5 Reasons to Outsource Your Ecommerce Fulfillment
If you sell products online, then you'll need to have your orders picked, packed, and shipped to your customers. This seems like a simple task, but to do it efficiently and effectively can be quite involved, risky, and costly. I'm going to point out a few things that perhaps you haven't considered while thinking of handling your own fulfillment/distribution.
The biggest consideration should be the ability to scale the operation to allow growth potential. If you start out with just a few dozen orders per week, but grow to a few hundred orders per week, it's obvious your facility needs will be much different as time goes on. Once you take a step into leasing space to handle your operation, you'll likely be locked into to an agreement for an extended period. If you get a facility too large, you're wasting money. If you get a smaller facility, you may outgrow it quickly.
Outsourcing your fulfillment rids you of this burden altogether. If you utilize a professional fulfillment provider, they will already have space available, and you'll only pay for the space you use (see Storage by Pallet or Volume - November 2017).
Most shopping cart technology, which you likely have, already provides some level of order management. However, it does nothing to help with managing inventory. This means you'll have to invest in an inventory system, or WMS - Warehouse Management System.
These systems don't come cheap. Prepare to spend tens of thousands or even hundreds of thousands up front, plus monthly fees. You'll need a robust system that helps track inbound inventory, returns from clients, various storage types (pallets, bins, shelves, etc.), movement between storage locations, efficient pick sequencing (which lowers your cost per unit), and the list goes on and on.
If you outsource to the right company, all of these concerns go away. Professional fulfillment service companies provide all of these services as part of being a customer. Some charge a monthly account fee, but others do not. Either way, your products will be managed by a much better solution that costs much less.
Receive Deeper Shipping Discounts
If you setup your own operation, you may start out with low order volumes, which in turn relates to relatively low shipping volume. Parcel carriers like UPS and FedEx are not going to extend very deep discounts to low volume shippers.
Unless your web-store is producing lots of orders, let's say 1,000 per week, you are almost guaranteed to get much better discounts on shipping through an outsourced fulfillment provider. With outsourcing you can expect discounts of 12% or better for ground transportation and up to 50% on air services. For international services, the discounts could be even higher.
If you run your own operation, then you'll have to manage your own inventory of shipping supplies. If you have a dynamic product line, then you'll need a variety of packaging solutions. Having the right amount in stock of each packaging component is just as important as normal inventory.
Outsourcing relieves you of this burden as well. Although you'll lose the option of branding boxes with your logo, your packages will be protected by generic packaging used by all other clients of the fulfillment provider. Some fulfillment providers include the packaging cost with their normal processing cost, others charge as they are used on an order basis. Either way, you won't have to manage supplies inventory.
A fulfillment provider that stands behind their service will offer a guarantee for their services. This means they are so confident in their processes that they are willing to refund processing and shipping charges for orders that suffered a pack error.
If you manage your own operation, you or your management team must focus on continuous improvement to reduce the risk of errors and eat the cost of actual errors produced by your operation.
In summary, it's always best to outsource things that aren't part of your core business. Your time is better spent focused on the things that are the most productive for your ecommerce business - marketing your business and increasing sales.