Happy Sunday!

I've been getting bombarded with questions about 3PLs lately. This makes a lot of sense as it’s one of the core infrastructure pillars of running any successful brand. When you are trying to scale, fulfillment is a make-or-break operational lever that can either accelerate your growth or completely kill your company if it’s not done right. So for this week, I wanted to interview the founder of the fast-growing independent 3PL (Tondo Fulfillment), Jim (I call him “Jimmy”). This email was inspired by a candid interview conversation that Jimmy and I had together. But, before we get into that…

Vendor of the Week

Tatari — Making TV ads as measurable and ROI-driven as digital

Every DTC/CPG founder and marketer I speak with is seeking the next growth lever beyond Meta and Google. The answer? TV… but not the old-school, “spray and pray” kind. I’m talking Convergent TV (linear + streaming) powered by data and optimization.

Tatari is the platform making that possible, turning TV advertising into a trackable, performance marketing channel. It’s how brands like Manscaped, Vuori, and Chime turn big TV reach into real ROI (even agencies like Croud and Socium license Tatari for their clients). In fact, Tatari has been recognized by AdExchanger and Business Insider for pushing the TV ad industry forward (Most Innovative TV Tech, Hottest Adtech Company awards in 2023).

Here’s why Tatari is a game-changer for growth teams:

  • Full-Funnel Impact: TV isn’t just a branding play anymore; it drives conversions.
  • Linear + Streaming Reach: Linear TV still reaches 50%+ of U.S. households, and Tatari helps you tap that huge audience and all the cord-cutters on CTV. 
  • Works Like Digital: Tatari operates like your favorite digital ad platform. You can launch with as little as $25k (not the $180k+ it used to require). Test multiple creatives with different hooks/offers, target and even retarget your own site visitors on TV, and optimize in real-time based on performance. (For context, my first TV test in 2017 cost $180k; those days are over.)
    Performance Boost Across Channels: A well-run TV campaign doesn’t just drive direct sales; it amplifies your entire marketing mix. Brands using Tatari see lifts on Meta, TikTok, Amazon, and Google when TV is in the mix – the halo effect is real.
  • Control & Transparency: Unlike typical opaque CTV vendors, Tatari gives you the keys. You’re buying inventory directly (avoiding sketchy middlemen and fraud), getting transparent reporting, and benefiting from better pricing.

Learn more about Tatari and book a demo for your brand here. See how Convergent TV advertising can become your next growth engine.

Limited Supply

To start Season 13 of Limited Supply (which puts us at 145 episodes out so far), I took the leftover questions from the last Q&A and answered them live, going deep into tactics, concepts, and resources for you to explore. Check it out anywhere you listen to podcasts by searching “Limited Supply.”

Third-Party Logistics & Warehouses

For context, Jimmy started Tondo in 2021, but he’s been in the 3PL game for a long time. Today, Tondo works with 75+ brands and manages tens of thousands of shipments per day across their 2 warehouse locations. They generally work with brands that do more than 2K shipments per month (scaling up to 100K+ shipments per month), and they focus on small, lightweight products. They prefer high-volume, low-SKU brands and work extensively across beauty, cosmetics, supplements, hair care, and other categories.  If you want to chat with Jimmy about this stuff, you can always email him at jim@tondofulfillment.com

Alright, let’s dive into my conversation with Jimmy…

First, let’s start with the basics.

What is a 3PL, and how does it differ from doing fulfillment in-house?

As most people know, a 3PL stands for third-party logistics. It’s essentially your outsourced fulfillment team. Instead of you packing boxes in your garage or warehouse, your 3PL receives your inventory, stores it in their facilities, and ships orders when customers buy. 

The best way to think about it is that if you decide to do fulfillment by yourself, you own the headache of picking, packing, shipping, and returns. If you use a 3PL, they own the headache for you (and speaking from experience, this is a very valuable headache to delegate to someone else and get off your plate). 

What services does a 3PL provide, and what are common add-ons?

In general, the foundation of any 3PL is going to be about receiving, storage, pick/pack, shipping, and potentially returns processing. Returns are typically an add-on, but this is something your 3PL should do for you if they can manage it. 

Depending on which 3PL you choose, other add-ons are usually around: 

  • Kitting and bundling (which is important for subscription boxes or multi-item sets)
  • Quality control inspections on inbound inventory shipments 
  • Custom packaging beyond basic poly mailers (Some 3PLs have this capability, and others don’t) 
  • B2B fulfillment for wholesale orders (i.e., when you are shipping to Target, Walmart, or traditional retail) 
  • International shipping 
  • Damaged goods processing
  • Returns and exchanges, as I mentioned earlier. 

Most brands start with the basics and then add on services as they need them later on.

How does pricing work?

I asked Jimmy, and he said that the truth is that 3PL pricing varies by provider and brand because it’s all about storage and weight/size of each item/package. That said, normally, you can expect: 

  • Storage fees (per cubic foot/month)
  • Pick & pack fees (per order)
  • Shipping costs (Sometimes marked up depending on the provider)
  • Receiving fees (per unit or shipment)

Other fees you might see on your SLA:

  • Setup and onboarding fees
  • Account management fees
  • Minimum monthly commitments 
  • "Handling" fees for returns
  • Oversize/overweight penalties
  • Peak season surcharges (Like for BFCM but Tondo doesn’t do this) 
  • Inventory auditing fees
  • Technology platform fees

Always ask for a complete fee list and all of the upcharges that could potentially come your way. If they won't provide one, do NOT use that 3PL.

When should a DTC brand move to a 3PL?

In general, I think it’s all about operational pain points you feel from doing this in-house. When I spoke to Jimmy, the main things to think about are these. If you are: 

  • Spending more than 20% of your team’s time on fulfillment
  • You're hitting 100+ orders/day consistently
  • Shipping costs are eating 10%+ of revenue due to inefficiencies
  • You can't scale fulfillment without hiring more full-time staff
  • Customer complaints about shipping times are increasing

This is when you need a 3PL. Some brands require 3PLs at $50k/month in revenue, while others can self-fulfill at $500k/month. It depends on your product mix, order frequency, and the makeup of your in-house team. According to Jimmy, it’s far less about revenue milestones and more about shipment volumes. At 50-100 orders per day consistently, you need a 3PL. 

The biggest mistakes early-stage brands make with fulfillment:

I think some of the biggest mistakes you can make when choosing a 3PL are: 

  1. Choosing based on price alone: Cheap 3PLs can be expensive in the long run because they cut corners. 
  2. Not planning for peak seasons.Signing base contracts in January without considering the increased volumes/demand during BFCM in Q4.
  3. Bad inventory forecasting leading to stockouts or excess storage fees
  4. Poor product packaging creates damage and return issues
  5. A bunch of hidden fees, which I’ll talk about below. 

Where brands can get screwed by 3PLs:

As anyone who listens to Limited Supply knows, you will know that my former co-host Moiz, has a huge beef with 3PLs because a lot of them screw over brands. They do.

In general, I think there are many ways brands can get taken advantage of by 3PLs, but a few that stood out from my conversation with Jimmy were: 

  • Bait-and-switch pricing (i.e, low quoted rates that increase immediately after onboarding)
  • Minimum commitment games forcing you into long contracts before proving value
  • Storage calculation tricks, measuring cubic feet differently than quoted
  • Hidden receiving fees charged extra for "non-standard" packaging
  • Technology platform lock-in makes it expensive to switch by owning your data
  • Fuel surcharges for shipping 
  • Hidden out clauses that make you pay a ton of out-of-the-door fees to close your account or retrieve your inventory if you want to make a change. 

What does a good onboarding process look like & what are the key indicators of a successful onboarding?

According to Jimmy, a smooth onboarding includes a dedicated account manager, a timeline for how long it will take to get you set up, an inventory receipt and audit process, an integration and testing phase (Which takes a few days), and some check-ins with the team to see how things are going. They also get you on Slack so you can chat with your AM if needed anytime. The red flags to watch out for are around pushing you to sign long-term contracts immediately, not providing any client references if you ask them, no dedicated account manager, and no trial period. 

Jimmy said Tondo can get brands set up in a few days, get them into Slack with their account manager, receive items, store them, and get ready to pick/pack and ship in under a week. A lot of 3PLs I’ve chatted with seem to take longer than that, so I imagine the industry standard is somewhere between 2 weeks to 2 months, depending on the size of your inventory.

Evaluating 3PLs

I asked Jimmy what the metrics were for evaluating 3PLs, and he basically said that the number one thing you should be looking at is the order accuracy rate (this should be 99.5%+). You also want inventory accuracy and a very low damage rate (<1%). The other things to look at are around speed. You want order processing to be same-day before a cutoff time, and you want return processing to happen quickly. 

You should also look at the cost metrics around the all-in cost per shipment, the storage cost per unit, and the return processing cost and timeline (if you signed up for them to handle your returns). Good 3PLs also provide software dashboards for this, and the best ones proactively reach out and share insights as far as what both you and they can do to improve all of the metrics above. 

A few questions to ask before signing an SLA with a 3PL:

  1. What's your average client retention rate?
  2. Can you provide a few references from brands in my category?
  3. How do you handle peak season capacity?
  4. What happens if you lose or damage my inventory?
  5. How quickly can I retrieve my inventory if we part ways?
  6. What integrations do you support natively to plug into my existing software stack?

Working With a 3PL:

When working with your 3PL, you should have real-time access to inventory levels by SKU, order status and tracking, performance metrics, and all billing metrics related to your spending with them. 

Jimmy said that every single week, you should get a line-item cost sheet down to the penny of how much you paid for everything. This should be radically transparent, and if the metrics being shared are confusing or opaque to you, you need to change 3PLs. It should always be easy to see how much money you are spending and on what, so there should be 100% transparency here.

Should you use more than one 3PL? 

Jimmy works with several multi-8-figure brands and a few 9-figure brands at Tondo. He said that you don’t really need multiple 3PLs even at the 9-figure mark, but you do need multiple locations. Tondo has warehouses in Delaware and Utah. This way, they have coverage in 2 key areas of the country and can be closer to the end consumer. When you do this, your customer experience goes up because you can deliver packages faster, no matter where someone lives. The 3PL you work with/will work with likely integrates with all major shipping providers, such as USPS, UPS, DHL, OSM, etc., ensuring they can quickly dispatch packages upon receiving orders. 

Handling BFCM with your 3PL

Another big thing to discuss with your 3PL is how they handle BFCM and Q4. This is the highest volume period, so you need to understand their pricing, capacity, and capabilities when you sign an agreement. You want to be able to know that they can flex up or down as needed. During this period, you might have surcharges due to temporary staff being added, extended operating hours, and increased fees for the increased volumes. 

That said, Jimmy (and the bootstrapped mindset that he has) hates this and will never do surge pricing for Q4. He doesn’t think this is right because he sees Q4 as his client’s Super Bowl and wants them to win, not gouge them with extra fees. Last year, he had a DJ at their warehouse, and they had a party for BFCM where all of the employees were celebrating shipping out thousands of packages per hour. You want to work with a company that invests in its people.

Returns

Returns are another area where most 3PLs show their true colors. The cheap ones treat returns like an afterthought with slow processing, poor communication, items disappearing into the void, etc. If I am hiring a 3PL, I expect 48-hour return processing, for them to do the quality inspection and make restocking decisions, and to have super clear reporting on returns. I also want them to integrate seamlessly with my customer service platform so everyone on my team can see what’s happening in real time. Jimmy said that they will do whatever the brand requests. If they want 48-hour return processing, they can do it. If they don’t mind and want to batch returns once a week, they can do that too. Whatever the brand wants, he will do. 

Inventory forecasting and stockouts

Most 3PLs are pure fulfillment, meaning they ship what you tell them to ship. The best ones provide demand planning insights, but they won’t run your entire inventory management for you. That’s not their job. Good 3PLs will tell you when stock is low and provide usage reports to help you with forecasting. The best ones integrate with your inventory management system and provide recommendations based on the data they are seeing. They should be sending you emails with insights, or you should be doing calls with your account manager to make sure you are on the same page. 

One thing I wish every DTC founder knew

Your 3PL is an extension of your brand. Customers don't know or care that you outsourced fulfillment; they just know that their package arrived late, damaged, or wrong. You have to choose your 3PL like you'd choose any other extremely important business partner. They are the ones responsible for getting your product into your customers' hands. If it’s a bad experience, your brand trust and loyalty tank. It’s worth the education and investment needed to get this right. 

When I asked Jimmy the same question, he basically said the same thing. The other thing he said was that some 3PLs treat their clients like a number on a screen. He thinks you need to go deeper to find a true partner that actually cares about the health and growth of your brand.

Alright, that’s all for this week. Let me know if you have any questions about 3PLs, and I’ll try to answer them on a future episode of Limited Supply.

That's all for this week

I hope today’s email was a helpful read and got you to double-check your 3PL bills. Beware of the hidden fees… they’re so real. Every brand that uses a 3PL always sees them as technology fees or some sort of miscellaneous fees attached.

It’s Sunday night, so I hope you plan to get 9 hours of sleep tonight (I know I will be!) and have a fantastic upcoming week. Thank you for your readership and for making it this far down.

I’ll see you next Sunday for another tactical deep-dive.