Moiz Ali

Why Every 3PL is Doing it Wrong:

For the first six months after launching Native, I personally picked, packed and shipped every order we received from my brother’s dining room table. I bought a label printer from Staples (there was one next to the California Pizza Kitchen just South of Market in San Francisco) and would print the shipping labels and pack the orders while watching episodes of Star Trek: Deep Space Nine.

It took quite a bit of effort to do this, as I was also running marketing, customer service, and operations for the business at the same time. I often would skip Tuesdays and Thursdays just to keep my sanity. Fortunately, there was a post office in the Financial District of San Francisco and I could walk a block or two and drop off all the packages for them to get shipped to customers. Even today, I prefer living near post offices just in case!

I would encourage anyone starting an eCommerce business to do their own picking and packing as long as they can handle it. Understanding how fulfillment worked helped me think about designing boxes and bubble mailers for the business, and made me sensitive to weights, dimensions, and even software. I remember as we designed custom boxes, we aimed to have our entire package be under 7 ounces because at the time, there was a big price increase if you hit 8 ounces instead of 7. Even more importantly, when we designed our three pack of deodorants, we aimed to get the whole thing under one pound. My friend Nick Kwan who runs Package Works helped me do all this.

In any case, I’ve written extensively about working with 3PLs in eCommerce. I’ve worked with half a dozen personally over my lifetime, and have sat on the board or invested in businesses such that I’ve seen how a few dozen operate.

Frankly, I think they are all doing it wrong.

If I were running a third-party logistics company (3PL), the first thing I’d do is rethink the way we ship across brands. Most 3PLs treat each brand like a silo—separate inventory, separate labor, separate shipping queues. That’s a mistake. It misses out on the biggest opportunity remaining in logistics: network effects.

Let me explain.

The entire value proposition of a 3PL should be: we can do this better, faster, and cheaper than you ever could on your own. But most 3PLs stop at "we’ll ship your orders for you." That’s table stakes. Of course you can ship my order without a high error rate. So can everyone else.

But the real way to own/grow a 3PL is network effects. You should be thinking “the more brands I sign up, the more money I can save them and the more profitable I can be.” And once that happens, you have a network effect flywheel that becomes invulnerable.

The common way 3PLs may think about network effects now is the more brands I sign up, the more packages I ship and the more I can negotiate with UPS and FedEx for lower rates. While you should do that, that isn't the right way to think about network effects. This might save you 5-10 cents compared to your competitors, but not enough to dominate the industry. In fact, this thinking is the reason no 3PL stands out when you’re searching for a new one to move to.

Instead, here’s the play:

Group orders going to the same recipient together. Imagine you’re a large 3PL for the likes of 9 figure eCommerce business, and represent Native Deodorant and Magic Spoon. Next, imagine a customer orders both Native and Magic Spoon on the same day or the same weekend. This sounds implausible, but I can tell you from first hand experience it is happening way, way more than you realize.

Rather than shipping out two boxes separately (one for Native and one for Magic Spoon) and paying for two shipping labels (postage twice), you ship the packages together. You could work out an arrangement so everyone still gets custom boxing that go in a master case, and also work out an arrangement so everyone saves on shipping (as a 3PL, you could also increase your own margin here).

By consolidating shipments across multiple clients:

• You unlock volume discounts with carriers.
• You reduce split shipments and partial loads.
• You increase fulfillment density, which cuts down zone costs.
• You can start thinking like a freight network, not just a warehouse operator.

This isn’t super effective when you only have two brands, but imagine if you had 200 brands in your fulfillment center. Or imagine if you have 2000. If you can get 5-10% of orders shipping with other packages, you can offer meaningful savings when it comes to postage - not just 5 cents. (we’re talking about taking a 2LB package and going to 3LBs, instead of shipping out two separate packages that are 2LBS and 7 ounces separately).

Even better: If you go a layer deeper, you can start to layer on predictive analytics—like, hey, 12 brands shipped to Boston yesterday and 10 more are queued for today. Route those together. Or: this zip code gets 3 packages a day from 5 different clients—what if we pre-position inventory there?

This is where the magic happens. Once you consolidate demand and shipping lanes across brands, you start to get the same kinds of scale advantages that the giants have. The more brands you serve, the stronger your routing gets. The better your rates get. And the more compelling your pitch becomes to the next brand thinking about switching 3PLs.

So yeah—if I were running a 3PL, I wouldn’t just be focused on pick-pack-ship. I’d be building the connective tissue between brands. Because the future of logistics isn’t just about moving boxes. It’s about building networks.

Have you looked at your brokerage account/stock portfolio in the past 48 hours?