Pros and Cons of Outsourcing Your Fulfillment

September 3, 2018 Home Care

There’s a lot more to running an online business than there appears to be at first glance. Big-picture decisions such as how to handle fulfillment can determine your ecommerce success. One of those decisions is based on product fulfillment. Should you keep it in-house or outsource? Let’s look at the pros and cons of outsourcing your fulfillment.

 

 

 

Pros of In-House Fulfillment
Customers like effort in the details. Doing your own fulfillment enables you to customize your customer’s experience when receiving your product. You can create custom packaging, add a handwritten thank-you note or include a little freebie in the package. And, because you control the entire process, you don’t need to reach out to another company to keep track of your inventory levels.

 

You’ll be handling your stock first-hand, so you’ll have a better idea of when you need to order or produce more product. You’ll also decide what kind of shipping service to use, which can result in cost savings. Most importantly though, you won’t be paying someone else to do this for you. Instead of an additional expense, the money saved can go right back into your business.

 

Cons of In-House Fulfillment
As your e-commerce business grows, self-fulfillment becomes more difficult. It’s a time-consuming process and the more sales you make, the more time is required to package and ship orders. As your fulfillment process becomes more involved, there’s less time and fewer resources available to expand the business even further.

 

Another negative is the space requirement. As your product demand increases, you’ll need to adjust your inventory levels to make sure you can cover all of your customer’s purchases at a given time. This means expanding your current warehousing situation, or trying to find an alternative solution. As the e-commerce market grows, companies can expect warehousing costs to go up, too. In 2013, e-commerce companies were responsible for just five percent of North American warehouse leases. That number has grown to 20 percent. According to Curbed, the new generation of electronic fulfillment centers requires three times the distribution space than old brick-and-mortar stores. This adds to the demand for well-positioned points on ever-growing supply chains.

 

Pros of Outsourcing Fulfillment
One of the biggest reasons e-retailers choose to outsource fulfillment is time. When you don’t have to handle packaging, shipping and the returns process, you can focus upon expanding your business, or developing new products. If you use a third-party logistics firm to handle your fulfillment, you can properly scale your business as it grows. As the volume of inventory changes, you don’t have to worry about finding more room for storage or paying for storage space you aren’t using.

 

If your store sells furniture online, outsourcing fulfillment can be a gift. Furniture is large and oddly shaped, which means it will take up a lot of space in a warehouse requires specialized shipping services. Outsourcing fulfillment to a third-party eliminates those headaches. Instead of spending an unnecessary amount of time finding a proper shipping method for furniture pieces, your fulfillment company will take care of it while you’re looking to make the next sale.

 

Cons of Outsourcing Fulfillment
As good as outsourcing fulfillment sounds, there are drawbacks. It can be expensive to hire a third-party to handle your fulfillment. These companies charge for multiple services that can all factor into a single sale, such as inbound shipping, storage, packaging and outbound shipping. These fees add up quickly with higher sales volumes.

 

Even though most fulfillment companies give volume discounts, their rates are generally going up. According to Finances Online, the cost of shipping is increasing by an average of five percent each year. This remains a challenge for online sellers who’ve turned to fulfillment services that can analyze data and find cheaper shipping methods.

 

Each e-commerce business operates in its own way and thus could benefit differently from self-fulfillment or outsourcing fulfillment. Before making a decision about which is best for your company, review the pros and cons of outsourcing fulfillment and how they’ll impact your business.