If you are selling something, but not making it yourself and maybe not even shipping it yourself, you already know there are a variety of manufacturing, 3rd party warehouse, distributor, wholesaler and supplier resources for you to use, whether it’s a dropshipper, warehouse, fulfillment center, 3PL or some combination of all of these. With so many resources offering similar services, and sometimes little-to-no difference in the services they may provide, it’s difficult to differentiate between them and figure out exactly what you need during your research phase. If a 3rd party warehouse and a fulfillment center are providing the exact same things, why are they labeled differently? C’mon man, make it easier for me to figure out what I need as an online retailer. Regardless of the differences these types of companies may be offering the retailer, they all have at least one thing in common – these kinds of services have changed over the years, expanding their role to better serve a demanding and exponentially growing ecommerce ecosystem (both buyers and sellers). Here’s the deal:
Dropshipper: Dropshipping can (understandably) cause a lot of confusion. There are two different ways to be a “dropshipper”- if you dropship product (you never touch the product you sell), you are considered a dropshipper. Likewise, a dropshipper can also be the facility that provides dropshipping services for the dropshipper “seller.” When discussing dropshippers, its important to distinguish between a dropshipper the seller, and a dropshipper the service. Today, we’re talking about the service.
Dropshipping is the process where you have your orders sent to a dropshipper, who then sends the product directly to the customer once you have paid for the item. Dropshippers can be manufacturers of a large variety of products, but don’t have to be a manufacturer of anything. A seller does not have inventory control when deciding to dropship – the supplier or the manufacturer controls how much of what is made, and when to discontinue a product.
3rd Party Warehouse: Warehouses are traditionally large, with hundreds of employees. The employees inspect incoming goods for quality standards, store goods and record their location, create pick lists, and ship products. Warehouses were used exclusively for storage in the past. To keep up with growing competition, they can also now act as a logistics and fulfillment center, and ship directly to the customer. Think Amazon FBA as an example of a modern warehouse. Sellers have more inventory control through a warehouse, because they see which inventory, and how much of it, is being stored.
Fulfillment Center: Fulfillment centers receive orders from affiliated stores. They process the order, and send items to companies. The product does not usually go directly to the customer from the fulfillment center.
Supplier: A supplier is traditionally a manufacturer- they create the product that sellers order. A dropshipper can be a supplier since they manufacture products, so some suppliers have more robust order fulfillment practices today.
3PL: A 3PL (Third Party Logistics) is a team that acts as the back-office employees of a seller. They handle the processes of order fulfillment and shipping. 3PL’s can work with a seller’s existing warehouses or dropshippers- or, they may own their own fleet of warehouses, suppliers, trucks for shipping, and other order fulfilment service systems. 3PL’s first gained popularity in the 1970’s and 80’s.