Outsourcing to a Fulfillment Provider: 9 signs of Being Overwhelmed with Your Logistics
Before we get into the key points, we would like to add a disclaimer by acknowledging that outsourcing fulfillment is not for everyone. However, anyone working in e-commerce should research the facts and figures before making the decision to keep fulfillment in-house. Just because you can currently handle your order fulfillment in-house doesn’t mean it’s the smartest long-term solution! People often overestimate the cost and effort involved in using a fulfillment provider for small business shipping. Feel free to contact us for a non-binding offer!
1. Fulfillment Is a Distraction When Growth Is Strong
Chances are you have other and possibly stronger skills and experience besides logistics. If fulfilment is in any way a distraction from the normal activities that grow your business, it will most likely never become your absolute strength. Or, even worse, focusing on fulfillment can reduce your productivity in areas where you excel!
Furthermore, the opportunity cost of in-house order fulfillment can hurt your business more than it helps. Fulfillment providers not only take care of all the picking, packing and shipping requirements you face as an entrepreneur, but also generate a psychological freedom from these details. This freedom will allow you as an entrepreneur to focus on marketing, sales and product design. Delegating the crucial task of fulfillment can also free up positive energy that you can use to improve all the other skills you need to grow your business.
Scalability is another key element in deciding whether or not to outsource order fulfillment. You may be able to keep up with orders now, but what about 3 months from now? And when that day comes, will you have the peace of mind and time you need to choose the right fulfillment provider?
2. Your Fulfillment Costs Rise
Many startups have focused their operations on conserving resources to maintain better control while growing the business. This is great because you’re focusing on the core aspects of your business, but it also requires you to think long-term and not just look at one-time set-up fees, but also consider the bigger picture of outsourcing fulfillment. Does your business need to scale quickly to gain a competitive advantage? Or do you benefit from a fulfillment provider? By putting off using a fulfillment provider, you may be missing out on their extensive network. Plus, a well-connected fulfillment centre can offer you valuable industry-specific advice.
If you’re still concerned with costs, at least make sure you’re doing the calculations accurately. Once you factor in the cost of printers, scales, racking, facilities, labour and consumables, it’s not uncommon for the total cost of outsourced fulfilment per order to be less than the DIY cost per order. This also fails to take into account the value of freed-up working capital, perhaps the most important resource of all.
Delegating the repetitive process of receiving, warehousing, picking, packing and shipping to others can be the deciding factor in the battle between growth and stagnation over time.
3. You’re Paying Too Much for Shipping (and You May Not Know It!)
If you have ever worked with a fulfillment provider, you will have noticed that shipping costs have been greatly reduced by the fulfillment provider. Shipping is extraordinarily expensive for small businesses that don’t have the leverage to negotiate better rates. If you’re shipping a particularly cumbersome and unbound product, you may find that your shipping costs eat up your entire margin!
Because fulfillment centres ship large volumes, they have typically negotiated discounted rates with several reputable carriers.
4. You Are Concerned about Brand Damage Caused by Incorrect Orders
Unfortunately, most customers today only give a company one chance to deliver on a promise. Therefore, it is imperative that you meet their expectations when they place their very first order.
Regardless of how familiar you are with your own product line, manually entering orders – or picking and packing products without an inventory control system – leads to a margin of error that you may not be able to accept.
That’s not to say that fulfillment centres are perfect, yet most fulfillment providers today have inventory management systems that can keep error rates to a minimum.
5. Storage Space Is Getting Tight
Don’t let storage become an obstacle to forecasting inventory. By using an order fulfillment company, you are able to accurately forecast inventory levels and stock enough products based on market demand without having to consider more warehouse space. Since companies receive significant discounts for bulk orders, your price advantage by ordering a larger volume of inventory can cover some of the costs associated with outsourcing fulfillment. This solution is cheaper and far more convenient than renting a storage unit and far more convenient than storing your product in the storage room.
6. You Hope to Develop a Larger In-House Fulfillment Solution
Should you find yourself researching issues related to fulfillment operations and how to optimise your in-house efforts, it may be time to look into third-party options. Growing a profitable business takes a lot of work and every resource is valuable. So why waste resources building an order fulfillment department when you can simply outsource the entire operation?
Fulfillment partners have proven to be integral in helping smaller businesses streamline and scale their logistics processes. As experts in supply chain management, a fulfillment provider can help your business with factors such as sourcing cheaper packaging, finding better shipping options and even advising on your business model.
7. You’re Expanding Internationally
Outsourcing your international fulfillment is a great way to enter a new market without the risk of opening your own warehouse abroad. With the help of a fulfillment provider, you can solve this problem efficiently. Not only do fulfillment companies get better international shipping rates – and may even be strategically located in your destination country – but they also have experience with exports and the associated customs documentation.
The landscape of customs, declared values and harmonised tariff codes is complex and complicated. Instead of learning these ins and outs yourself, you might consider working with a fulfillment company that has demonstrable knowledge in this arena.
8. Inventory Management Is a Challenge
If you’re a small business, you probably don’t have a need for state-of-the-art technology to grab a product off the shelf, put it in a box and stick a label on it.
But once you have hundreds of different products in your warehouse, you’ll need to invest in some kind of inventory management system to keep track of stock levels and sales forecasts. Mismanaged inventory – whether insufficient or excessive – can cause significant financial problems for even the most robust businesses. When choosing a fulfillment company, always ask detailed questions about their fulfillment software.
Depending on the company, you may have access to inventory management software included in your monthly fee. This is another alternative to reduce other operating costs when you outsource order fulfillment.
9. Slow Delivery Times and Delays Put a Strain on Your Business
Sometimes larger fulfillment providers are strategically located near major shipping centres. This allows for faster delivery times and lower shipping costs. The physical location of your business can cause delays simply due to a lack of access to key carriers. The advantage of this is that up to two days can be lost in the transfer to a distribution centre. This are two days that a fulfillment centre can give you…. two days that will prove critical to customer satisfaction and retention.
No two businesses are exactly alike, so you’ll need to do a little more company-specific homework before you can make an informed decision about whether outsourcing fulfillment is right for you. We are happy to support you with this decision!