When is the Right Time to Outsource your Fulfillment Needs?
January 15, 2024
Through the years as ongoing development continues to grow in the business industry, companies have no doubt been exposed to new and profound challenges over the years. One of their ongoing challenges that every business faces is the constant need to meet customer demands while maintaining a competitive edge towards rivaling companies. Fulfillment is one of the most critical aspects of the customer experience, which often poses logistical hurdles that can impede scalability and profitability. This of course does not only apply to long-standing businesses, but also newly launched ones in meeting customer demands and getting their orders out. In the business industry, where everything keeps shifting and changing, there is a limit to what self-fulfillment can do as demands begin to pile and many other aspects of the business need to be dealt with.
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This issue has then sparked the strategic solution known as outsourcing which is known as a way of revolutionizing the way businesses can manage and maintain fulfillment operations. But before then, it is important to understand more clearly what is outsourced fulfillment, what benefits does it provide, and most importantly when should you decide to outsource your fulfillment needs.
What is Outsourced Fulfillment?
Outsourcing Fulfillment can be understood as the act of managing the order business process through hiring third party logistic providers (3PL). In outsourcing fulfillment through these third party services, they often include things such as managing warehousing inventory, packaging items, or shipping orders out to customers and may include many others. These services in which they can provide is dependent on what you need for your order fulfillment which in turn also affect the 3PL you choose. Although in choosing the most suitable provider, other aspects like the cost, the proximity of warehouses, and their software integration abilities are key to consider to fully unlock the benefits in outsourcing fulfillment.
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Many businesses that continue to grow will often shift from self-fulfillment (In-house fulfillment) towards outsourcing to fulfill customer needs. But what are the general differences between the two?
In general, In-house Fulfillment as the name suggests means that the business itself is the one responsible for the entire fulfillment process. This is usually present at the beginning/early development of a business which gives the business full control and insight towards fulfilling business processes and handling demands. But as the business develops further along with increasing demands, businesses will most likely decide to outsource their fulfillment in keeping up with increasing orders, provide warehousing, access faster shipping programs, save money and time, while also boosting overall profits.
Benefits of Outsourcing Fulfillment
There are plenty of benefits or reasons to outsource business fulfillment through 3PL which was briefly mentioned before. Below are some of the advantages or what you can expect from outsourcing your fulfillment, which include:
With 3PL, businesses can get help to optimize their important aspects in their operations, this not only includes integrated systems but it can also increase visibility and management of core business aspects. This can include aspects such as inventory management, item or delivery tracking, security, handling of shipment, more options for carriers, and even easier or more practical payment processes. In providing information and visibility of core aspects, they can help businesses to assess patterns, create a more organized system to overview, and spot any aspects that are lacking or that need improvement.
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With several locations of warehousing or fulfillment centers that are usually provided by 3PL, businesses can extend their reach towards customers while also improving product shipping options and faster delivery. With more strategic locations across the country, it also allows businesses to ship cheaper than self-fulfilling your orders. This is due to self-fulfillment businesses only being shipped from one location which causes more expensive shipping and increased transit times as you need to ship across multiple shipping zones to reach customers who are farther away from the location.
In Business Operations, there is no doubt that fulfillment and logistics are important although they can take up a significant amount of time, resources, and energy. As this commonly affects self-fulfillment businesses, it may cause lack of focus on other important aspects in their business like further development, generating sales, and growing customer base which is crucial development for early stages for a business. By delegating this task through outsourcing (3PL), It can help to free up time to improve and develop your products or services, build your brand further, and do other important aspects which need more extensive attention.
In business development, it is important to be able to keep up with customers and their rising demands. This is one of the core aspects in choosing to use outsourcing since usually with a growing business the amount of demands can be overwhelming to handle for self-fulfillment. That is why it is important to decide when is the right time to outsource your fulfillment needs as it corresponds towards demands, business conditions, and what you need to delegate towards building your business and optimizing core aspects of your company.
When to Outsource your Fulfillment Needs
As previously mentioned, knowing when to outsource fulfillment is vital to keep order fulfillment cost-effective and maintain the level of service that meets customer expectations. In assessing your business, here are some indicators that you may need to outsource your business fulfillment.
As volume of order rises, this can be seen as both a blessing and a curse especially for early developing businesses. As orders increase in quantity, other aspects such as storage, staffing, and other costs increase as well to keep pace. If this continues without further efforts of managing and optimizing, these aspects will inevitably spiral out of control which may lead to the failure of a business to keep up with ongoing demand and other related issues.
With the development of a business, expansion is one of the key ways for a business to develop further in increasing profits, scale, and reachability towards new customers or markets. Although this development whether domestically or internationally comes hand in hand with a significant requirement for the company to have a solid fulfillment strategy. This is where 3PL may come in to support the business in making expansion plans go more smoothly.
Another indicator for the need of 3PL or outsourcing is the lack of storage needed towards meeting demand and the increased volumes of products stored. Management towards these storages are also important while also being energy, time and resource demanding. Through hiring a third party fulfillment company, businesses can have access towards scalable storage solutions that enable businesses to adjust warehouse space in line with their sales.
When there has been a noticeable decline whether that be delivery, development or service, it may be an indicator for a business to seek outsourcing their fulfillment. In operating a business effectively and efficiently, it is important to strategize and divide resources accordingly for the overall development in the company. That is why offloading order fulfillment services to a trusted 3PL can allow a business to re-center focus towards other core aspects in business operations.
Lastly, when a company has an overwhelming problem with costs in meeting customer demands it may help to consider hiring 3PL to be more cost effective. Costs stemming from warehouse picking, packing, returns handling, shipping, production materials, and labor can be expensive and can even derail a fulfillment operation. By making the decision to outsource fulfillment, a business can still fulfill customer demands while also setting up the foundation for the business to have more robust growth opportunities, better customer service, and faster, scalable fulfillment.
