How Does Using a 3PL Company affect your per unit cost for selling FBA in the US?
Have you wondered "How will this affect my profit margin?". Well, let us try and help explain. To start off lets define what 3PL is and how it generally works. 3PL stands for third party logistics. So what does third party logistics mean....the application is simple, instead of shipping your product directly to Amazon, you ship to a warehouse location in the US who in turn puts it up on racks and stores the product until you are ready to send it to Amazon Fulfillment. When you are ready to send it, you provide the information to the your partner and they ship your cartons to Amazon.
What are the fees associated with 3PL partners?
Receiving Fees - Usually a 3PL partner will charge to receive the product into their warehouse. Fees are typically charged by piece, pallet o cubic feet.
Storage Fees - Normally charged by cubic feet of space or pallet position and sometimes by the piece.
Sending/Shipping Fees - This fee applies when you are ready to ship your products either by carton or by piece if you are using your 3PL partner to ship individual units direct to consumer. This fee will always be by the piece or carton.
Additional fees for packaging, bundling services, shipping cost, etc may apply.
It is important to read the fine print of the agreement the 3PL partner provides. You may also find some partners who can actually manage your inventory needs through your Seller Central Account. You can always limit their permissions to only include shipping within your account and then provide them written instruction as to what levels of inventory you would like to maintain or have them follow Amazon Sellers Central's recommendations.
You should expect to pay upon receipt and usually monthly invoices are provided with reports to show the amount of inventory you have held with your partner.
Example of how this could affect your per unit cost:
If a 3PL partner charges $4 to receive in cartons and $4 to send cartons out
to Amazon, not including shipping. Storage is by pallet position and the
3PL partner charges $50 per pallet position. For simplicity sake lets assume you
shipped in 20 cartons with each carton having 10 units in each for a total of 200
units. If you are charged $10 for shipping one carton to Amazon or a
total of $200 for shipping using Amazon's preferred vendor UPS. 20 Cartons is
going to be 1 pallet position and you send all 20 cartons to Amazon one
month after arriving to the 3PL partner. Here are the fees:
Receiving - 20 x $4 = $80
Storage - 1 pallet position for one month = $50
Sending/Shipping to Amazon - 20 x $4 = 80
Shipping Cost - $200
Total spent using 3PL in addition to what it would have cost you to ship directly to Amazon FBA - $410
If you take the $410 spent with the 3PL company and shipping charges from Amazon and divide the $410 by 200 units, the increased cost per unit would be $2.05. You would need to add this into what it cost you to manufacture the product and what shipping to the USA cost you in order to figure out your gross margin on this product.
This information has been provided by Amazonsellershelp.com, a logistics and warehouse company in the USA that helps Amazon FBA sellers. The company is actually owned and managed by a group who sells large volumes on FBA. If interested check out their website.