outsourcing fulfillment

The Pros and Cons of Outsourcing Ecommerce Fulfillment

outsourcing fulfillmentBeing an online seller requires a lot of work. Not only do you have to provide customers with appealing and useful products, but you have to purchase, market, and deliver them, all while providing excellent customer service, performing daily operations, and working to grow your business. It can be far more than a full-time job. That’s why it’s important to streamline every process that you can.

One way to do that is by outsourcing fulfillment. Many ecommerce business owners use a 3PL (third party logistics) provider to process orders and ship products to their customers. As with anything, there are advantages and disadvantages to outsourcing fulfillment.

First let’s take a look at the options you have for order fulfillment, and then the pros and cons of outsourcing fulfillment process.

Options for Order Fulfillment

Every ecommerce business owner has to have an order fulfillment process. Most choose from these three: merchant fulfillment, dropshipping, and outsourced fulfillment.

Merchant Fulfillment

Many online retailers start with merchant fulfillment. That means that they store, pick, package, and ship products to customers themselves. They have total control over inventory management, which is one of the main advantages of merchant fulfillment. However, as a merchant’s business grows, merchant fulfillment becomes too time-consuming. It’s easier to package and ship your own products at 50 orders a month, but what about 500, or 5,000?

Dropshipping

Dropshipping is another method of order fulfillment. It’s a hands-off process for ecommerce retailers. Sellers list products from a manufacturer’s catalog, who then fulfill and ship orders on their end. The seller never touches or handles the product. It’s a simple process that is easily managed with a dropshipping software solution and many ecommerce merchants and large retailers use it.

Outsourced Fulfillment

Outsourcing your fulfillment is somewhere between self-fulfillment and dropshipping. You choose a 3PL, send your inventory to their warehouse for storage, and then communicate customer orders to them to be fulfilled and shipped. It’s not quite as hands-off as dropshipping, since you do have to purchase or create inventory and ship it to your 3PL, but it does allow for more seller control.

Deciding whether you should use outsourcing as your order fulfillment method necessitates considering the pros and cons of the process and which aspects are most important to you and your business.

Related:Take a more in-depth look at the differences between merchant fulfillment, dropshipping, and outsourced fulfillment.

Outsourcing Pros

  1. You can focus on your business. Outsourcing fulfillment allows you to save the time required to pick, package, and ship items. That means that you are able to focus more on the growth of your business – marketing products, increasing sales, and increasing revenue.
  2. You’ll save on shipping. Shipping costs can be a huge expense for ecommerce sellers. Because shipping rates are typically driven by volume, working with a 3PL provider gives you access to more economical freight charges. Additionally, most providers allow sellers to benefit from the collective volume of their entire warehouse – saving you even more.
  3. You don’t have to perform manual inventory audits. Because your inventory is located at an order fulfillment warehouse, you won’t have to perform manual audits of your products yourself. The provider takes on those duties, and their findings will include integration with your inventory management tools so you always know what your inventory quantities are.
  4. You can scale your business easily. It’s far easier to expand or contract the space needed for your inventory when you outsource fulfillment. As the volume of inventory changes, you don’t have to worry about finding more room for storage or paying for storage space that you are not utilizing.
  5. You don’t have to worry about customer service and returns. Customer service issues and processing returns can take up a lot your time. When you partner with a fulfillment center, they provide support for your customers and process returns for you.

Outsourcing Cons

  1. You can’t personalize packaging. There is no room for personalization or branding with your packaging. If the opening-the-box experience is an important customer service and marketing component for your business, you won’t be able to accomplish it if you outsource fulfillment.
  2. It can be costly. While you will likely save money on shipping rates, the overall charges for using a fulfillment center can be costly. You will likely be charged for the storage, picking, packaging, and shipping your items to customers. If you have a lot of great selling products, you can still save money, but if you have products that sit on the shelves, then it may get expensive. Careful consideration and attention to fees will tell you whether outsourcing is worth it financially.
  3. You have no control. You are giving up control of the whole fulfillment process. You have to be comfortable with another entity being completely responsible for this aspect of your business.
  4. Vendors make mistakes. It will happen. The wrong item will be sent, they’ll send too many or too little of a product, or items will get broken or damaged. And unfortunately, you may not even know about it until a customer complains. Working with the highest quality fulfillment centers will minimize mistakes, but you have to be prepared for them to happen.

Choosing Your Fulfillment System

Ultimately, the choice of how you fulfill orders is up to you. Each process has benefits and drawbacks and they have to be weighed carefully. The above lists are just a few things to consider, but they should help you in narrowing down your choice. Keep in mind, you aren’t limited to using only one method. Many online retailers use a combination of all three to run their businesses successfully. Sync your processes with order management software and you can have your cake and eat it too. Happy selling!

Like our tips? Follow us on Twitter or like us on Facebook. Sign up below to become a subscriber.

Need More Tips On Growing a Successful Ecommerce Biz?

Download the free eBook and get 75 tips from ecommerce experts!

  • This field is for validation purposes and should be left unchanged.

Sign up to receive the hottest ecommerce tips!

Related Posts