Are you planning to launch an ecommerce business or have you been in the business of selling products for some time? Then you surely would have thought about how to manage warehousing, shipping, and fulfillment.
Converting a lead and getting sales is the best part of a business, however, once the order is received, one needs to ensure that the product reaches the customer undamaged and on time. So how can a product reach the customer, there are 3 possibilities.
- You collaborate with a dropshipper who fulfill the orders on your behalf.
- Your orders are fulfilled by you and your team.
- You collaborate with a logistics company that handles warehousing and fulfillment services.
If you decide to manage the packing and shipping on your own, it is beneficial as it is flexible and cheaper.
For startups or businesses having products that require unique packaging, it is better if they handle their own logistics.
Businesses having difficulties with their cash flows should opt for in house packaging and logistics.
However, if your business is growing fast and you have the funds in hand, then it is better if you outsource and go for third-party fulfillment services.
Third-party fulfillment services providers store your products in warehouses, pick and pack the products when orders are received, and then finally ship the products directly to the customers on behalf of the business.
Using third-party fulfillment services, we can lower the shipping costs and improve the delivery timelines. Click To TweetThey help in improving the efficiency of the operations department, whereby saving time and allowing the entrepreneur or manager to focus on other areas of business. These services may cost the business, but these improvements are really helpful for an ecommerce business to grow.
Benefits of Using Third-Party Fulfillment Services
Spread Out Shipping Locations
It is common knowledge that shipping orders to customers based out of an area around the warehouse is cheaper and cost efficient. If the warehouse is near the customer’s location, the products reach the customers in a short time.
If a business has its warehouse in Maryland, Washington but it has a number of customers located in New Jersey. You may have to offer free shipping to be competitive and not lose the customers to your competitors. But shipping from Washington to New Jersey is not cheap, it may cost upto $10 per order for shipping. At the same time if the business collaborates with a Third-party fulfillment company which has warehouses in and around New Jersey, the company will be able to ship the product for as low as $5.
This way the business will save a lot on unwanted shipping costs for shipping to various parts of the country. Availing services from Third-Party Fulfillment companies also saves on the number of days for delivery. If the warehouse is in the locality, the products can be delivered in just one day.
Hence the biggest benefits of using third-party fulfillment services is that you will be able to offer fast, free shipping to your customers without compromising on the profits. This will boost the growth of your business.
Reducing the Operating Expenses
Each retailer or ecommerce business may be facing different issues related to shipping or warehousing. But by collaborating with a third-party fulfillment services provider, all the ecommerce stores can benefit hugely and reduce their operating expenses. Some ways on how the operating expenses can be reduced by collaborating a third-party fulfillment services provider are:
- One can eliminate or reduce the expenses of hiring a warehouse or storage depot.
- One can reduce the cost of labor and taxes related to activities of order fulfillment.
- Reduction in packing material costs, as fulfillment services providers have competitive rates
- Economical shipping services can be availed and the packing and shipping can be fast
- Reduction in the shipping costs as warehouses of the fulfillment service providers are located in various places.
These costs which are saved by employing a third-party fulfillment services provider can be invested in other areas of the business, like marketing or advertising for increasing sales and growing business.
Opportunity to focus on other areas of Business
Other than the monetary benefits the biggest benefit is that the entrepreneur or manager will have extra time on their hands to focus on other areas of business. Especially for small businesses or startups where you have to manage both lead generation, marketing, packaging, shipping etc.
If the packing and shipping is outsourced to a third-party fulfillment service provider, you and your team will get more time to work on lead generation and content marketing etc. By focusing more on marketing, advertising and after-sales service, you will be able to earn higher revenues and increase your sales growth.
When Should you Collaborate With a Third- Party Fulfillment Service Provider?
In most cases, businesses during their early days handle the packaging, shipping etc. on their own. Once they start expanding and business grows, they start collaborating with Third-Party Fulfillment Service Providers as they are not able to handle the scale of business on their own. However, the problem is it is not easy to determine when it is the right time to switch and join hands with a fulfillment service provider.
Below mentioned are a few signs which one should notice and start outsourcing:
1. Seasonal or fluctuating sales
If you are in a business that is seasonal or whose sales are fluctuating all through the year, it is not advisable to have your own warehouse and recruit staff for warehousing and packaging for the whole year. You can hire a logistics company, who will fulfill your orders as and when received.
2. Time consuming
If other aspects and areas of business are keeping you busy, making order fulfillment a tedious process it is time you hire a third-party fulfillment service provider. It is very important that as a businessman you devote your major time to sales and marketing, hence taking the help of a logistics company would really be beneficial.
If your business is fast growing then there are chances that before you get a chance to adapt you may soon grow too big for your current infrastructure. This can have an adverse effect on your growth. Instead, if you collaborate with a specialized logistics company, they are better equipped to adapt to the growing changes.
Parameters for Choosing a Third-Party Fulfillment Services Provider
- Cost of Service: Determine the cost of fulfilling your products. The cost varies from product to product. The price of fulfillment services is determined by the size and weight of the product.
- International shipping: If you have customers based outside the country or state, you need to make sure that the service provider caters to international or outside the state clients.
- Experience: You need to choose a service provider who has prior experience in handling products of your industry, this is especially applicable to perishable products like food items, which require special storage equipment. Or handling glass products require special packaging and material.
- Location of Warehouse: Consider the number of warehouses the provider has and where are the warehouses located. Will they be able to cater to your clients of a specific area? What would be the cost involved in storing inventory and packaging it?
- Easy Returns: Choose a service provider that can manage your returns easily.
- Customer Service and Support: The service provider should have a strong customer service and support team. If there is an issue with regards to the shipment or delivery, you need to have a team that can assist you and support you. The service team should be contactable and efficient.