Pros and Cons of Fulfillment Outsourcing for eCommerce

The e-commerce market grew by 17% last year. It is too early to talk about the consequences of the coronary crisis, but the fact is indisputable: in the face of lockdown, the share of online shopping has increased significantly. In particular, in the UK and the US in the first quarter of 2022, the volume of online shopping increased by 53%.

Due to quarantine, many offline businesses have moved online, long-standing players in the online shopping market have felt the influx of competitors and began to look for ways to strengthen their position and offer the end consumer more favorable conditions.

Outsourcing fulfilment can be one such solution. Online sales are actually a long way from an offer to a successful sale of goods to a buyer.

Operational processes in the online store

At the last stage, there are several possible actions: for example, processing cash on delivery or working with returns, which includes both financial and logistical operations: return the goods to the warehouse, check its serviceability and put it up for sale again. Fulfillment is the process of processing an order from its creation to receipt by the customer. It combines 4 blocks of work:

• Receipt and storage of goods.
• Order processing.
• Complete set of the order.
• Delivery of goods.
• You can delegate fulfillment to an outsourced operator.

Pros of outsourced fulfillment

Time. The life of a business owner or director often revolves around closing operating processes. As soon as at least one employee leaves the process (for example, due to illness or vacation), even more work is added — the company needs to find a replacement for the missing staff. However, business grows when the priorities of management are strategic development: planning, marketing, reinvestment. Fulfillment outsourcing allows you to spend your time growing your business, rather than maintaining it at the current level.

Saving. Fulfillment outsourcing is the case when it will be more expensive without it than with it. Company will have to spend a considerable amount of money on fulfillment on its own.

The company can also calculate the salary of the sales manager and the person who will handle the payments. This amount will have to be paid monthly, even if there are no sales. But when outsourced, payment is made for each order.

Reporting. Tons of boxes in the garage, where Jon makes a list of available goods in a notebook and conducts an inventory manually. This is how small business owners day looks like.

In such a situation, shortcomings inevitably occur, and the whole team spends time searching for lost goods. Such a story is impossible with a fulfillment operator.

Operators use WMS-systems that allow you to quickly make an inventory and accurately display all the information about the balances in the warehouse. Additionally, operators integrate with CMS and CRM systems and top marketplaces. And all the data about your products and orders can be viewed in your personal account.

Speed ​​and service. In Wallmart the average time of a complete set of the order — 1.5 minutes. All orders received before 14:00 are sent to buyers on the same day. It is impossible to imagine such a pace in a team of several people without process automation and a large number of employees. Prompt receipt of orders also plays a role. Do your managers lose applications and do not call back? Minus 20% of orders! The client has already bought from a competitor.

If the delivery is long, the probability of failure increases. An employee may not have time to deliver the goods to the post office today, and the company will lose a customer. Operators have their own arrangements with postal services.

Flexible scale. There is a peak season, so you need another loader for 3 weeks? Jon fell ill again, someone else will have to take orders from customers. But not with an outsourced operator. The key advantage is that the service is provided by the company, it adapts to your requests. There is no need to be engaged in hiring, training, as well as pay a full salary to an additional employee during the peak season and pay out of pocket to pay for anything in quiet periods. The fulfillment operator will process all orders without the risk of missing people.

Cons of outsourced fulfillment

Outsourced fulfillment is a solution to many problems, but it also has its drawbacks.

Product safety. This issue is entirely on the side of the fulfillment operator. So when choosing a partner, pay attention to the following points:

• goods insurance in contracts;
• surveillance cameras for employees’ workplaces;
• warehouse protection;
• alarms;
• access control systems and warehouse entrance;
• video recording of receipt of goods.

Big players are getting crowded. Online stores with 4000+ orders per day follow the path of in-house filling. They will have a large number of cancellations at the stage of acquisition, such processes are easier to manage in their own warehouse. There is also a demand for building your own system of motivation among employees, setting KPIs and the ability to more accurately regulate costs. Outsourcing is harder to do.

Standardized processes. When working with an operator, the company will not be able to customize processes permanently. With its composition, it is easier to launch special offers every other day: add promotional items to orders, pack promotional kits in a special way, etc. Outsourced fulfillment is designed for one option of interaction, rather than a constant change of rules.

Dependence on work schedule. If products are managed by an operator, the business hours also depend on it. Make sure that the partner mode of operation covers the needs of your store, and your target audience is ready to make purchases at the time when the operator accepts the order.

Outsourced fulfillment is not a universal answer to any question. For many businesses, this is a way to get rid of operating processes, save and provide better service. At the same time, outsourcing has its limitations. It’s up to you to work with a fulfillment operator or build your own system. It is important that your business grows successfully and stably.