This episode offers a candid look into the operational challenges of scaling down an e-commerce business, specifically focusing on the critical and often painful process of changing 3PLs. Eric Bandholz shares his company's recent experience, highlighting unexpected cost increases, service issues, and the strategic decisions required to optimize fulfillment and minimize dead stock. This is a must-listen for e-commerce operators navigating growth or retraction, providing practical lessons on vendor selection, contract negotiation, and inventory management.
Key takeaways
When scaling down, reassess 3PL fit, prioritizing cost-effectiveness over previous capacity needs. The partner that served you well during growth may not be suitable for leaner operations.
Thoroughly vet 3PL quotes. Provide extensive historical data, and be wary of quotes that seem too good to be true. Document all promises.
Always scrutinize the first invoice from a new 3PL. Discrepancies in shipping costs and fulfillment fees can quickly erode anticipated savings. Analyze detailed reports to understand cost drivers.
Be prepared for potential short-term performance drops post-transition, whether it's a 3PL change or a website overhaul. Factor this into planning and customer communication.
Liquidating dead stock safely and efficiently is crucial. Factor in carrying costs versus potential returns, and control the customer experience even during liquidation.
Scaling down a business is less fun than scaling up. The issues might be similar, but the process is different. In this week's episode, host Eric Bandholz addresses the recent experience of Beardbrand, his company, changing 3PLs — third-party logistics providers. He describes the need to reduce warehouse and fulfillment costs, having lost a large wholesale customer. He explains why he chose an initial provider, only to encounter higher-than-quoted rates and poor service. He switched ...
When scaling down, reassess 3PL fit, prioritizing cost-effectiveness over previous capacity needs. The partner that served you well during growth may not be suitable for leaner operations.
What does this episode say about operations management?
Thoroughly vet 3PL quotes. Provide extensive historical data, and be wary of quotes that seem too good to be true. Document all promises.
What does this episode say about supply chain optimization?
Always scrutinize the first invoice from a new 3PL. Discrepancies in shipping costs and fulfillment fees can quickly erode anticipated savings. Analyze detailed reports to understand cost drivers.
What does this episode say about vendor management?
Be prepared for potential short-term performance drops post-transition, whether it's a 3PL change or a website overhaul. Factor this into planning and customer communication.
What does this episode say about cost reduction?
Liquidating dead stock safely and efficiently is crucial. Factor in carrying costs versus potential returns, and control the customer experience even during liquidation.
