There comes a time in every growing company’s life when it has to ask itself this question: Should I outsource order fulfillment or continue managing it in-house?
“An outsourced order fulfillment service can take a lot of burden off your shoulders,” writes Marc Prosser in How to know if you should outsource your shipping and fulfillment. “Not only do these companies house, package, and ship your products, but they can usually do this immediately when an order comes through on your website or e-commerce platform.”
Some business experts may say there’s a “tipping point” (i.e., a certain number of orders per month) associated with the outsourcing decision, but there are other signs to look for.
Here are five good indicators that it may be time to outsource order fulfillment to a reputable third party:
- You can’t keep up with increased order volumes.
The good news is that your company is growing, but the bad news is that it can’t keep up with the new order volume. This, in turn, can result in decreased service levels for customers—a veritable death knell in today’s fast-paced, high-expectation buying environment. If you’re seeing this, it’s probably time to reevaluate your fulfillment strategy.
- You’re running out of warehouse or distribution center (DC) space.
Real estate is expensive. If you’re at or a near a point where your warehouse or DC is maxed out, consider outsourcing fulfillment and storage instead of leasing more space. This will help lift the burden of filling orders while also preserving your capital.
- You’d like to focus on your company’s core competencies.
If you’re putting too much time into packaging, managing, and sending out shipments—and not focusing on your core competencies—then it may be time to offload fulfillment to a trusted business partner. If your company’s core business isn’t logistics and shipping, outsourcing these functions will allow you to put more effort into what you do best. Also, there’s a good chance an outside expert will identify operating efficiencies that help them do it cheaper.
- You’re grappling with seasonal and/or fluctuating demand cycles.
If your business is seasonal in nature, or if demand for your products fluctuates throughout the year, then a full-time, in-house fulfillment department probably isn’t necessary. In fact, it could be costing you money. Third-party logistics providers (3PLs) like Kanban Logistics cater to companies that require a high level of flexibility, which means you can confidently outsource the fulfillment function to them either year-round or on an as-needed basis.
- Your warehouse labor costs are out of hand. As one of the most expensive aspects of running a warehouse or DC, labor costs can sneak up quickly as you gear up to meet growing and changing customers’ demands. You’ll need pickers, packers, receivers, replenishment workers, and managers to oversee the operation. These folks need to be trained (both initially and ongoing), paid, and supervised. When you outsource order fulfillment to a third party, these labor worries and expenses literally go away overnight.
When deciding between an in-house or outsourced order fulfillment strategy, remember that what works for one organization may not work so well for another.
By weighing the pros and cons of each option, considering your company’s biggest challenges in this area, and interviewing several fulfillment providers, you’ll be able to make the best decision for your particular operation.
For help comparing the costs to make the best decision check out the In House Versus Outsourced Fulfillment Price Calculator.