Important Considerations Before Outsourcing Your Online Business Fulfillment
By Jane Dawson
Fulfillment, the act of filling the order by selecting the right products, packing them for shipment and getting them delivered to the customer, has become an art and a science in these days when Internet buyers, used to split second access, also require effectively split second fulfillment.
As an online retailer, you already work with the advantage of not needing a bricks and mortar store for your customers to visit in order to purchase. Your virtual store is convenient and open twenty-four/seven. For some, it would be possible to run your entire business from a table at Starbucks if you did not have the issue of fulfillment to handle.
The fulfillment process requires that you have an inventory of products on hand, warehoused in some organized fashion so that orders can be filled efficiently, staff that pick items based on customer orders, wrap the items and pack for shipping and a relationship with a shipping carrier. However, by maintaining the fulfillment process in-house, you maintain complete control over the inventory and customer service that is vital to your business success.
If you consider outsourcing fulfillment, for example through dropshipping or Amazon merchant services, you may be able to reduce many of the costs that you now pay, replacing them with vendor costs that may be lower because the vendor can operate more efficiently.
For example, if you employ someone half time to perform the fulfillment function for you, you may have periods of excess capacity. The vendor is often better able to adjust staffing to keep capacity matched to requirements.
If you decide to look at fulfillment vendors, you need to be sure you understand how all fees will be calculated. Some outsourcing providers charge a percentage of sales volume, while others may charge flat per-order and per-item fees, and then apply discounts based on the level of volume. Fulfillment partners may also add additional fees related to packaging, receiving and storing inventory.
You should also review the vendors performance. Be sure that the vendor is committed to maintaining an adequate stock of product on your behalf, that accuracy of order filling is high, turnaround time for delivery is acceptably short and that shipping carrier fees are reasonable.
Look for a fulfillment provider that has an electronic system for inventory control, order processing and communication. You want the vendor to be able to quickly and accurately update you about what new inventory has arrived and what remains.
The fulfillment vendor should have return policies that you feel comfortable offering to your customers and should also have a ready avenue for you as the retailer to call and get any information you need or get help resolving a customer complaint.
If your ordering volume is sizable, you may be able to negotiate discounts based on levels of volume. You may also be able to negotiate discounts to be paid if the fulfillment vendor misses established performance targets such as delivery time, out of stock percentages, for example.
Once you have all of the information on potential vendors, you will need to make both the quantitative cost/benefit comparison, i.e., is it less costly to keep fulfillment in-house or outsource it, and the qualitative assessment, i.e., can I trust the vendor with my customer service? Is the elimination of the headache of managing fulfillment worth any extra costs associated with outsourcing?
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