Most businesses start out fulfilling customer orders in-house, whether from a dedicated warehouse or just a corner of your shop. As sales grow and channels diversify, order fulfillment becomes more complex and time-consuming. Plus, you need more and more space just to store the inventory you’re going to sell. Mix in the growth and struggles that the pandemic has created with maintaining reasonable fulfillment during the year-end sales boom, and it all gets much more complex. That can quickly lead to trouble.
When there’s no more room or you’re experiencing delays and upsetting customers, it’s time to consider outsourcing those fulfillment tasks. If you’re not sure when you’ve reached this stage, here are four instances where a partner could potentially help.
Required positions are going unfilled
Many companies are experiencing staffing shortages this year. Some employees are shifting to fully remote work after getting a taste for it during Covid-19, students are reducing hours as schools open back up in person, others have left the workforce completely, and there are many open positions across the country. Having a smaller workforce pool and increased competition makes it tough on every business to maintain staff levels.
Operations can quickly get behind when that occurs in the warehouse, leading to delayed fulfillment and unhappy customers. These issues compound quickly, generating a backlog that requires hiring, training, and weeks to get past.
If you’ve either lost staff or can’t hire enough to keep orders flowing smoothly out of your in-house shop, it’s time to consider outsourced providers that have existing teams. A good 3PL will have people and physical space available to support your operations right away, plus the ability to absorb your growth.
When you need to expand into additional facilities or regions, outsourced fulfillment providers should already have teams in place to help. You can avoid having to hire management and warehouse staff on top of leases and other expenses. Instead, you focus on shipping goods to a new warehouse where teams are ready and waiting.
You’re worried about carrier capacity
Another concern that’s top-of-mind for most eCommerce businesses is that we’re approaching the end of the year. Typically, you’ll face some carrier capacity concerns as your order volume ramps up, but 2020 took that to new heights. Many logistics leaders expect 2021 to be even more challenging as eCommerce has continued to scale this year.
Reach out to your carrier partners and see what capacity they can guarantee. If it isn’t enough, you may want to consider outsourcing your fulfillment. The big reason is that 3PLs can give you more capacity immediately, leveraging their relationships to support your growth. Many 3PLs will have relationships with regional carriers, offering more options to deliver orders to hungry customers. You may not have enough time or order volume right now to negotiate new relationships directly with carriers and get the guaranteed capacity you need.
Shrinkage is creating notable losses
Every shrinkage event is a concern for your profitability and overall revenue. As shrinkage rates climb, you need to resupply sooner. But, with current supply chain issues and inbound delays at ports, high shrinkage levels can quickly lead to stock-outs. If your in-house operations can’t determine the cause or get control of shrinkage, you’re at a greater risk than ever.
Outsourcing fulfillment tackles shrinkage-related expenses in a few ways. First, it can help to eliminate shrinkage when your partner has robust monitoring and inventory control tools. Every 3PL should, and your business deserves a zero-shrinkage guarantee that makes you whole when theft or loss occurs. Second, when shrinkage occurs, the 3PL picks up any added costs. That covers increased labor around inventory counts and verification, replacement costs, and investing in new security and tech measures.
If your operations are stretched, experiencing high shrinkage, or you don’t have the capital to invest in greater security, outsourcing fulfillment can address these concerns for you.
Fulfillment gets in the way of opportunity
In-house fulfillment can be challenging to scale at the same pace that opportunities arise. This is especially true when companies branch out into new sales marketplaces or methods, such as wholesaling. Your teams and technology must handle multi- or omnichannel fulfillment, which is very different from any single-channel effort. It’s a struggle when sales growth outpaces institutional knowledge gains.
You want fulfillment to stay streamlined and effective. Adding new platforms and channels increases warehouse complexity. Your pickers will need to manage different kinds of orders. Packing stations may need to adhere to different rules and requirements for each marketplace. Expanding to Amazon’s Fulfillment by Amazon program, often called FBA, creates a massive opportunity to reach new customers but introduces extra hours of work each week just to prep products for an Amazon warehouse.
Fulfillment service providers typically work with most marketplaces as well as direct-to-consumer shipments. They’ll know the rules and requirements of each service. That knowledge protects your orders and avoids returns or fees, while your business doesn’t have delays in selling on new channels. You get experts without having to bring them on staff or take time to train your entire warehouse on new policies. Thankfully, 3PLs also tend to have systems already integrated and supporting marketplace reporting and requirements.
Don’t let an opportunity slip by because you can’t meet a fulfillment requirement. Outsource that operation to open your business up to more customers and fulfill more orders. Give yourself the best chance to meet deadlines and avoid mistakes as you scale.
About the author
Jake Rheude is the Director of Marketing for Red Stag Fulfillment, an ecommerce fulfillment warehouse that was born out of ecommerce. He has years of experience in ecommerce and business development. In his free time, Jake enjoys reading about business and sharing his own experience with others.