When you really begin to understand Product Sourcing, you understand how to spot trends in consumer products that you can take advantage of, how to do Market Research, how to source products from various places with various methods, how to understand your cost of goods sold so that you can better predict your profits, how to combine different products into bundles that people will pay more for, how to streamline your receiving and shipping processes to maximize your profit margins, and much more. Product Sourcing encompasses a number of different subjects that are very important to the success of your online business.

Myself and Lisa Suttora of WhatDoISell.com recently co-authored a McGraw-Hill book titled “What To Sell On eBay And Where To Get It”. Our book is now available in bookstores and on Amazon, and covers a lot of those different Product Sourcing subjects.

The Product Sourcing subject I wanted to talk about today is using a 3PL to handle your receiving and shipping for you. That’s a question we get from a lot of people here at WorldwideBrands.com, and I’ll get to what “3PL” means in just a minute. When you’ve found a product that really sells well for you online, you probably want to start carrying a repeating inventory of them, meaning that you’re going to keep on buying that same product or products from a manufacturer or wholesaler, and selling them online.

Once you get to that point, you’re well on your way to being very successful, if you’re not already. Getting to that point is also a crossroad of sorts. When you start buying larger and larger repeating inventories, you need to start looking at the time you spend warehousing and shipping your own products, and wondering if someone else could do it for you more effectively. You also need to decide if you want to invest some money in streamlining your shipping process in order to advance your overall business.

When you warehouse your own products, chances are you’re filling up your garage with them. That means you’re shipping them yourself as well. All these things take time, and time is money in any business. The less time you have to physically spend warehousing and shipping products, the more time you have to expand your business. This is where the 3PL comes in. The term 3PL means Third Party Logistics. Most people know this as a “fulfillment” company.

A 3PL is a large warehouse and shipping operation that stores and ships products for many different people at the same time. One 3PL could be storing and shipping products for a hundred or more online Sellers, or any number of other kinds of businesses.

Here’s how it works.

1. You set up an account with a 3PL. They give you a web-based interface with their system, so that you can interact with them just like you were dealing with your own warehouse.

2. When you place an order for, say, 500 purple widgets that you plan on selling online, you don’t have it sent to your house. Instead, you have it sent to the 3PL company you work with.

3. The order arrives at the 3PL. They take the products off the truck, and scan them into their computerized inventory system for you. They notify you through your Web interface that your products have arrived, and you can go on your computer to see your new inventory numbers.

4. The 3PL stores your products on their own warehouse shelves, and mark the shelves with bar codes identifying the products as yours.

5. When you make a sale, you bring up the 3PL system on your computer screen, and tell them where to send the product.

6. The 3PL sends someone into the warehouse to pick the product from your warehouse shelves. Then they process it and ship it to your customer for you, using UPS, FedEx, USPS, or whatever shipping carrier you want.

7. The product is automatically removed from your online inventory.

8. We all know that sometimes customers want to return products they buy from you. A 3PL is great for that, too. They’ll take the return, process it for you, and place it back on your shelves for resale.

So, working with a 3PL is like having your own giant warehouse facility and employees without having to rent the space and hire the employees.

Of course, nothing in business is free, and there are certain charges you pay to a 3PL to do all this for you. Typically, it can cost from a few hundred dollars to a couple of thousand to get set up with a 3PL and to customize your interface with them.

You’ll generally pay a monthly fee to use their inventory interface.

You’ll pay a certain charge per carton for the 3PL to unload your products from a truck, scan them in and stock them on their shelves.

There’s a charge for the 3PL to pick your product from the shelf, and process it for shipping to your customer.

Then, you’ll pay the actual shipping cost plus about 10%.

So, working with a 3PL is not for those who are selling small numbers of constantly changing products. It works very well, though, for online sellers who are selling the same products over and over again, and buying those products from a manufacturer or wholesaler in bulk lots.

I strongly recommend looking at the Marlin Logistics web site for anyone who wants more detailed information on using a really good 3PL.

You can find them at www.MarlinLS.com.

Chris Malta
Founder/CEO
Worldwide Brands, Inc.