Efficiency is critical in understanding the costs of outsourcing ecommerce order fulfillment. A properly functioning core operation is the key to overcoming peaks in sales. Customers expect to receive their orders within 48 hours on average, but that is impossible if you process hundreds of orders daily.
This article will discuss the benefits and disadvantages of both in-house and third-party logistics services. Ultimately, you’ll have to decide which method to use, but these points are worth considering.
Costs of Outsourcing E-commerce Order Fulfillment
Outsourcing your ecommerce order fulfillment can help you keep track of inventory, spot patterns in buyer behavior, and increase your global reach. In addition, by letting a company do the work, you can focus more on marketing and growing your business. But, of course, there are other reasons to outsource.
Outsourcing ecommerce order fulfillment can save you money. Outsourcing partners typically invest in the latest inventory management and ERP systems. This is important because the software helps you track and manage orders efficiently and effectively. However, it’s also time-consuming and expensive to purchase the latest technology. So, it’s better to outsource your fulfilment of orders than to invest in your technology. In addition, you can have the peace of mind that a third-party fulfilment company has the infrastructure to grow with your business.
Integration of POS and WMS Systems
Warehouse management systems are the most widely used tools for ecommerce companies. They are designed to automate processes, keep track of inventory, and expedite orders to maximize sales. Integrating POS and WMS systems can help businesses improve their organization and boost efficiency. A POS and WMS system can also be incorporated, giving companies a unified view of inventory across channels.
Integrating POS and WMS systems enables POS customers to implement the Quality Control feature. Quality Control involves checking the purchase order against the picked item to ensure it is accurate and ready for shipping. If the inventory is not synchronized, a store associate can place orders for out-of-stock products. This can lead to a situation wherein a store associate must make several trips to multiple warehouses, all located in different locations.
in-House Order fulfillment
Regardless of your e-commerce business size, you might consider fulfilling in-house e-commerce orders for various reasons. In-house fulfilment allows you to control the logistics of your order fulfilment better. It is often the preferred option for smaller e-commerce merchants shipping a limited number of monthly orders. It also decreases costs, as in-house pick-and-pack employees need fewer resources than external third-party companies.
Outsourcing eCommerce order fulfilment is a viable option if you’re only starting. However, outsourcing the process can be more efficient and cost-effective. While in-house fulfilment allows you to control inventory, you may need more money to invest in the equipment for pick-and-pack operations. For larger orders, you should outsource the fulfilment process altogether. In-house shipping services can also be a cost-effective option for small businesses.
Third-party Logistics Services
Whether your eCommerce store sells products directly to consumers or you have a warehouse where inventory can be stored, it’s worth considering integrating third-party logistics services. These services can save you money on shipping, staffing, and merchandise. They can also help you lower cost margins and free up time for marketing. As a result, third-party logistics services are a powerful tool for increasing profits and maximizing your business’s growth.
While many eCommerce businesses choose to manage their fulfilment in-house, there are many benefits to hiring a third-party logistics company. Not only can third-party logistics help you save money, but they can also automate retail order fulfilment. Third-party logistics services can streamline order fulfilment, allowing you to focus on other strategic tasks. Third-party logistics companies can also store inventory and pick and pack products for you, resulting in happier customers and better business performance.
Disadvantages of Outsourcing e-commerce Order Fulfillment
Here are some potential disadvantages of outsourcing e-commerce order fulfillment:
- Loss of control – Outsourcing leaves you relying on another company to handle critical operations like inventory management, packing, and shipping. Lack of direct oversight could negatively impact quality.
- Customer service complications – Issues or delays with an outsourced fulfilment partner can reflect poorly on your business if customers aren’t satisfied with service levels.
- Added costs – While outsourcing aims to reduce expenses in some areas, fees for labour, warehouse space, and software systems do add up. There may also be minimum commitments or lengthy contracts locking you in.
- Order errors and product damage – Though uncommon with reputable fulfilment firms, botched orders and improper product handling during the pick/pack/ship process remain a risk with outsourcing.
- Security risks – Permitting external provider access to your inventory data, customer details, and financial information exposes you to potential leaks or cyber-attacks if provider security proves subpar.
- Logistical problems – Changing fulfilment partners down the road usually proves extremely complex and disruptive if not planned well.
While outsourcing order fulfillment solves some ecommerce problems, dependence on third parties does come with notable operational and financial considerations. Thoroughly assessing providers mitigates downsides, but lack of direct control inevitably remains the crucial tradeoff.
Conclusion
Optimizing order fulfillment operations is crucial for ecommerce merchants to keep pace with sales, meet customer delivery expectations, and minimize overhead. While initially handling fulfilment in-house allows control, outsourcing to experts often proves more scalable and cost-effective in the long term.
Third-party logistics firms invest heavily in state-of-the-art warehousing management systems, inventory control technology, and shipping infrastructure attuned to ecommerce. This enables automation, accuracy, and speed, making it impossible for small teams to match. Integration also grants helpful visibility into purchasing insights and trends to inform merchandising.
Of course, thoroughly vetting partners is essential to realize outsourcing benefits without sacrificing quality service. But the world operates by outsourcing everything from food delivery to WiFi installation, so why not leverage fulfilment specialists, too? The right provider empowers online retailers to focus on delighting customers and accelerating growth, not packing boxes. Consider if hands-off help could take your web storefront or catalogue to the next level.
