Outsourcing order fulfillment has many advantages. Here are just a few to consider when looking at considering whether to keep fulfillment in-house or to outsource it.
1) Focus on business
Unless you own a fulfillment company, fulfillment isn’t your primary function. By outsourcing fulfillment, you gain time to spend on primary functions such as sales, marketing, supply chain, and innovation. Let the experts deal with storage, shipping, software, and other fulfillment-related requirements.
2) Financial considerations
There are financial advantages to outsourcing fulfillment. The costs of setting up a warehouse, staffing, managing, securing, and developing technological solutions is daunting.
Start-up companies may not have adequate storage facilities or the funds to build them.
Fulfillment companies typically have thousands of square feet of warehouse space. Companies that warehouse their own inventory have additional expenses, too, such as staff and utilities. A fulfillment company distributes this expense through storage fees to multiple clients which results in a storage fee that is less than an individual company would pay to do it in-house.
4) Shipping costs
Unless a producer ships thousands of items per month, they don’t get the beneficial “bulk” shipping rates available to many fulfillment companies. The price these companies pay often deviate from standard shipping prices by 30% or more. In some companies, the savings associated with shipping bulk rates provided by fulfillment companies can outweigh the charges of the fulfillment company itself. You may also be able to negotiate a flat-rate for shipping—a single fee based on weight and service, as opposed to weight, service, and destination. This makes shipping expenses predictable, which makes budgeting easier.
5) Shipping materials costs
Similar in concept to the savings associated with shipping costs, shipping materials bought in bulk also are purchased at more favorable rates. When compared to the cost of purchasing supplies for shipping through retail outlets, savings can amount to 50%. Of course, this depends on the fulfillment company.
Often, fulfillment companies include the packaging fee in the cost of shipping, or per order. This is how fulfillment providers can quote “free packaging.” Most order fulfillment service providers make a list of standard cartons available to their clients. A company whose product doesn’t fit one these packages may need to provide their own packaging or pay an additional fee.
6) Behind-the-scenes fulfillment services
There are many hidden aspects to running an e-commerce business. Don’t forget to look at these services when making your decision.
- Receiving and unpacking merchandise
- Receiving orders via mail order, email, phone or phone
- Processing of credit cards
- Handling of returns, including inspecting merchandise and restocking
- Preparing documentation for international shipments
- Generating reports
- Updating customer databases
- Issuing customer credits
- Maintaining inventory
- Making bank deposits
- Answering customer service phone calls, e-mail correspondence
7) E-commerce software need
Fulfillment houses develop intelligent e-commerce systems to help manage the many elements within the business. The e-commerce system is adaptable and may be able to integrate into clients’ ordering system. Some fulfillment houses may even host commerce sites themselves. The software also enables integration into respective couriers’ systems to provide clients with live information about package deliveries.
As you can see, fulfillment isn’t for the faint-of heart. Why not let the experts take care of this for you while you focus on growing your business?