22 Oct
When starting or already running an e-commerce business, you must have thought about warehousing, shipping, and fulfillment. The fulfillment services market has been growing steadily following e-commerce and retail expansion in emerging markets.
As your business grows, fulfillment and shipping needs will require a commitment of time and resources. You might want to consider third-party fulfillment providers to make the process more efficient.
Without a doubt, making sales is the most exciting part. But what’s next? How the order will be delivered to customer?
There are three ways this can happen:
- You sell a product from a dropshipper who will fulfill orders for you.
- You fulfill your own orders, either independently or with a team.
- You work with a logistics company that will handle your warehousing and fulfillment.
There are benefits of packing and shipping your own orders as it is cheap and flexible too. Usually businesses that are just starting out often handle their own logistics.
But if your business is growing quickly and you have the cash on hand to outsource, you may be interested in exploring third-party warehousing and fulfillment.
What Are Fulfillment Services?
A fulfillment service refers to a third-party warehouse that checks in products and prepares them before shipping the customers’ orders. The warehouse is the fulfillment center, where the processes take place. If you don’t want to handle your shipping, probably due to the volumes of orders, outsourcing is ideal.
What Does a Fulfillment Center Do?
All fulfillment centers operate slightly different but they all accomplish the same thing. Basically a fulfillment center works as a command for all your orders preparing to get shipped.
As an e-commerce business, you’ll have your inventory stored in the center to prepare for order fulfillment. Once a customer completes a purchase on your e-commerce store, the process begins.
The fulfillment service providers at the center pick the order, package it accordingly, and label it in readiness for shipment. The fulfillment center ships the products to a customer’s home or any other given address for business-to-consumer orders.
Third-party logistics providers complete the entire fulfillment process on your behalf.
What Do Fulfillment Services Cost?
Fulfillment services typically charge by the hour or per unit/pallet. Providers add up costs for receiving, storage, pick and pack, shipping, kitting or bundling, returns, custom packaging, gift services, and setup. They then apply transactional (e.g., receiving, shipping) and recurring (e.g., storage) fees.
Benefits of Using Third-Party Logistic
The biggest benefit of using third-party logistic is letting someone else do your work. Outsourcing warehousing and fulfillment can have a meaningful influence on your business’s growth.
1. Avoid long-term leases
Several logistic companies offer flexible pricing. This means that as you grow or go through slow periods, they’ll be able to adapt to your needs and adjust costs accordingly. Renting your own warehouse space usually requires more of a commitment.
2. Bring on the experts
Once you hire an outsource fulfillment service provider, you don’t only get warehouse space but you get people to work for you too. Because when you fulfill and ship your own orders you will need to hire staff, and managing staff requires much time.
If your business is still not stable then you might hesitate to promise someone a job. Hence outsourcing your work to a logistic company and let them be responsible for hiring responsible and good staff.
All third-party logistics have a team of experts and supportive staff who are there to help you every time you need them. They manage all of the labor needed for receiving, inventory management, and order processing and shipping.
3. Use your time to optimize
Your time can be better spent on managing and optimizing across the company. When you let someone else take care of logistical details, you can focus on the things that have a greater impact on your business. That means you can concentrate on business growth and goals.
4. Be more agile
Yet doing it yourself can almost be free. On the other hand customers demand expect fast deliveries but doing it in house can lead you to delay in shipping and can cause bad customer experience.
Partnering with third-party logistic can benefit from their efficiencies and leverage their buying power on packaging and shipping costs. Some even share real-time stock levels and status updates so you can be proactive.
This can let you and your test different new strategies and techniques to achieve rapid growth.
When is the right time to switch to outsourced fulfillment?
Some of the companies add a third party solution as they scale but some still fulfill their own orders. Here are some signs which can let you know when is the right time to switch to outsource fulfillment.
1. Cyclical or uneven sales
If the numbers of orders you process vary throughout the year, then probably it doesn’t makes sense for you to run your own warehouse and manage staff. The logistic company can fulfill your needs amazingly.
An expert can handle times when your daily order volume peaks so you can deliver a consistent and efficient experience every time.
2. You are too busy
When you get too busy in fulfilling the orders and don’t have time to focus on growth its then the time to opt for a third-party logistics. As you are a business owner, you need to devote time on sales and marketing, expanding your business and improving your business if you want to be around for the long time.
3. Lack of infrastructure
If you’re growing geographically, you may expand your current infrastructure before you can adapt. Shipping to locations across the country or even the world poses logistical challenges that increase expenses and shipping times, among other things. This can hamper large-scale growth.
When you outsource to a global fulfillment partner, they’ll be better equipped to serve a growing customer base, leveraging multiple locations and optimizing fulfillment accordingly.
Third-party warehousing and fulfillment isn’t right for everyone, but if you find yourself in one of these situations, it might be time to start calling around and chatting with logistics companies.
Who Shouldn’t Work with Third-Party Logistics Company?
There are times when using third-party logistics doesn’t make sense. No matter what size your business is.
1. Limited cash flow
Whether you are a startup or not if you don’t have funds, you have to do this on your own. Hiring a logistics can be out of your budget. In these cases, you might have to bootstrap business growth and use your own time as an investment, instead of paying employees or contractors.
2. Highly specialized business
You may be astonished at the amount of customization many logistics companies offer. Still, not everyone will be able to find a company that can do what they want. If your business has highly specialized needs, it might make more sense to handle your fulfillment internally.
3. Business with limited daily order volume
If you have a limited number of orders per day and they are easily manageable by you or any of your employee that’s good enough. But when you hit around 5 to 10 orders per day that can’t be managed in house, now it’s the time to search for a third-party logistics company.
What about Returns?
Many logistic companies solve this problem by its own on behalf of you. Typically, customers will send a return directly to the fulfillment center, where the company inspects it for damage and validates any customer feedback. They’ll then replace the product or issue a refund; you never even have to get involved. If the returned product is in sellable condition, they’ll also restock and ship it in a future order.
How To Choose a Fulfillment service provider?
Choosing a fulfillment service provider can be difficult but to narrow down your choice you have to look at some important points.
- Find a logistic company that works with similar e-commerce as yours.
- Most important thing is your budget. Before choosing any company you have to see which fits well in your budget.
- You’ll want to find fulfillment services that can smoothly integrate across multiple e-commerce platforms.
- Look for an option with real-time analytics tracking, so you can make informed decisions about inventory allocation, purchasing, and more.
- Take your time to learn about which ever company you are thinking to choose.
Wrap Up
Fulfilling orders in-house can become a challenge as your business grows. You might need to consider fulfillment services to keep the process efficient regardless of the scaling. The benefits of outsourcing order fulfillment are worth pursuing.
All you need to do is to find a best third-party logistics company that will handle your order shipments for you.