). The chapter introduces a framework for understanding 3PL usage, which includes different stages of fulfillment. Stage 1 involves handling fulfillment personally by receiving, packing, and shipping packages from one's own home.
• 05:00 - 06:00: Stage 3: Transition to 3PL In this chapter, the transition to using a Third-Party Logistics (3PL) is discussed. Initially, handling product fulfillment yourself is recommended for businesses with up to 200 orders a month as it is cost-effective. This stage allows business owners to manage their products closely, giving them deep knowledge and intimacy with their products. However, transitioning to 3PL can provide a broader reach and potentially scale the business, although it may result in less personal interaction with the product.
• 06:00 - 08:00: Stage 4: Return to In-house Fulfillment Stage 4: Return to In-house Fulfillment focuses on the benefits and importance of returning to in-house fulfillment for businesses. It highlights the crucial aspect of knowing and improving product quality, which can be better managed when handling fulfillment personally. The chapter also emphasizes the value of adding personalized touches, such as handwritten notes, to enhance customer loyalty, increase lifetime value (LTV), and build brand affinity. This approach ensures customers feel appreciated and encourages repeat business through the personal connection established with the brand.
• 08:00 - 10:00: Summary and Conclusion Stage two involves scaling your operations to between 200 and 600 orders per month. At this point, acquiring a storage unit and possibly hiring an employee are recommended. The storage unit allows the employee to fulfill orders independently, providing flexibility compared to home-based fulfillment.

How to ship your orders as a clothing brand (3PL vs storage unit) Transcription

• 00:00 - 00:30 this video is going to be about when and how you should Implement a 3pl into your business as well as discuss a few of the other options you have if 3pl is even right for you and so on and so forth so without further Ado let's just get right into the definition of what a 3pl even is 3pl stands for thirdparty Logistics provider 3pls basically help with warehousing your products fulfilling the orders to the customers and receiving the returns from the customers so right now if you're not using a 3pl what you're doing is you're intaking the
• 00:30 - 01:00 products into your home the UPS or the DHL or the FedEx guide drops it off at your home you take the box into your garage living room basement you unbox it you have all your products and then when the customer orders you get your own shipping supplies and you pack it then you bring it to the post office and you send it to your customers 3pls will mitigate all of that time that you are spending doing that for your customers you're basically handing it off and delegating that entire process to them so how much does a 3pl cost there's a
• 01:00 - 01:30 few fees some are fixed some are variable depending on how many packages you're shipping per month for receiving fees that means for every time that you receive a box from your manufacturer they have to spend the time to intake that box open it QC it or QA it to make sure that it's not messed up and then they will literally sort it into their bins inside their warehouse which takes time so they have to charge for that storage fees is pretty much exactly what it states 3 pl's have a warehouse that they have to pay pay rent for so they
• 01:30 - 02:00 have to pass along some of those costs to you so if you're using a certain amount of space within their warehouse if you only have 30 boxes they might charge you 500 if you're anything like me in my 3pl I have like 200 300 400 boxes I'm paying over $2,000 for storage fees so keep that in mind when you're thinking about using a 3pl and then thirdly they have Pick and Pack fees this is where the majority of your spend with your 3pl is going to come from so if you do a th000 orders in a month with
• 02:00 - 02:30 your 3pl then they're going to charge between $2 and $3 per order and usually they even charge like0 cents 50 cents 75 cents to add other items into the order so for example if you had a two item order they would charge say $2 flat for the initial order and then to throw more items into that package will be another 50 cents so you're looking at for three or four or five item orders $3 or $4 just to do that picking and packing and then they can ship it out using USPS or
• 02:30 - 03:00 FedEx or UPS and last but not least returns processing fees when your customers do not like the item or it doesn't fit or there's something wrong with the the package or the item they have to send it back to the warehouse the 3pl usually charges around 50 cents to a dollar just to intake the return because that is time they have to take to receive it inspect it make sure that it's hasn't been worn or like you know dirtied muddied whatever it is and then they can put that back into you know your little storage spot so that they can use it to fulfill again and you're not just wasting the piece so the
• 03:00 - 03:30 question is when should you actually use a 3pl this is a very common question I get this a lot so I do have a framework for 3pl usage that will go over in this module and when it makes sense or doesn't make sense to use a 3pl the framework essentially consists of stages so we'll go over that right now the stages of fulfillment stage one is you know your DIY you're doing yourself you receive the packages into your home your packing it and shipping
• 03:30 - 04:00 it yourself and this is good for up to 0 to 200 orders per month it saves you the most amount of money which is important because you are literally in the most Scrappy stage of the business trying to get it off the ground with only a couple hundred orders per month or less but it allows you to personally handle all of your products and to know your product very well whereas like for me if I'm using a 3pl I don't really see my product too often so I'm not knowing it as well or as intimately as if I'm literally like managing it in my house
• 04:00 - 04:30 and picking and packing it and setting it out to my customers so knowing your product the quality of your product is is super important because that way you'll know how to improve upon the product as well beyond that it also allows you to do personalized notes to the customer if you're fulfilling it from your house which is huge for LTV as well as customer Affinity so that they can love your brand essentially when they receive that handwritten note and then they will be able to order again and again and again because they understand that you have that personalization and care for who they
• 04:30 - 05:00 are and and the fact that they supported you so stage two is when you start to do more orders per month between 200 and 600 orders per month this is when you'll get a storage unit you can do it yourself if you want but you can probably also get an employee you can get an employee at this at this stage because then the employee can go fulfill in the storage unit without you going there whereas like if it's in your home then you're not if you're you know out to dinner the employees probably not going to just let themselves into your house um and and fulfill for you so
• 05:00 - 05:30 that's what the storage unit in stage two allows you to do it allows you to have an employee who can go to the location and fulfill without you actually being there as well um this is what I call like Scrappy delegation so in stage one you're being super Scrappy yourself and you're just doing it yourself but here you actually have a little bit of a structure you have a little bit of a work life balance and so for 200 600 orders a month you can do this if you want to go over what the costing will be is about depending on where you live $200 to $400 per month
• 05:30 - 06:00 for storage uh if you're in you know in the middle of the country maybe not in LA or not in New York or something like this then you're probably only going to have to pay $100 you can check with your you know you can go on Google and type in storage units for rent probably see what your average cost is but here in La we have to pay like $400 $500 $600 a month for storage which is kind of crazy but it's totally worth it to get all the product out of your house and then for your employee who can come pick and pack to two times a week three times a week
• 06:00 - 06:30 four times a week like Monday Wednesday Friday Saturday something like this you can pay on between 500 $800 $1,000 work it out with someone it could be like you know a local high school student a friend who's in college someone who could use the extra money and has a flexible schedule so they can come a few times per week you can pay them out by monthly or on a monthly basis or even structure it like uh per order like a dollar per order or something like this so that if you do ,000 orders you pay them $1,000 that's fair to me so in total it'll be about $700 to $1,200 a
• 06:30 - 07:00 month for the stage two the positive is that it lets you move inventory out of your living room uh which is great so then you you know your H your home is your home and it also frees up your valuable time to focus on marketing or and scaling the business and then you'll have an employee friend college student whoever it is family member go to the storage unit and fulfill for you so it's basically the combination of being a cheaper option than a 3pl but it also allows you to have ADD lifestyle and
• 07:00 - 07:30 time benefits so stage three this is where you are starting to do more volume you can finally afford to use a 3pl at 600 plus orders per month using a 3pl absolutely makes sense at 600 orders per month you'll have the necessary volume to make the 3pl worth it this much inventory and orders for 600 orders a month starts to get super hectic in the storage unit and especially gets hectic in your living room um but be careful because you don't want to use use a 3pl
• 07:30 - 08:00 just because you hit 600 orders in a single month there are fixed costs associated with the 3pl like the storage fees and stuff which might be $1,000 a month so if you had 600 orders in a single month but you don't drop again for like 3 four months then you're going to be paying that five you know $500 $1,000 a month for no reason while you're waiting for your next drop so essentially just don't waste money in this scenario make sure you're hitting 500 600 orders per month for at least 2
• 08:00 - 08:30 to 3 months in a row sustainably to confirm consistent volume and stage four which is completely optional is when you can move back into an officewarehouse hybrid I would personally only do this at 1,000 orders 12200 orders 1,500 orders per month you have the option to take fulfillment back inhouse um and this is both a marketing decision and a lifestyle decision so for me personally I do a lot of traveling so if I got an office or a Ware house or something like
• 08:30 - 09:00 this it would go to waste because I wouldn't really be going into the office too often uh whereas like if you're kind of like you know like a an introvert or kind of like a HomeTown Guy where you kind of just stay in one spot then the added benefits of this is that you will actually use the warehouse and the office every single day and all your employees will come in your partners will come in to to work with you and the benefit is that content creation for your clothing business will actually be very easy it'll be more productive as well it's cheaper than the 3pl because
• 09:00 - 09:30 you're paying for the convenience of essentially delegating it to them they manage the employees they they manage their rental with the warehouse that they're using they have all the softwares and everything like that so it's cheaper actually to have your own Warehouse where you hire employees and manage them however the cons are that it adds complexity because now you have employees you have to manage your own rent so it might be cost effective but now you have additional complexity on top of already scaling the business itself in terms of Revenue and marketing
• 09:30 - 10:00 you have to manage the inventory and also manage employees hire and fire them that also takes time so as a summary DIY your fulfillment at first this is extremely good for getting to know your product being very personal with your customers making sure that each package gets a little love so that when they receive the product and they open it they get this personalized message like hey thank you for ordering again just notice that you order this you're going to love XYZ so they're going to feel loved and that you've written that note
• 10:00 - 10:30 for them with their name and everything um secondly you can do a storage unit with an employee which is optional so that you can delegate and move the inventory out of your house then you can use a 3pl as you scale and can start affording those fixed storage costs um and then optionally you can take it back in-house so it's easier to make content in the warehouse behind the scenes content and save money but do keep in mind you will be adding complexity because now you have to manage Warehouse insurance as well as managing hiring and
• 10:30 - 11:00 firing employees so that you can fulfill your packages um as a business so hopefully that was helpful and answer the question of when and why and how you should incorporate a 3pl in the stages of fulfillment within your business