Why Outsourced Fulfillment Is the Key to Success
Discover why outsourcing fulfillment services are essential for business success. Streamline operations and cut costs.
Streamline your order management through optimized delivery routes and faster delivery times with Circuit for Teams.
When your eCommerce business takes off, keeping up with the spike in demand can be a struggle.
Outsourcing fulfillment can help level up your business, keep up with the pace, and elevate your customer experience.
Your fulfillment strategy can define your business. Imagine Amazon as a brick-and-mortar department store and not the super fast delivery business we all know and love today. Or think about how Zara's streamlined supply chain has made it a global leader in fast fashion, setting it apart from competitors still struggling with longer lead times.
Not sure if outsourcing order fulfillment services is right for you? Consider this your ultimate guide. In this article, we'll cover what outsourced fulfillment is and why it may be the game-changer your eCommerce business needs. We'll weigh the pros and cons, discuss the role of third-party logistics (3PL) providers, and even give you tips on selecting the right partner for your outsourced fulfillment needs.
Let’s do it!
- Outsourcing can dramatically reduce shipping and warehousing costs.
- Scalability is easier to achieve with outsourced fulfillment services.
- Meeting customer expectations for fast delivery can drive business growth.
- Focusing on core competencies is easier when you're not bogged down by fulfillment tasks.
- Circuit for Teams can help you fulfill orders faster than ever with optimized delivery routes for your delivery drivers.
Fulfillment is the backbone of retail operations. It’s the process that geta your product from the warehouse shelf to your customer's front door.
When someone buys something from you, that item has to be picked from your storage, packed up, and shipped out.
Sounds simple, right?
Well, not always.
If you're doing all these tasks yourself — known as in-house or self-fulfillment — you've got a lot on your plate. You've got to keep track of what's in stock, figure out the cheapest and fastest way to ship it, and even find a place to store it all.
In-house fulfillment operations like the example above often face challenges like managing inventory, fluctuating shipping rates, and finding adequate warehouse space.
But here's the good news: there are different ways to tackle these challenges, known as fulfillment solutions.
Here are some of the options:
- Do it yourself (in-house fulfillment). This works well if you're just starting and not shipping many items yet. But be prepared for the nitty-gritty tasks, like picking, packing, and making trips to the post office.
- Third-party fulfillment (third-party logistics/3PL). These are companies that do all the hard work for you. They store your products, pack them up, and ship them out. This can be a good move if you're shipping a lot of products and don't want the headache of doing it yourself.
- Hybrid fulfillment. Maybe you want to keep some products in-house but outsource the rest. That's a hybrid model. This gives you more control over some products while easing the load for the rest.
- Dropshipping. Here, you don't even touch the product. When someone orders from you, the product ships directly from the manufacturer or another retailer. This can be super easy, but it also means less control over shipping times and inventory.
This covers the basics of retail fulfillment, but we need to dive deeper to understand more about how these different approaches can affect your business and customers.
Outsourced fulfillment explained
Outsourced fulfillment is when you hand over the job of storing, packing, and shipping your products to another company. This other company is often called a third-party logistics provider, or 3PL for short. They specialize in doing all the heavy lifting so you can focus on other parts of your business, like finding new customers or developing new products.
Here's a breakdown of what outsourced fulfillment involves:
- Storage. Your products need a place to live until they're ordered. 3PLs have warehouses where they keep your products safe and organized.
- Picking. When an order comes in, someone has to go grab that item from the shelf. In the case of outsourced fulfillment, the 3PL's staff takes care of this. They "pick" the ordered item from their fulfillment center storage and get it ready to be packed.
- Packing. After picking, the item gets packed up nice and snug for its journey. This involves not just putting the item in a box, but also adding any necessary cushioning material, packing slips, and promotional materials you want to include.
- Shipping. Once it's packed, it's time to ship. The 3PL has relationships with various shipping couriers, so they can get you better rates and make sure the product arrives as fast as possible.
- Returns. If a customer isn't happy and wants to return an item, 3PLs can handle this too. They'll process the returned item, put it back in inventory if it's in good condition, and manage refunds.
- Inventory management. One of the underrated perks of using a 3PL is their advanced inventory systems. They keep a close eye on how much stock you have left, so you know when to reorder. Some even sync with your online store, updating in real time as orders come in and go out.
Outsourced fulfillment vs. in-house fulfillment
Deciding between outsourced fulfillment and handling everything in-house?
Both have their perks and drawbacks.
Here's a simple list to help you compare.
- Outsourced fulfillment. 3PLs usually have advanced tech to keep track of your inventory. Some even integrate directly with your online store, updating stock levels in real time.
- In-house fulfillment. You're in charge of your own inventory, which can be good for control but bad if you're not great at keeping things organized. You'll also need to invest in a reliable inventory management system.
- Outsourced fulfillment. While you'll pay a fee to the 3PL, you might actually save in the long run. They get bulk shipping rates and can manage labor more efficiently than you might be able to individually.
- In-house fulfillment. You'll need space for storage, employees for packing, and you'll be paying retail shipping rates unless you're shipping in big volume.
- Outsourced fulfillment. You have less direct control, as another company is handling your products. However, many 3PLs offer dashboards where you can keep an eye on things.
- In-house fulfillment. You have complete control over the process, from storage to shipping, and can make immediate adjustments as needed.
- Outsourced fulfillment. Outsourcing makes it easier to scale your business. When orders increase, the 3PL can handle the uptick without you having to change much on your end.
- In-house fulfillment. Scaling up means you'll have to find more space, hire more people, and manage more SKUs and inventory, which can get complicated fast.
- Outsourced fulfillment. Outsourcing frees up a lot of your time. You don't have to worry about packing boxes or running to the post office.
- In-house fulfillment. Fulfilling orders, managing stock, and handling returns can consume a good chunk of your day.
Benefits of outsourced fulfillment
Let’s explore the benefits of outsourced order fulfillment:
Cost savings and efficiency
Outsourced fulfillment can actually save money. With bulk shipping rates and efficient warehouse management, fulfillment companies offer more bang for your buck. Shipping costs are the second highest expense for eCommerce businesses after the cost of products. So shipping options and savings can be a big deal, and the cut costs can make outsourcing fulfillment a cost-effective solution.
Order volume going up? With a 3PL provider, you can easily handle more volume without breaking a sweat or hiring extra staff. Flexibility in sales channels means you can scale your eCommerce order fulfillment up or down as needed.
Improved customer experience
Two-day shipping has become the norm in the eCommerce world thanks to giants like Amazon. A third-party logistics company can help you meet these high expectations, directly impacting your customer base's satisfaction and business growth.
Focus on core competencies
With the hassle of order management off your plate, you can focus on what truly matters: product development and growing your core competencies.
Automation in fulfillment
Doing your own fulfillment can be time-consuming. Many 3PL companies have automations in place to streamline the order fulfillment process. Some even have automated picking robots and conveyor belts moving packages throughout their space.
Selecting the right fulfillment partner
Finding the right logistics provider needs careful consideration of pricing, services, and specialization. Make sure your fulfillment service provider aligns with your business values and long-term goals — and your budget!
Making the transition
Switching from self-fulfillment to outsourcing doesn't have to be a headache. Proper planning, especially in storing inventory and managing shipping labels, can help you create a smooth transition. Talk with your fulfillment provider about how to ease the transition, any common start up issues to be aware of, and what you can do to make the process easier.
Unleash your business’s potential with outsourced fulfillment
Looking to upgrade how you're handling fulfillment? Outsourced fulfillment can be the strategic move for your business.
Not only does it help maintain optimal inventory levels, but it also streamlines the complex task of shipping orders.
When you outsource, you get the twin benefits of cost savings and scalability, making it easier to adapt as your eCommerce venture grows.
If you decide that handling your own fulfillment makes more sense for your business, then you need to know about Circuit for Teams.
Our platform specializes in route optimization and real-time tracking, elements that can cut your delivery costs by up to 20%.
Our platform offers a suite of features designed to streamline your operations:
- Route optimization. Cut down on delivery times and fuel costs by finding the most efficient routes for your deliveries.
- Real-time tracking. Keep an eye on your deliveries as they happen, allowing for instant adjustments and better customer updates.
- Proof of delivery. Collect digital signatures and photos within the app, creating an instant paper trail for any delivery disputes that may arise.
So, if you're a business owner, startup, or knee-deep in eCommerce, don't miss the chance to optimize your fulfillment operations.
Ready to make the switch or enhance your existing setup? Start your free 14-day trial with Circuit for Teams today and unleash the full potential of your business.