How to Pick a 3PL Without Getting Burned: Red Flags, Green Flags

**Matt Bertulli** (0:00)
All right, welcome back to another episode of the Operators Pod. I got Curtis and Mike with me today. We got three topics we're gonna dig into. The first is a long standing debate in consumer. It is owned warehouse versus 3PL. 3PL, how do you pick them? How do you price them? How do you compare these things? We're gonna just jam on this for a little bit about like how we have experienced this topic, right? Curtis, you're super deep in it. Mike, you've got both. I've done both.
And with all of this wrapped up in, Amazon's now opening up their entire logistics network as like an AWS for logistics. So I think it's time that we just hit this.
And I think I'd like to start it off, guys, with, let's start broad. Let's start with, is there a scenario in which owning your own warehouse is the right call? Like you handle your own fulfillment. Mike, how do you think about this? Curtis, I'll get your read on this second, but Mike, kick us off, man. Where would you then own your own fricking infrastructure?

**Mike Beckham** (1:06)
Yeah, I think if we're going to talk about this, first thing I'd just say is, it's just like owning your own manufacturing. There's situations where like it makes sense to own your own fulfillment and to vertically integrate there. And there's situations where it doesn't. And not surprisingly, actually a lot of the same principles that apply to manufacturing, I think apply here. So there were a number of kind of posts on social media going back and forth about this idea. And our friend Bill put together a really good one where he basically was making the argument that it's kind of a siren song, like doing your own fulfillment. The siren song can actually slow down your growth and e-com. And so I guess I'll start here by saying, like the reason I think that fulfillment feels attractive is that it's not complicated.
So when you're paying somebody else to do it, you're looking at it and you're like, nothing about what you're doing is complicated. I could do it and then I could make more money. And there's a lot of good reasons. I mean, there's a reason why so many people rely on 3PLs, that doing the 3PL work is actually a lot more complicated than people think it is. And just like manufacturing, you need kind of economies of scale. And if you don't have economies of scale, then it doesn't really work. So just really simply, one of the things we've learned is, hey, you have to step into a lease if you're going to do your own fulfillment. And that means that you're paying a certain amount every month, regardless of how much you use the facility. So all of a sudden, hey, you have to have a certain amount of volume, a certain amount of storage, a certain amount of throughput on fulfillment. Or this isn't gonna make any sense at all. And I think the generalized advice is, hey, if you're a brand and you're growing quickly, like the primary concern when it comes to fulfillment is to just have somebody that can keep up with you and can be flexible with you. So like we worked with a local partner Encore, and even though we probably have given them a bunch of gray hair, they were an incredibly good partner in that what we really needed more than anything else was not cost savings early on. It was like flexibility. Like we could tell them, hey, we think we need 60,000 square feet. And then we come back a month later, sheepishly and we're like, well, we need 120,000 square feet or vice versa.
As we have grown and matured as a company, now I think I'm starting to, like we are building a building, we are going to be doing more of a fulfillment and we're at a different stage and I'd be happy to talk about why that's true. But I think the generalized advice to start with is like, it's really great to have a good partner here early on, and when you're in the growth phase.
And then as your business matures, I think everybody develops this kind of urge to think about vertical integration and how can I do more? And I'd be happy to talk about how we've done that.

**Matt Bertulli** (3:54)
So, initial variable here to think about for people is higher growth rate, 3PL is likely a better option. They are more set up to handle capacity increases, right?
And I guess Curtis, you've hit on this in the previous episode, like you buy a building, you set up a building and you quickly outgrow it. And now all of a sudden it's like physical space in your own logistics is a constraint. Whereas once you're bigger, it's slower, right? So you can do it. So Curtis, take us away, like give us, give us your take on this.