Every small business in the eCommerce world wants to sell a lot of products. It's part of the natural progression of growth in business.
But with growth comes growing pains. Old processes have to be retooled to allow an ecommerce business to scale. One of the first processes to become unwieldy in a growing business is shipping. Many business owners find themselves suddenly asking the question "should we be outsourcing order fulfillment?"
It's a big question, and an intimidating one. At Fulfillrite, we fulfill orders for other businesses. When onboarding new clients, we often answer questions to help small business owners understand whether outsourcing order fulfillment is right for them.
In this article, we're going to bust some of the common myths about outsourcing order fulfillment. Many of these myths start not from misinformation, but rather anxiety and a poor understanding of what outsourcing fulfillment actually looks like.
Myth #1: "Order Fulfillment is Expensive"
By far the most common myth about order fulfillment solutions is that they are expensive. Many people who look at outsourcing order fulfillment are uncomfortable with the charges. They see a fee of about $2.00 per order plus postage. They see account maintenance fees and storage fees. There are various value-added services which cost additional money.
Order fulfillment pricing can seem complex on the outside, but here are a few things to remember. First, fulfillment companies can negotiate lower shipping costs. Lowe shipping rates will save an enormous amount of money for you in the long run, and is often enough to offset other per-order charges.
Order fulfillment companies also benefit from both economies of scale and process efficiency in a way that small businesses cannot. Fulfillment companies order supplies in bulk, meaning that supplies cost less per unit. Additionally, when all you do all day is pack boxes and ship them out, you get really good at cutting down on any wasted time in the process. This helps keep overhead low, and fulfillment companies - all of whom are competing fiercely - pass the savings along to their customers.
Lastly, even if outsourcing fulfillment appears more expensive than in-house fulfillment, a small business will inevitably save on three costly resources. The first is time, as self-fulfillment is a very time-consuming process for small businesses. The second is labor, which ultimately costs money too. The third is storage space, which also costs money (or at the very least, unnecessarily clutters up an office with square footage spare). Overall, this makes outsourcing order fulfillment more cost-effective than it might appear.
Myth #2: "My Business Isn't Big Enough for Order Fulfillment"
It is true that order fulfillment is not a panacea for every online store. Indeed, a business needs to have at least some consistency in order volume to break even on account maintenance fees. That said, the threshold is pretty low. Once your business is shipping 100 orders per month, or any many cases, 50 per month or more, you will break even.
Haven't crossed that threshold yet? It's still worth considering outsourcing fulfillment in advance. The ability to scale a business rapidly requires you to knock out as many obstacles to growth as possible. Shipping orders can become nightmarishly unwieldy very quickly. All it takes is one successful flash sale to flood a small business with more orders than can be shipped!
Not sure whether you need to think about outsourcing order fulfillment yet? Check out our guide on the 6 Signs Your Business Needs Third-Party Logistics!
Myth #3: "Outsourcing Order Fulfillment is Complicated"
Every company has a slightly different order fulfillment process, so we can't necessarily speak to the specifics of others. However, to dispel the myth that outsourcing order fulfillment is complex by necessity, here's an overview of how we onboard clients:
You enter each of your unique items in our system (SKUs).
You integrate your shopping site software with our system, or enter orders manually.
When you have inbound shipments, notify us so we can receive them.
That's it! That's all there is to it. We know you're busy, and we have no interest in dragging out the process. There are parts of order fulfillment that are, indeed, very complicated, but we - like many of our peers - do our best to eliminate complexity from your experience.
Myth #4: "If I Outsource Order Fulfillment, I'll Lose Control over My Business"
The fear of losing control over your business is a valid one. Letting another company hold onto your inventory and handle a customer-facing aspect of your business is nerve-wracking. There are, however, a few things to keep in mind here.
As we previously mentioned, outsourcing fulfillment will free up - at the very least - time, physical space, and labor hours. Outsourcing fulfillment will give you more control over those critical resources so you can better showcase your brand. At worst, you're giving up one form of control for another form of control.
If you're worried about being locked into a contract, that's also a valid concern. If you're looking to outsource fulfillment, you can always ask ahead of time, "Do I need to sign a contract?" If you don't like the answer, you can walk!
Lastly, order fulfillment services often provide quality software that gives you visibility into the fulfillment process. We'll go into this in more detail later, but for now, just remember that this data can actually give you more control over your business.
Myth #5: "If I Outsource Order Fulfillment, The Customer Service Will Decline in Quality"
Let's be honest with each other here. If you hire a bad fulfillment company, customer service will decline. This is a very reasonable fear. However, there are steps small business owners can take to make sure they hire the right company.
The best way to make sure outsourcing order fulfillment does not cause a decline in customer service is to vet the company beforehand. You can learn a lot just by reading online reviews and speaking directly with company staff.
If you find a good fulfillment company, they can ship faster on average with more consistent quality than your small business can. It's a natural result of shipping all day, everyday and learning all the subtle tricks to improve the process. Fulfillment companies are a goldmine of information - we recommend that you make the most of what they can teach you!
Still worried about fulfilling customer expectations? You can still directly deal with customers. Some fulfillment companies will offer customer service, but you don't have to take them up on that.
Myth #6: "If I Outsource Order Fulfillment, I'll Lose Visibility into the Process"
It is true that if you outsource fulfillment, you won't be able to watch packages being shipped. In that sense, you will lose visibility into the process.
There is a silver lining here, though. Fulfillment companies, by necessity, have to have complex storage systems and keep accurate inventory records. All this data and the business processes that support the collection of this data, can be really useful to you. Many companies, such as our own, will grant you access to detailed information on your inventory and the supply chain, as well as the whereabouts of every single package. In fact, you're likely to end up with more data than you would have with self-fulfillment!
Myth #7: "Fulfillment Companies Won't Handle My Inventory Carefully"
Much like the above point about customer service, this is a valid concern. Many fulfillment centers will rush goods out the door. This is particularly common around the holidays when online retail merchants are rushed off their feet.
The problem isn't universal, though. Some companies treat every item like it's solid gold. Other companies simply do not. All you can do is vet fulfillment companies ahead of time and choose one with excellent customer service.
Final Thoughts
Outsourcing order fulfillment doesn't have to be expensive or complicated. Nor will it take away your control or ability to understand the way the business operates. It doesn't require you to run a massive operation nor will you constantly have to worry about poor customer service or damaged goods.
This is a guest post by Brandon Rollins. Brandon is a Marketing Consultant at Fulfillrite. His main areas of expertise are online marketing and supply chain management. He also runs Pangea Marketing Agency and Pangea Games.