Whether to outsource logistics or manage it internally is a key question for most e-commerce enterprises. Usually, a thorough cost-benefit analysis of both options is necessary. It can help determine which makes the most sense before making a choice.
Order fulfillment outsourcing is becoming a preferred choice, albeit the choice is often based on various factors. These deciding factors include the size and type of the organization, availability of money and labor, geography, and operational hazards. Continue reading this piece to discover the benefits of 3PL fulfillment services.
What Is Fulfillment Outsourcing?
Companies usually handle their own fulfillment needs. Yet, they may hire a fulfillment business to handle this task. Simply put, they may outsource the job using 3PL fulfillment services.
Companies have two options:
- They may completely outsource their fulfillment activities to a 3PL
- Continue to manage some of them while outsourcing the rest
It all boils down to the specific requirements of the firm. Consider a business model where you are not responsible for picking, packing, shipping, or managing the warehouse operation. You can focus on expanding your company. It allows you to enjoy a steady cash flow by passing the burden of order fulfillment.
Outsourced fulfillment services are all about doing that. Exactly that is something that 3PL eCommerce fulfillment businesses can assist you with. Businesses overburdened with their current obligations may outsource fulfillment services as a solution.
When a company outsources its fulfillment operations, it gives control of some operations to a third party (3PL). The 3PL party may assume complete control of these operations in specific circumstances. Or they may gain limited control.
An outsourced fulfillment service allows you to rent space from a 3PL firm. This firm stockpiles your products. It also processes your orders for shipment each time a customer buys a product.
Initially, you engage in a contract with a third-party logistics service provider (3PL) to store your items. You will pay a monthly charge based on the space in the warehouse facility. Then, you integrate your business with its inventory management system to help optimize the process.
Your 3PL partners receive the order information when a customer purchases a product from your store. Then, the 3PL fulfillment company processes the order and prepares it for shipping.
Top Four Benefits of Outsource Order Fulfillment
Outsourcing your eCommerce order fulfillment to a trustworthy 3PL company has many advantages. Following are the top four advantages of hiring eCommerce fulfillment companies to handle order fulfillment on your behalf.
- Maintains a Lean Business Structure
Backend logistics requires a lot of labor. Your business structure may get more complex if you handle order fulfillment internally. It implies that you will have to hire, train, and pay staff. In addition, you will need to rent additional space and buy all the necessary tools and supplies to pick, pack, and ship orders.
Contracting with a 3PL logistics service provider allows you to keep a lean business structure. You can avoid all the hassles associated with staffing and managing personnel at your fulfillment center. Also, this will lower your payroll expenses.
- Helps Avoid Long-Term Agreements
Did you decide to handle order fulfillment in-house? Then, you need to sign long-term lease contracts and make other long-term financial commitments to rent storage space for your goods. You will have to rent extra space as your company expands or construct brand-new buildings to store your products. All of these drive up overhead expenses and hurt ROI.
You can avoid these costs by using 3PL businesses to outsource order fulfillment. With these businesses, you pay a set storage cost and only pay for the room you utilize to store your goods. Your storage costs won’t vary unless the volume of units you store does.
Using a 3PL provider for order fulfillment allows you to share leasing obligations, such as rent, equipment, utilities, and other operating costs, with all the other shops utilizing the space.
- Focuses on Business Growth and Expansion
Order fulfillment takes time to complete. Accurately selecting, packing, and wrapping boxes for shipping takes time. When your e-store is still small, fulfillment may be simple for you to handle.
When your business expands, inventory disappears from the shelves more quickly. You notice that more orders are pouring in from various sales channels, including in-store, sales events, and online. Order fulfillment may now exceed the capabilities of your personnel and consume a large portion of your working hours.
A 3PL warehouse has skilled workers who know the pick, pack, and ship process and can complete it more quickly and effectively than you can. You may concentrate your time and energy on marketing, creating, sourcing, and selling your items by hiring a 3PL outsourcing fulfillment to undertake the labor-intensive tasks on your behalf.
- Reduces Shipping Costs
Shipping charges could destroy your profit margins if your goods are not kept close to your customers. With warehouses throughout the county and beyond, many eCommerce fulfillment firms have an advantage when providing affordable shipping rates. 3PL logistics providers assist you in cutting down on delivery times and expenses by guaranteeing to keep your products close to your clients.
You can save anywhere from 15% to 35% on shipping costs by outsourcing your eCommerce fulfillment services to a specific location. This is so that 3PL fulfillment companies sending courier companies a huge volume of orders can negotiate reduced shipping rates.
In addition, they have robust shipping software that enables them to explore and evaluate shipping rates from various carriers and choose the most affordable rates for your deliveries based on your product catalogs and shipping policies.
While delivering your products at pre-negotiated rates, you will also benefit from the 3PL warehouses’ purchasing power to lower drayage costs for less than truckload (LTL)/full truckload (FTL) shipments. Due to the lower price of packing and shipping goods, you will also cut your packaging expenses.
Thorough cost comparison and internal fulfillment solutions are necessary to understand the financial benefits. Using a 3PL order fulfillment can sometimes be more affordable and quicker to implement than internal fulfillment. Better rates, services, experience, and a broad network of business alliances all along the supply chain are a few examples of the genuine benefits a 3PL provider may offer your company.
Many companies rapidly grasp this concept and comprehend the advantages of fulfilment outsourcing. It will need some initial work to select the ideal 3PL fulfillment services that suit your demands and pay off in the long run. A 3PL with the appropriate core capabilities will be a long-term partner eager to boost your company’s success.