As the online industry continues to grow at an ever-increasing pace, the demand for outsourced fulfilment companies has never been higher. After all, sellers don’t set out to become warehouse keepers when their main aims should be to source and sell great products.
Deciding to outsource your order fulfilment is all about timing, and centres around three essential trigger points:
1: Sufficient demand
2: Sufficient margin
3: The need to employ people or take on a warehouse
What is Outsourced Order Fulfilment?
To summarise, Order Fulfilment is defined as asking someone else to pick pack & ship your orders, so you don’t have to. Any leading third party fulfilment house would house numerous retailers under one roof, providing them with a range of additional support services. Such services could include anything from web photography and listing support through to enquiries handling and inbound telesales.
For a nominal cost per order, outsourcing you fulfilment frees you up to take care of the more virtual aspects of sourcing goods and marketing.
How Would I Know When to Outsource?
Running a successful online business will normally result in various growing pains along the way. A lack of space, time, expertise and cash are common stumbling blocks normally associated with business growth.
Some sellers that have a clear business plan decide to outsource from day 1 and spend their time in other key areas of the business. Other sellers decide to keep things in-house until they have established “proven demand”. With outsourced fulfilment you only “pay for what you use” hence when orders are low your costs remain low.
A minimum of 100 orders per week, or around 15 orders per day is a useful threshold at which some of the above constraints should be evident and sufficient benefit can be obtained from outsourcing.
Can I Afford to Outsource?
The more pressing question is can you afford not to?
If space, time and know-how are holding you back, then outsourcing to a reliable fulfilment house is a sure-fire way to regain control of your business. If you intend to sell on line for a bit of “pocket money” then fine – You should stay as you are, enjoy it and treat it as hobby.
If you have greater ambition to be a sizeable seller, then sourcing great products at the right price and taking them to market will require dedication. Employing staff, taking on an industrial unit etc, all contribute to your fixed costs. Meanwhile your cost per order equivalent is more likely to exceed that of any flexible “pay as you use” alternative.
More often than not, fulfilment houses are able to pool their throughput with the major carriers to obtain lower delivery tariffs. In tapping into such buying power, savings can be realised and often offset the cost of picking your orders.
How can I expect to benefit from letting someone else pick & pack my orders?
There are numerous benefits to be realised as result of “letting go” of the physical aspects, and these include:
- More time to source & sell
- Space is no longer a concern
- A better work/life balance
- A scalable business (complete flexibility)
- Steal a march on the competition
- Tap into existing industry expertise, and knowledge of “best practice”
- Potential to lower your operating costs
- Potential to grow your sales through channel expansion
Demand for outsourced order fulfilment is growing as quick if not quicker than the online world itself as more and more sellers realise the advantages of working with a third party fulfilment company.
You can get more information on picking and packing orders from our other blog posts.
A brief re-cap
If you value your time and are serious about growing your online business then outsourcing should be a viable option for your business. Employing warehouse staff and taking on industrial or self-store units merely adds to your fixed costs, reduces flexibility and increases risk. Alternatively, you could consider moving some of your lines to a fulfilment centre, like 3P Logistics as an initial move. Instead of taking on more staff or space, examine the possibility of moving stock that takes up an appropriate percentage of your orders into fulfilment and study the cost and time benefits incurred. It can offset your expansion costs, and open up your eyes to the benefits.