As a company gets busier, the increase in orders means more warehouse space is needed, along with additional employees and a better order processing system. But figuring out the best way to overcome challenges like these shouldn’t just be about dealing with the here and now – it needs to be about creating a solution that enables the company to grow in the future as well. The best solution is often to work with a 3rd party fulfillment operation, here are 4 reasons why.
Clearly, outsourcing fulfillment needs to make sense cost-wise. When looking at the ROI of a potential partner, businesses need to account for all the expenses that relate to order fulfillment and shipping - including storage space, racking, payroll, supplies, IT management software, insurance, and maintenance. Outsourcing fulfillment minimizes a lot of these expenses and will be cheaper overall as the many overhead costs of running a fulfillment center are shared among all the clients. Since customers only pay for the services used, costs are variable based on their actual activity levels.
Economies of Scale
Quality 3rd party fulfillment centers handle a lot of orders daily. This can create economies of scale for its customers in several ways. Probably the most valuable is lower shipping rates because customers can benefit from the collective shipping volume of the facility. With this also comes experience and a clear understanding of all the shipping options – which enables better routing choices for each order so both cost and service are optimized.
Efficient Storage and Distribution
It sounds obvious to say, but fulfillment centers are better equipped to handle and store inventory. Supply chains are also very data intensive. This means technology is not just a ‘nice to have’ option anymore. Many companies managing fulfillment in-house are limited by old WMS and Order Management systems, while any modern fulfillment center will provide best in class technology that companies often cannot afford on their own.
Seasonality and Business Changes
Fluctuations in sales volume can be a challenge with in-house order fulfillment. For a business with an increase in sales during certain times of the year or unanticipated spikes in volume, meeting a big influx of orders is always difficult. Shortage of space and employees will lead to fulfillment delays – and higher costs. A fulfillment partner smooths out this kind of variability and gives your business more flexibility to increase or decrease distribution to match demand.
Be Positioned for Growth
It takes a strategy and foresight to position a business to grow. Outsourcing order fulfillment gives companies a stable framework to know the work of packing and shipping orders will get done right. This enables companies to focus on the other areas of their business that can provide the most impact on getting them there.