DIY order fulfilment?
When starting out, many online retailers decide it’s more efficient to fulfil customers’ orders themselves, so called DIY order fulfilment. And that is the best way to start if you have the time to pick and pack yourself and take parcels to courier or postal depots.
But if your business is successful, it won’t take long before your living room starts to resemble a factory floor. There’ll be boxes, packing tape, bubble wrap and address labels everywhere and you won’t be able to see the TV for overflowing boxes, but that won’t be a problem because you won’t have time to watch TV anyway.
At this point, you’ll be searching for real-world solutions to your fulfilment problems. Options include renting a small industrial unit and employing warehouse staff, arranging for your supplier to ship direct to the customer, or making use of third-party eCommerce order fulfilment services. The question is, should you carry out your own order fulfilment or contract it out to a third party vendor?
Why outsource the order fulfilment service?
One of the biggest hurdles for many new eCommerce store owners is how to handle inventory. Outsourcing fulfilment solves this problem by passing order fulfilment off to a third party vendor, enabling you to focus on what you do best - driving traffic and making sales without risking too much capital.
Outsourcing also allows your business to grow at a controlled pace without having to invest in expensive warehouse space and staff. This is particularly important today as commercial property rents are becoming more and more inaccessible for new businesses and employment costs are going through the roof.
Benefits to an ecommerce business of outsourcing
Businesses large and small can benefit from outsourcing fulfilment to a third party. In fact, some of the largest retailers in the world, including wayfair.com and zappos.com, built their businesses by using outsourcing to keep costs down. But reduced costs and increased efficiency aren’t the only advantages of outsourcing - it also allows you to:
Make use of the latest technology – as a small business, you won’t be able to afford the latest shipping technology which allows you to monitor shipments, update customers and obtain proof of delivery. Outsourcing allows you to make the most of these technical enhancements to improve your service without any upfront investment.
Remain flexible in a fast moving market – with outsourcing, flexibility is the key. You can expand and contract the amount of space and facilities you need as your business grows. This is particularly useful if you operate in a seasonal market which ebbs and flows throughout the year.
Benefits of picking and packing in-house
Of course, outsourcing isn’t always the answer. Some businesses may benefit from keeping order fulfilment in-house. This is especially true if you operate a speciality business or sell perishable goods such as cupcakes. But for non-perishable products and goods that can easily be stored in warehouses at ambient temperature, the benefits of keeping fulfilment in-house include:
Cost - If you have the time to pick and pack your own orders then clearly you’re saving money. And when the orders get to the level that stop you spending time on building your business you can afford to look at outsourcing.
Staff - If you want to scale up and get your own warehouse space, then you will need more people. This will allow you to offload some of your work and share it among your colleagues.
More control over inventory – having inventory on hand allows you to find more creative ways of selling it. For example, you could arrange a trade sale or exhibition to showcase your products to potential customers.
Personalise products – personalisation is big business and can allow you to differentiate your product or service from the competition. However, this is very difficult to achieve using a third party fulfilment service as they don’t have the personalisation equipment required.
Tailor your merchandise and packaging – Apple is one company that likes to tailor its packaging to reinforce its brand values. However, most third-party fulfilment services are not great in offering bespoke packaging and even worse at gift wrapping! That said, the outer carton can be plain and the product can be delivered to the fulfilment company fully packaged (like the iPhone).
Shipping your orders
One of the main benefits to outsourcing your ecommerce pick and pack service is to access better courier and postal service rates. Shipping costs are a huge chunk of fulfilment costs. Typically, the buying power of a fulfilment company will allow you to buy next day rates and international services for less than you would pay if you set up your own contracts.
Additionally, complex documents like customs forms for international and managing tariff charges on parcels will be handled by the fulfilment company.
Will your customers receive a better service?
As you know, in the online world customers can easily go elsewhere if they have a bad experience. So making sure your customers get their orders on time and are kept informed with parcel tracking is becoming essential to compete online.
If you are struggling to get your orders to your customers within a very short timescale (typically within 24 hours of ordering) then a good fulfilment company will definitely enhance your offering and this will be reflected in positive customer reviews and of course your profit margins.
To answer the question of whether you should do your own order fulfilment, you need to answer the following three questions honestly:
Do you have time to fulfil orders yourself?
Do you have enough space to fulfil orders properly?
Do you have enough money to fund and staff a fulfilment centre if required?
If the answer to any of these questions is no, you should seriously consider using the services of a third party order fulfilment provider. This will allow you time to focus on growing your business, increase your order volume and provide exceptional service to your customers. It will also free up capital to spend on marketing and product creation, which after all, is why you went into business for yourself in the first place.
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