As ecommerce continues to rise, the fulfillment industry is set to grow at a compound annual growth rate of 13.9% between now and 2030. Online retailers rely on fulfillment to manage inventory and returns, track order data, pick, pack, ship and get packages swiftly through the last mile and into the hands of the customer.
With the amount of products shipped, it's not uncommon to wonder if self-fulfillment is a good option. In-house fulfillment empowers you to handle your product on your terms. However, outsourced fulfillment is still attractive, offering a multitude of benefits. So, how do you decide which is right for you?
The answer isn’t simple. Both offer different benefits. Often, the decision comes down to cost, labor, time, space, sales and size. And it’s not a decision to take lightly, especially since the fulfillment process enormously impacts the customer experience. It all comes down to what’s best for your business. So, let’s dig in and find out.
When a brand uses an outside third-party logistics (3PL) to manage fulfillment for them. They can be responsible for some or all of the process. They have the space, labor, materials and technology to handle orders from checkout to delivery.
Ecommerce brands can outsource some or all of their fulfillment operations. Many modern 3PL providers have technology and integrations that streamline data and provide real-time insights into a brand’s processes.
Retailers can select from services such as:
Ecommerce businesses outsource warehousing to 3PLS to receive and store inventory safely until needed. Some outsourced warehousing is equipped to store specialized items – for example, heat sensitive – to maintain product integrity or items that require sequencing, such as First In, First Out (FIFO). During peak season, additional storage for seasonal inventory is often necessary.
Another warehousing service is multi-node fulfillment. Some retailers only need a centralized warehouse location to store their inventory, while others may use a multi-node network that places SKUs at several facilities close to important customer hubs.
Proper storage, efficient monitoring, and accurate reporting of Stock Keeping Units (SKUs) are crucial for maintaining an organized product catalog. Retailers must ensure they don't run out of in-demand items and miss out on sales opportunities or end up with surplus inventory by ordering too many units. Using a reliable 3PL, retailers can obtain detailed inventory reports that prevent overselling merchandise and set appropriate reorder points.
Order fulfillment is the process of getting an order ready for shipping. This involves:
Order fulfillment uses ample time and resources – and as order volume increases, it can become necessary to outsource.
Eighty percent of consumers say returns management is the most important factor when considering the overall order experience, making returns management crucial for today’s ecommerce retailers. Retailers must be able receive, process and recondition items for resale swiftly. Otherwise, refunds are delayed, or you end up with dead stock, which can cost you both customers and valuable resale opportunities.
3PL providers are experts in fulfillment. When working with brands, they can offer insights and expertise along with support. When performing fulfillment in-house, you are negotiating costs with carriers and having to stay on top of industry trends. An excellent 3PL partner will help you perform these functions. Having seen the challenges and solutions in the industry, they are often able to help strategize packaging, storage and more. If you use their OMS and/or WMS, you'll have support there as well.
Choosing self-fulfillment will often depend on your size, scope, number of products and other factors. For example, a small startup with one product that only sells 100 units per month will likely choose to self-fulfill. On the opposite end, a major international brand may have a number of their own fulfillment centers. However, keeping fulfillment in-house comes with both pros and cons:
Many retailers are happy to hand over fulfillment operations and let a 3PL do the heavy lifting. That said, outsourced fulfillment is not for everyone.
If outsourced fulfillment to a 3PL is optimal, take steps to ensure success. Let’s say you’ve assessed that outsourcing is the best option: For example, growth is hindered, you’re too heavily involved with fulfillment, there are fulfillment issues, you’re ready to hand over the reins or it makes financial sense.
Begin the process by assessing your needs regarding products, order characteristics, sales channels and customer expectations. Next, compare the different outsourced fulfillment models. Last, find the fulfillment partner that best fits your needs.
Contact us today to find out if Cart.com is the right outsourced fulfillment solution for you.