Ecommerce order fulfillment is an essential ingredient of a successful ecommerce brand – but fulfillment isn’t what drives merchants to join the space and start selling. So, it’s not surprising that many ecommerce businesses hit a ceiling, where managing the fulfillment process in-house is no longer paying dividends.
So, what are the benefits of outsourcing fulfillment services to an ecommerce fulfillment partner? What are some signs that outsourcing order fulfillment is the right path for your ecommerce business?
First, let’s define outsourced fulfillment
Outsourced fulfillment is when a company chooses to outsource the ecommerce fulfillment process to an external third-party logistics company, which is responsible for managing order fulfillment processes on its behalf. Responsibilities include managing inventory, and ensuring that packing, shipping, and returns are executed efficiently.
Outsourcing order fulfillment processes to a 3PL helps businesses free up valuable bandwidth in-house for other growth initiatives, achieve better cost savings, and leverage industry expertise to improve fulfillment. Most importantly, outsourced fulfillment provides better scalability as a business grows, making it easier to expand fulfillment operations and access more support and resources when needed.
Why might ecommerce brands need to outsource order fulfillment to a 3PL?
Growing operational costs
In-house fulfillment using a private facility is a good place for emerging brands to kickstart their fulfillment operations. However scaling this with rising order volume requires massive investments in industrial real estate, equipment, technology, and labor. These fixed costs quickly eat into profit margins, especially since in-house fulfillment cannot easily accommodate peaks and troughs in customer demand. This can result in warehouse space or labor going underutilized at some times of the year, but not being sufficient during seasonal peaks.
A lack of in-house logistics expertise
Many ecommerce business owners don’t have a wealth of knowledge in logistics or supply chain management, especially at scale and taking advantage of new technologies. Operating a warehouse efficiently means understanding areas such as order management, inventory management, picking and packing processes, shipping optimization, reverse logistics, and more. Without the right knowledge, fulfillment costs and errors will increase as you grow, which impacts customer satisfaction.
Managing fulfillment is impacting other business operations
Managing the day-to-day demands of ecommerce order fulfillment requires an entire team and robust processes – something that takes valuable time away from other business activities. Growth initiatives such as marketing, adding sales channels, and CX management can end up on the chopping block when you’re juggling endless fulfillment tasks. Over time, this can cause your brand to stagnate and struggle to keep pace with customer expectations.
What ecommerce fulfillment services can you outsource to a third-party logistics provider?
A third-party logistics partner can handle a broad range of outsourced fulfillment services on behalf of businesses, including:
Warehousing
Your fulfillment center or warehouse space is the nerve center of your fulfillment operation. This includes receiving and storing inventory from manufacturers or suppliers, optimizing inventory storage space based on fulfillment center layouts, and ongoing inventory management to balance customer demand and inventory levels.
Order management
Whenever a customer order is placed, it needs to be routed to your fulfillment center so it can be picked, packed, and shipped to your customer quickly enough to meet delivery expectations. Fulfillment companies assist with order processing by connecting their order management systems (OMS) with a business’s ecommerce platform or other sales channels, so new orders can be routed instantly to the right facility.
Picking and Packing
After order processing, items requested in customer orders need to be picked from locations across the fulfillment center and packed to keep them safe in transit. A fulfillment company will set up picking locations to maximize fast travel routes around fulfillment centers and speed up the turnaround from order fulfillment to shipping.
Shipping
Shipping costs are one of the biggest overheads for an ecommerce business. An outsourced fulfillment partner can assist you by selecting the right shipping rates based on the optimum balance of speed and cost. The appropriate shipping method will also depend on the destination, the size of the package, and other special considerations such as hazmat or additional handling. Shipping orders with third-party logistics companies also offer the benefit of lower shipping costs with major shipping carriers by leveraging their higher shipping volume.
Reverse logistics
A streamlined returns process is essential to maximize resale opportunities for returned merchandise and ensure customers receive refunds or exchanges quickly. This includes unpacking, inspecting, and reconditioning returned goods to add them back to your inventory.
The benefits of outsourcing fulfillment
Better cost savings
Because 3PLs provide economies of scale with their warehousing infrastructure, transportation networks, and workforce, outsourced fulfillment enables companies to reduce overhead costs significantly. They can negotiate better rates with shipping carriers due to their partner’s higher shipment volumes, and leverage advanced technologies and automation to minimize labor expenses. This results in lower fulfillment costs compared to in-house fulfillment operations.
Scale more seamlessly
Fulfillment partners can help to streamline warehouse workflows, order processing, inventory management, shipping, returns, and more. This results in faster order turnaround times, improved customer service, and the ability to easily scale up during peak sales periods. In-house teams with static resources often struggle to adapt to spikes in order volumes, while 3PLs have the flexibility to scale their client’s fulfillment operations up or down as needed.
Faster fulfillment and delivery
Customer expectations for rapid delivery timeframes are only speeding up as the likes of Amazon crack the last-mile delivery problem, with ecommerce deliveries going from multiple days to overnight and even same-day delivery speeds. Many outsourced fulfillment companies offer networks of multiple fulfillment centers so brands can put their inventory closer to their customers, shortening the last mile and achieving faster delivery speeds.
Focus on your business
Fulfillment partners don’t just take fulfillment processes off your plate; they free you up to invest in other business growth activities that are easily neglected when you’re focused on getting customer orders from A to B. Outsourcing order fulfillment helps to free up precious time and focus to launch a fresh product range, a new promotion, or other initiatives that keep your brand top of mind for customers.
Why do ecommerce brands avoid outsourcing fulfillment?
Order volume is too low
When a business handles less than a hundred orders per month, order volume is too low to make outsourcing fulfillment cost-effective. Most fulfillment centers are multi-client spaces designed to offer large amounts of warehouse space, labor, and technology support, so handling fulfillment in-house until order volume grows is a better decision.
Loss of control over the brand experience
One of the biggest perks of in-house fulfillment is the ability for businesses to control every aspect of the order and delivery experience. If a brand wants to add custom packaging, freebies, or coupons to their online orders, they can brainstorm how best to achieve this internally and experiment as they see fit.
However, an outsourced fulfillment provider will not always offer businesses the same level of flexibility. Value-added services are more complex and costly for third-party logistics companies to execute, which is why not every 3PL offers them. This makes some brands hesitant to commit to outsourced fulfillment services, as this could compromise the brand experience.
Concerns over hidden fulfillment costs
Fulfillment pricing can be opaque and difficult to understand, especially when fulfillment providers use different methods to charge for fulfillment services like inventory storage, picking, and returns. Comparing fulfillment partners (and their pricing models) can get quite overwhelming, especially for brands who are new to outsourcing fulfillment. Concerns over hidden fees and paying more for fulfillment than necessary prevent some businesses from outsourcing order fulfillment operations.
Struggling to find the right fulfillment partner
Finding the right outsourced fulfillment provider is not easy, especially when the industry is full of third-party logistics providers offering ‘similar but different’ services. How do you decide what fulfillment expertise you need, which fulfillment strategy is going to support business growth, and whether a 3PL can keep pace with evolving customer expectations for the ecommerce experience?
Outsourcing fulfillment with ShippingTree
Real-time inventory and order control
ShippingTree’s intuitive dashboard enables brands to know exactly what’s happening in the warehouse. Get notifications when your stock is running low or see where an order is within the fulfillment process—all in real-time.
Seamless integrations and open API
Whether you’re selling direct-to-consumer through Shopify, pushing products to retail stores, or using Amazon FBA, ShippingTree is equipped to do it all. Plus, our open API enables brands to easily customize reporting for more control over the types of data they want to see.
Value-added ecommerce services
Increase your average order value by creating dynamic product bundles or boost the customer unboxing experience with branded packaging. ShippingTree is here to make sure that your order fulfillment leaves a lasting impression.
Fast, cost-effective shipping
Get closer to your customers and reduce shipping costs with our multi-node distribution network. Our strategically located warehouses in Los Angeles, Columbus, and Dallas guarantee consistently speedy delivery times—every time.
Want to learn more about Shippingtree’s fulfillment services? Contact us today.
