August 28, 2021, 6 min. Read
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Although outsourcing order fulfillment can seem daunting, it can be a great step to long-term sustainable growth. Although informal picking, packing, and shipping operations can be a great way to help new business owners, it is not the best option for rapid or unexpected growth. Outsourcing order fulfillment to a third-party can save you time, build and maintain a good reputation, and allow your team to concentrate on scaling without worrying about logistics.
There are three scenarios where outsourcing is a good idea:
Related: A Short Guide to Ace Order Fulfillment for Your E-Commerce Business
1. Rapid growth can overwhelm operations
This is a great time to celebrate a growing business! You should plan for scaling if you don't have plans. However, it is important to invest in the right infrastructure. Outsourcing fulfillment is an logical step in this process. There are several benefits to a rapid growth cycle:
Managing & storing inventory. If your home has doubled as your business headquarters due to rapid growth, it is likely that you will soon run out of space. To increase your margins and prevent stock-outs, you'll need to invest in inventory. You will also need to find a place to store it. A fulfillment provider can help you store and manage inventory so that your team can focus on other aspects like sales and marketing.
Meeting deadlines. Startups are often small and have limited resources. This can make it difficult to meet deadlines during periods of unexpected growth. While it may have been possible to do what was initially possible with a few people around the kitchen table, things quickly become overwhelming. Customers also expect fast delivery. According to Narvar's customer experience platform, 53% of customers won't buy something if they don't know when it will arrive. Third-party fulfillment can ensure that orders are picked, packed, and shipped quickly. It can also provide advice on the best shipping options.
Minimizing errors. Human error in order fulfillment cannot be avoided with the assistance of a small number of employees or family members. Outsourcing allows you to access automated picking and packing functions as well as verification software, which will make errors extremely rare.
Related: 3 Things to Do To Scale Your Ecommerce Company
2. If key members of the team are too focused on the wrong things
Chances are you and/or your team have played different roles in the business you have started. To avoid costly backlogs, key staff members are often required to pick and pack orders when there is unexpected or rapid growth. You are wasting money if sales and marketing staff are putting together inventory boxes and stuffing envelopes, rather than focusing on growth opportunities. Third-party fulfillment providers can assist with:
Managing inventory. Physically managing inventory becomes more difficult as a business grows. Although you might have been able manage most of the inventory on your own, large inbound shipment (palletized products or floor-loaded containers) can be difficult to handle. Product assembly, bundling, and quality-assurance processes require a lot of capacity. You can partner with fulfillment companies that already have these resources.
It is important to procure packaging materials. Ordering and reordering packaging material can be time-consuming and costly if you do your own fulfillment. This tedious task can be eliminated by working with a third party. You will also get volume discounts on items like bubble mailers and corrugated cartons, tape, and void fill, as well as other products such as polybags, polybags and corrugated boxes.
Manage returns, cancellations, and exchanges. It will be challenging to pack hundreds, if not thousands, of orders every day if you are short on cash. Your employees will be faced with new responsibilities when you add in the joys and challenges of reverse logistics and returns management. Businesses in the fashion sector are particularly affected by this phenomenon, which sees returns of between 30%-40%. Fulfillment partners have a lot of experience in this area. They can help businesses maintain their good reputation with stakeholders through the ability to navigate customer demands and make difficult logistical decisions. This alone is worth the investment.
3. As logistics requirements grow more complex,
Most businesses need to reevaluate their operations, priorities, and goals in order to grow. You may discover that your existing infrastructure and expertise cannot support growth as you face new challenges. Outsourcing allows for you to benefit from the economies of scale of fulfillment providers, while retaining your energy and focusing on growth-related opportunities. This type of partnership helps with:
Multi-channel fulfillment: Many businesses start with one sales channel, such as an Etsy shopfront or a website. This allows for easy inventory management. However, once companies start offering the same product in multiple places, operations can become more complicated and time-sensitive. Fulfillment providers have been trained to manage multiple sales channels for clients every day. Their powerful software systems can help you take the pressure off.
Engaging wholesale customers. Engaging with wholesale customers can dramatically increase your business' potential for profitability. However, these customers are a significant part of many businesses' growth, but they also make it a lot more difficult. Working with experts who have experience in serving large buyers will ensure that you comply with their often complex routing guidelines, avoid chargebacks and/or rejections, and help keep your wholesale growth plans on track.
High standards of accuracy. In order to remain competitive in the fulfillment market, accuracy is a must for both customers and sellers. Amazon has high standards in speed and accuracy, which are extremely difficult to meet if you pick and pack through informal arrangements.
Similar: Guide to Starting an Amazon Fulfillment Business
