There’s a point for every online retailer when tough changes are needed to keep your fulfillment and shipping operations up to speed with sales growth. Thankfully, this is actually a good problem to have, and the best solution often comes by partnering with a third-party fulfillment center.
Regardless of how many orders you ship each day and the current size of your fulfillment operation, if you manage fulfillment in-house, issues will come to the surface that indicate you need help. And the fixes will come through outsourcing your ecommerce order fulfillment operation.
Here are seven signs to look for to determine if your company is at the point of needing to outsource fulfillment:
High Error Rates:
Fulfillment is hard, and no company can honestly claim to have a 100% error-free fulfillment operation. There is no excuse, however, for lacking a structured and complete Quality Assurance (QA) process. 3PLs specialize in fulfillment — that is what capable providers are set up to do. Unless your company can commit to doing the same, it’s time to find a partner who already has a solid QA process.
High Shipping Costs:
Shipping rates are always a function of volume. The more you ship, the better rates you can negotiate. What would a 5%–10% reduction in shipping costs mean to your bottom line? Most third-party warehouses will pass on savings from their discounted rates so you can benefit from the collective volume of all their customers. With a lot of Peak Season surcharges already on the books and the GRI coming fast, taking steps to reduce your parcel shipping costs needs to be a priority.
Shipping from a single distribution point means longer transit times, on average, to your customers nationwide. This makes it hard to compete with Amazon Prime’s two-day delivery. Working with a national 3PL can give you multiple shipping points around the country, letting you service everywhere in two days using ground shipping and avoiding the expense of two-day air. Having access to a full suite of parcel analytics tools is a simple way to see if you could benefit from more shipping locations to improve service and lower your costs.
Lack of Technology:
Technology is expensive yet vital to optimizing any ecommerce fulfillment and shipping operation. Functions like inventory management and carrier selection grow in importance as your sales grow — and the best-in-class technology that large ecommerce order fulfillment providers can offer will optimize both for you. Software that facilitates inventory management and choosing the right parcel carrier are two platforms most 3PLs offer.
Sometimes fulfillment is not just putting something in a box. It can also be putting extra effort into merchandising and product presentation. Outsourcing provides access to experience and skills that allow more flexibility through services like co-packing or other special handling. It’s also a simple way to access seasonal or variable labor and storage space based on your business fluctuations.
High Operating and Material Costs:
Like shipping, buying packing materials is cheaper when you do it in bulk. These are instant savings when you outsource to a third-party fulfillment center. Other operating costs disappear completely, like paying for expensive steel racking and hoist trucks. With outsourcing, most costs are activity-based, so you only incur costs when you sell products. When you do fulfillment in-house, many of the associated costs are fixed.
The biggest challenge for most businesses is hiring and retaining good employees. Training and hiring quality employees in a warehouse environment are particularly difficult right now. Outsourcing makes this the responsibility of the warehouse, freeing you from that challenge and allowing you to focus on other priorities in your online business.
The decision to outsource order fulfillment is not a small one. But an online retailer’s growth potential is limited by its ability to fulfill and ship orders economically and to customer expectations. Working with a third-party logistics company will remove many limits to growth for any ecommerce business.