Although it’s a back-end operation, eCommerce order fulfillment is one of the most important contributors to the success of any online business. When order processing and delivery are slow or inaccurate, customers don’t hesitate to shop elsewhere.
That’s why your company should outsource order fulfillment to a third-party logistics (3PL) company – right? Not necessarily.
Despite the many benefits of outsourcing eCommerce order fulfillment, there are times when it makes more sense to keep this function in-house. Here are four of them.
1. You've only just begun. As a start-up, you don’t have a lot of data about average order pick rates, inventory accuracy, and shipping times. Before you talk to a 3PL, you need time to get a handle on things like:
- What your customers typically order, how much and how often
- Which items sell well all year, and which are seasonal
- How much inventory you need to meet demand
- How quickly your buyers want their orders fulfilled and whether they’ll pay more for faster shipping
Until you can answer these and similar questions with confidence, you may want to do your own fulfillment.
2. You’re past the start-up stage, but still gathering steam. Still experiencing low order volume or limited cash flow? Doing okay, but concerned it may not last? The early years of a business are fraught with uncertainty. Also, some 3PLs charge a minimum monthly fee to ensure all their costs are covered, so you could end up paying more than your actual volume warrants.
Since partnering with a 3PL typically requires a two-plus year commitment, it may be best to keep fulfillment in-house until you’ve grown and ironed out the wrinkles.
3. You sell unusual, bulky, specialized or highly customized items. Most 3PLs are set up to ship large volumes of standard goods. If yours is a niche business, producing one-off, highly customized or built-to-order products, it can be difficult (although not impossible) to find a 3PL to handle your order fulfillment. Ditto for large, bulky items like furniture, as well as hazardous materials and refrigerated products, all of which require special storage and/or handling.
4. You want complete control and need a 3PL for execution only. You’ve heard the saying, “if you want something done right, do it yourself.” Some people live or die by that philosophy. If you’re one of them, you probably want to keep your eCommerce order fulfillment in-house, so you’ll have complete control over the way your inventory is stored, packed and shipped.
Or course, you’ll also have total responsibility for ensuring that your order fulfillment is up to snuff. That can take significant time away from other important business activities, like acquiring new customers, developing effective marketing strategies and expanding your product line. But if control is important to you and you’re looking for a 3PL for execution only, not expertise, you’re unlikely to realize many of the benefits of outsourcing to a fulfillment expert.
A Few Closing Thoughts
While outsourcing eCommerce order fulfillment may not be right for your business at this particular time, about 50% of fulfillment operations are outsourced and that number is rising. A big reason: online sellers want to focus on growth and want to scale their fulfillment operations in parallel with that growth. A 3PL gives them this scalability advantage while avoiding large capital investments in infrastructure. This flexible fulfillment strategy also results in a predictable fulfillment cost that parallels the company’s revenue stream.
Here’s more good news: there’s more than one way to outsource fulfillment. You don’t necessarily have to turn the entire function over to a 3PL. There are lots of successful hybrid arrangements, in which some portion of order fulfillment is contracted out, while the rest is handled internally.
If you think it’s time to consider outsourcing your eCommerce order fulfillment, contact Amware. We can provide 1–2 day ground shipping to 95% of the US population and, in addition to consumer goods, we have facilities to handle specialized products like food and beverages and health and wellness products. Our experts will be happy to have a candid discussion of your situation and needs.
