How to Know It’s Time to Outsource Order Fulfillment and What to Look for in a Partner
What’s the most essential aspect of your online business?
The clear answer to this question is your ecommerce order fulfillment process, as it’s the key to keeping your customers happy after completing an order. Sure, a good website and marketing activities will draw in customers, but if you don’t have a good fulfillment process in place, you can ruin your reputation and chances of repeat orders.
When I say order fulfillment process, I’m talking about inventory and supply chain management, customer support, and quality control. Essentially it’s how you handle getting orders to your customers so they have a positive experience with your brand.
Collaborating with an outsourced partner is often the easiest way to improve your order fulfillment. So in this post, you’ll learn how to improve your fulfillment process, find out why I recommend outsourcing order fulfillment and get tips on finding a suitable fulfillment partner.
Ready to dig in?
Why is ecommerce order fulfillment important?
Each online order is a cause for celebration. But your work doesn’t stop there, as you need to pick, pack, and ship your products.
While customers don’t usually see what happens behind the scenes after they make an order, the fulfillment process can significantly impact their shopping experience. That said, order fulfillment is successful if:
- Your products get packed on time
- Shipment is delivered fast
- The package arrives in a good condition
Order fulfillment is one of the best ways to stand out amongst your competitors. Once most of your orders meet these standards, you’ll gain a competitive edge. Customers have infinite product options on the market. How you take care of your customers after a completed sale makes the biggest difference. And the demand for fast, high-quality service will only continue to grow. Some 65% of consumers say they’re ready to pay more for faster delivery.
In the early stages of launching your store, when you’re getting a couple of orders, you might be fine without any proper order management systems in place. But when a handful of orders turn into hundreds, you might run into some trouble.
How to improve the order fulfillment process?
If you’re looking to keep all your business aspects in-house, there are a couple of things you can do to improve your fulfillment process:
- Use order management software to keep track of your inventory and supply chains. Choose any available software to oversee all operations and analyze the profitability to find space for further business improvements.
- Regularly check the performance of your shipping carrier. If you’ve had multiple delayed shipments, lost packages, or poor customer communication, perhaps it’s time to switch companies.
- Get strategic about your new locations if you want to sell globally and are willing to invest a lot of money. Check where you’re currently making the most sales and think where you’d like to expand.
While having complete control over all aspects of your business has its advantages, long-term growth won’t be possible without substantial investments in infrastructure and employment. Labor costs alone can be quite extensive to provide good quality service. So you have to ask yourself: is it worth going through all this hassle?
If your answer is less than 100%, it might be time to consider outsourcing fulfillment. It’s not like you’d be giving up. On the contrary, you’ll be making a smart choice to improve your business all around.
Why should I outsource order fulfillment?
When you outsource fulfillment, your partner will fulfill orders in your place. It’s a cost-effective and low-risk fulfillment model that’ll not only improve your daily operations but also give you higher chances to jump into new markets.
It might be scary to trust a stranger with the heart of your business. In moments like these, remember that you’ll be partnering with industry specialists to take care of your orders. Warehouse employees are skilled professionals, so you don’t have to worry about letting go of this business aspect.
Fulfillment tasks like ordering boxes, packing products, printing shipping labels, and running to the post office takes a big chunk out of your workday. But once you partner up with a fulfillment company, you won’t have to deal with shipping prep, carrier services, and any of the behind-the-scenes inventory management tasks. Here are some of the other benefits you’ll gain when outsourcing fulfillment:
- Lower shipping costs thanks to multiple warehouse locations
- Reduced operations cost as you’ll pay for only what you use
- Improved customer service with a team ready to help any time of the day
- Seamless end-to-end visibility with inventory management software
- Predictable fulfillment and delivery
- More time to focus on other tasks
When should I outsource fulfillment?
If you have decided to partner with a fulfillment company, the next step is to determine when’s the right time to look for a partner. The timeline can be different for each business, but there are 5 cases when I’d recommend you to consider switching from in-house to outsourced fulfillment operations:
- Can’t keep up with shipments
The downside of growing your business is that you need to scale your order fulfillment strategies. If you feel like you can’t handle the order influx, it’s the right time to consider looking for a partner.
- You want fast shipping
Customers love getting their orders delivered in just a few days. But if you want to sell globally, this can be nearly impossible without renting warehouse spaces in multiple locations. Consider outsourcing fulfillment once you decide that you need same-day fulfillment and next-day delivery options.
- Costs are too high
Because each expense adds up, the best moment to move on is when your costs are significantly higher than your profit. For example, outsourcing fulfillment is cheaper when compared to hiring extra warehouse employees, so you’ll be able to invest your time and money to expand your online business further.
- Expand to new markets
You’ll have less risk if it doesn’t work out when you expand your online business with a fulfillment partner by your side. Start looking for a partner once you feel ready to test the waters in new selling regions.
- Need more expertise
Although you can do it all for your business, it doesn’t mean you should. If you lack some skills or time to deliver shipments quickly, it’s best to outsource professionals without overpaying in labor wages.
How do I choose a fulfillment partner?
Finding a suitable fulfillment service provider can be tedious with so many options on the market. I’ve compiled a list of things to look for in your fulfillment partner to make your research easier.
Inventory type and amount
What you sell matters. Some companies might have product restrictions based on size or value. Skim through your potential partner’s website to ensure your products can be stored. Similarly, there can be limitations to the minimums amount you can stock. For example, if you’re selling up to 50 products a month, you’ll lose money when a company asks you to stock at least 500 items. Make sure to check your order volume and all the requirements of your potential partner.
Once you’ve determined your current selling region and estimated the markets you’d like to enter in the future, you can look for a partner with at least one warehouse in that area. That way, your inventory will be closer to your customers, so you’ll improve shipping times and rates. You can also more readily enter new markets if you choose a partner with more than one storage location.
If you already have an online store, you need to double-check if your future fulfillment partner integrates with your platform. While you can integrate with big ecommerce players like Shopify and Wix at any fulfillment company, it might not be possible for platforms with a smaller audience. Also, check if you can have multiple stores with one account as then you’ll be able to sell your products both in your online store and on an online marketplace like Etsy.
How do fulfillment companies handle issues and deal with unsatisfied customers? To find an answer to this question, you might need to dig a bit on social media and on their websites to see how they communicate. Customers are likely to share their unfiltered experiences with services, so keep an eye out for reviews. Once you’ve done your due diligence, you can commit to a fulfillment company peace of mind.
Customer support availability
Human error and unexpected circumstances can happen. In these situations, you’ll benefit from a trusted customer support team that is fast with replies no matter the time zone. It’ll be better to look for a company that offers 24/7 customer support. Before settling on a fulfillment company, chat with one of their employees to test their support service quality.
How much does outsourced order fulfillment cost?
Having a scalable system in place for future orders is not for free, but it will be significantly less than going out on your own. That said, not every company will meet your budget. Here are some of the fees you have to consider when researching potential fulfillment partners.
Inventory storage fee
The storage fee is usually calculated based on the size and amount of items you want to stock. Like this, you’ll be paying only for the stock you have, avoiding overpaying for the service. Your fulfillment partner will charge you every month, so count it in your fixed costs. But if you sell half of your inventory, you’ll be charged only for the items left in the warehouse.
Each time someone orders your product, your fulfillment partner will charge you a fixed price. The regular price will consist of picking and packing your products.
- The picking fee is usually a small sum charged for selecting your products from inventory
- The packing fee is intended for the time spent on packing your order for delivery
Additionally, fulfillment companies might show these prices separately or combine them into one fee. Fulfillment costs also apply to additional services like adding branding materials to your orders. For example, suppose your partner offers to stock packaging inserts and custom packaging for your orders. Once an order is received, these fees will be added to the final fulfillment price.
Shipping is easy to overlook when calculating your profits, but it can make a big difference to your bottom line. Fulfillment companies are able to negotiate lower shipping costs with carriers they work with. You’re negotiating alone when you keep fulfillment in-house and will likely pay more. But the rates may vary from company to company.
When you want to compare shipping rates amongst different providers, you’ll face two types of shipping calculations:
- Flat rates divided into standardized categories. For example if your product weights between 6 to 12 oz it can fall into the small tier category. For all the products that fit this category shipping price will be the same.
- Custom shipping rates based on the individual size and weight of your items. In this case the shipping price will be customized for the exact product dimensions.
Use one of your items as an example to get the most accurate comparison. It might be tricky to compare rates between companies with different shipping calculation systems, but you will get the big picture.
There might be some additional payments that can vary for each company. In most cases, you’ll be able to access information about all extra costs like:
- Receiving inventory fee for the fulfillment specialist to unpack and stack your products within the warehouse
- Long-term storage fee for the unsold items that stay in the warehouse longer than the specified time
- Referral fee is the percentage your fulfillment company takes each time you make a sale
- Returns processing fee for receiving the items that your customers send back
- Kitting fee for adjusting the order management system to your specific business needs
Although outsourcing fulfillment will save you a lot of money in the long run, some companies might ask you for upfront costs. For example, some companies can ask you to pay a fee for an onboarding service, where you’ll be assigned a specialist that’ll guide you through their system and help you set up your store.
Ready to increase customer satisfaction rate?
The more your shop grows, you’ll see the actual demand to improve your ecommerce order fulfillment process. So to avoid dealing with the complex process yourself, leave it up to the order fulfillment industry specialists.
It’s clear that to improve your customer experience in a low-risk way, you should look for a company that will take care of repetitive tasks like shipping and inventory management.
The ball is in your court! Take the knowledge you’ve collected by reading this post and apply it to your own research. You can check if our Warehousing & Fulfillment service fits your business needs.