How to Outsource Ecommerce Order Fulfillment?
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Many entrepreneurs and business owners turn to ecommerce as an opportunity to build new income streams or grow their already established businesses. This popularity has skyrocketed in recent years as tools for building powerful ecommerce websites have become more widely available and affordable.
However, it’s still far from easy to succeed in ecommerce, with many underestimating the huge time, energy, and financial investment that even a modest online store can absorb in order to be successful.
In this guide, we take a look at outsourcing ecommerce order fulfillment and how using this tool can make running an ecommerce store significantly easier and less stressful.
Why is Order Fulfillment Important?
Order fulfillment is a crucial part of the ecommerce process. Without the ability to accurately fulfill orders in a timely manner, you are likely to face considerable dissatisfaction from your customers and possibly even lose money through refunds.
A good fulfillment process can be a powerful marketing tool. Evidence of this is apparent from the growth of big ecommerce businesses, such as Amazon, that offer seamless, super-speedy order fulfillment and returns.
When customers know they can trust you to deliver items quickly and without hassle, it makes it very easy for them to pick you as their supplier for future needs.
Benefits of Outsourcing Order Fulfillment
It’s clear that order fulfillment is very important to ecommerce success. But what are the benefits of outsourcing your fulfillment to a third-party logistics company rather than doing it yourself? Below, we’ll explore some of these advantages.
One of the biggest benefits of outsourcing your order fulfillment is the vast amount of time it will save you.
Not only does the physical act of finding, moving, packing, and shipping every order take up a lot of time, but so too does the initial set-up of the processes and systems needed for order fulfillment.
Time savings can also be made in other areas, such as customer service. Businesses that outsource fulfillment often benefit from smoother, more reliable product delivery. This equals happy customers and fewer complaints to process!
How much space you need to store your products depends on several factors, including the volume of sales you are making and the type of products you sell. For example, a small business that sells small items, such as books, will need considerably less space than a larger business that sells larger items, such as furniture.
However, most businesses will need to buy or rent additional space in order to store inventory for sale. This space can become tricky to manage as businesses grow, often requiring further hassle and cost to expand storage facilities.
Working with a fulfillment company removes the need for these space requirements and can also offer more flexibility as your ecommerce empire grows.
No Need to Manage Inventory
Managing inventory can be pretty time-consuming. It can even get a bit stressful, especially as your business grows!
Working with a third-party logistics company can remove, or at least reduce, these issues, taking some of those inventory responsibilities off your shoulders.
Not Having to Pack and Ship Orders
When you deal with shipping on your own, not only do you have to find the space to store your products ready for shipping, but you also have to find the materials, space, and time to physically pack and ship every order taken.
This isn’t an issue when you rely on outsourcing your fulfillment needs because your logistics company will do it all for you.
Track Inventory in Real-Time
Many third-party logistics companies offer business owners an easy way to track inventory, from its arrival at the warehouse all the way up to its delivery to the customer.
Not only is this really convenient. But it can actually offer you better transparency than you would receive if undertaking fulfillment on your own.
Benefit From Speedy Shipping
Consumers are increasingly demanding super quick delivery when they order the products they need. In fact, next-day and same-day delivery have become a competitive advantage for businesses that can offer it, with consumers often willing to pay more for a product that will get there sooner.
Many third-party logistics companies have the systems and knowledge required to make super-fast delivery a reality for businesses like yours. This will keep existing customers happy, as well as attract new ones.
Benefit From Cheaper Shipping
Shipping products isn’t cheap. In fact, shipping costs can often make buying products online unattractive and drive your customers to explore alternatives.
As third-party logistics companies usually deal with shipping for several businesses, this gives them massive buying power. Simply put, it allows them to find or negotiate much better rates with delivery companies. When you work with these providers, the cost savings are passed on to you.
Benefit From Shipping Expertise
There’s a learning curve that comes with ecommerce order fulfillment. Many ecommerce businesses have to learn as they go, but third-party fulfillment companies focus on one thing only – logistics.
When you outsource fulfillment, you’re able to tap into their considerable shipping expertise. This will help with major challenges such as shipping to new locations, shipping new items, and ensuring that you’re always getting the best shipping fees out there.
Wider Geographic Reach
There are many complexities to shipping your products to other countries. Outsourcing your shipping fulfillment will allow you to tap into the knowledge and networks these companies have built, making it easier to reach a wider audience.
Manage High Volumes of Orders Easily
When working with a third-party logistics company it becomes much easier to deal with a growth in sales.
As these businesses are typically set up in a way that can facilitate increased fulfillment activity, it allows you to focus on the sales, marketing, and product choice side of growing your business.
Provide Better Customer Service
A huge part of great customer service for ecommerce businesses is ensuring that it is easy for customers to order and return items should they need to.
Outsourcing your order fulfillment means you can rely on the tried and tested methods of the fulfillment company, so your customers can count on a reliable and efficient service.
Free Up Time to Focus on The Bigger Picture
Ultimately, the biggest benefit of ecommerce order fulfillment outsourcing is that it frees up your time to focus on more important aspects of your business!
When is Order Fulfillment a Bad Idea
So far, we’ve offered a strong case for shipping fulfillment outsourcing. However, this doesn’t mean it’s always the best option. Below are a few scenarios when outsourcing may not make good business or financial sense.
When You’re Starting Out
When you’re just starting your ecommerce business and order volumes are low, outsourcing your fulfillment can be a needless cost that could easily be dealt with yourself.
When You’re Selling Niche Products
Selling niche items usually relies on making considerable profit margins from a small number of sales. For this reason, working with a third-party logistics company can eat into your profit margins. Plus, outsourcing this kind of job just isn’t necessary when sales volumes are so low.
When You Want to Maintain Control
For some, letting go of control of every aspect of their business is unthinkable. Although working with a third-party logistics company gives you the benefit of tracking visibility, ultimately you relinquish complete control of your fulfillment.
Other Fulfilment Options
If you decide that outsourcing your fulfillment isn’t the best option for you, there are two other routes you can take:
- Self-fulfillment – this is where you purchase, store, pack and ship all orders yourself on your own premises.
- Dropshipping – this is where you do a deal with a manufacturer or distributor to fulfill orders directly, saving you time purchasing and shipping stock to a third-party logistics provider.
How to Outsource Ecommerce Fulfilment
Throughout this article, we’ve explored some of the benefits of working with a Third-Party Logistics (3PL) provider. We have also outlined situations where this may not be the best option and where other options may work better.
If you have decided that working with a 3PL is for you, then this section will walk you through the steps do this.
Step One: Pick a 3PL Provider
There are countless 3PLs out there, so finding one isn’t difficult. However, each one will offer a different level of service at a different cost. Here are a few things to look for and consider when picking a 3PL:
- Do they have multiple fulfillment centers for greater coverage and capacity?
- Do they offer a tracking integration?
- Do they offer custom services?
- What does their returns management system look like?
- Where are they based?
- How much do they cost?
- Do they offer automation support?
Step Two: Set Up Feeds
Once you have chosen a 3PL you will need to set up a feed to communicate order details with them. Although you may be able to automate this process, it is important to implement a system of checks to ensure that no orders are being missed.
Step Three: Ship Your Inventory
As your chosen 3PL will be fulfilling orders on your behalf, they’ll need to store your inventory for you. This means you’ll either need to arrange for your current inventory to be shipped to your chosen 3PL, or arrange for all future orders to be delivered there.
Step Four: Process & Manage Orders
As you make sales via your ecommerce site, you’ll need to process and manage all orders in partnership with your 3PL.
Step Five: Manage Returns
It’s important to ensure that customers are clear on the returns process and all returns are processed quickly and efficiently.
Outsourcing Ecommerce Fulfillment: Summary
Whether outsourcing your ecommerce order fulfillment is for you depends on many factors. However, if you do decide to go down this route, there are a ton of benefits. It can take the time and stress out of fulfilling orders, allowing you to deal with the bigger picture of running and growing your ecommerce store.
It’s worth bearing in mind, though, that outsourcing fulfillment isn’t the right move for everyone. You should think carefully about your business model and expansion plans before making any big decisions!
If you want more information on what a fulfillment center is, read our article. Or, to explore other ecommerce options, read our guide on how to start an online store without inventory.