This was originally published by Nathan Resnick, CEO of Sourcify in August 2017 and has since been updated for relevance and accuracy.
The spread of the coronavirus is making international shipping significantly more challenging than it already is. International shipments have been suspended in some countries. Transportation restrictions are changing by the day, causing port congestion as inventory is stranded out at sea. Lockdowns and international border closures are delaying or preventing commerce in others.
Fulfillment times for some orders have risen 40% since the COVID-19 outbreak. Orders that once took some operators 15 hours to fulfill from completed checkout to pick-up by a carrier for delivery now take up to 21 hours.
The impediments to fulfilling international orders are growing and changing by the day:
- The USPS warns of international delays to and from China and Europe
- Postal operations are being scaled back in Spain, France, and Italy
- The U.K.’s Royal Mail has suspended international delivery to many countries
- FedEx has temporarily suspended service to the Asia-Pacific (APAC) region
- UPS has suspended its money back service guarantee
- DHL is adding an emergency surcharge to express shipments
Keeping the fulfillment promises you make to international customers, especially as carriers suspend shipping guarantees, requires a close working relationship with international fulfillment partners. Regular and transparent communications with fulfillment partners provides the insight necessary to adjust shipping options and appropriately set customer expectations.
Before we help you determine whether you need an international fulfillment partner, or how best to re-evaluate relationships with current partners, it’s crucial to study the key drivers of coronavirus-related global fulfillment risk.
Three COVID-19 risks to global fulfillment
Risk #1: Reduced warehouse capacity
Workers may be taken off the floor due to being infected with COVID-19 or be unable to work in areas under government lockdown. Others lacking access to childcare may choose to stay home since schools and daycares are closed. All of these impact how many orders can be fulfilled in a given time period, leading to delays. Understanding workforce capacity trends at your 3PLs is vital when setting customer expectations about the timeliness of order fulfillment.
Risk #2: Warehouse closures
Warehouses in many regions have been deemed essential but run the risk of closing if the pandemic worsens. With nearly 40% of ecommerce brands experiencing virus-related shipping issues, international businesses are re-evaluating their global supply chain strategies. Supply chain diversification and resilience are now key strategic objectives for brands with global footprints. In the event of a closure, brands must be ready to redirect inventory to fulfillment operators that are open. If your inventory is not strategically distributed across multiple locations, like it is in the Shopify Fulfillment Network (SFN), now is the time to consider a multi-location inventory strategy.
Risk #3: Shipping disruptions
Closed borders, postal system delays, and delivery guarantee suspensions are all impacting order delivery time. Even if you are already fulfilling orders closest to your international customers, there’s no guarantee orders will arrive when they should with carriers and countries announcing changes seemingly daily.
Communicate constantly with customers and fulfillment partners. Understand what’s realistic in terms of expected fulfillment and delivery times. Be conservative with the fulfillment promises you make to international customers. Consider reducing the number of shipping options you offer. Prioritize communications with customers to set expectations in a fluid fulfillment environment.
Do you need a global fulfillment partner?
Navigating this pandemic hinges, in part, on accurately identifying whether you need international fulfillment partners. The temptation is to think that an international fulfillment partner is a necessity after rapid growth or that all 3PL providers are the same.
The vast majority of ecommerce businesses already rely on an international manufacturer. The great irony is that very few of these businesses take advantage of their ability to source globally when it comes to sales, storage, and shipping.
Don’t overlook the opportunities in your manufacturer’s backyard! Not only are countries like China, India, and South Korea some of the most popular manufacturing locations, they’re also home to some of the fastest growing ecommerce markets.
On the flip side, if you’re already hosting your own international warehouse, your company may be taking on unnecessary costs during slow times. A fulfillment partner enables you to mitigate that off-time risk.
And it’s not just about logistics. Fulfilling shipments is monotonous and may not be the most effective use of your team’s time. By outsourcing fulfillment, your team can focus on growth.
Lastly, one of the rarely discussed pain points of growth is an organizational infrastructure that can’t keep up with demand. You may not know how to scale your current fulfillment setup. That’s when you turn to a fulfillment partner.
Changing consumer behavior
COVID-19 is changing consumer behavior, at least in the short term. Essentials are being hoarded as fear of shortages prompt consumers to stock up on basics. If customer behavior changes permanently following the pandemic your global ecommerce strategy may have to change as well.
For instance, housewares, home furnishings, and gardening brands recently enjoyed a five-day surge in sales. Don’t immediately extrapolate on these trends or base your international strategy entirely on them, however, unless you suspect they’ll become permanent in a post-COVID-19 world. Be sure you understand customer behavior after the pandemic begins to abate.
In the meantime (or once the world is back to some semblance or normal) if you see a rise in international customers or are in the planning stages of world domination, first ask yourself the following questions:
- What are my current customer needs abroad?
- Where are most of my international customers based?
- Are current international customers pleased with our customer experience?
- What are current average international ship times?
- What is it costing me on average to ship to an international customer?
- In the next five years, do I see my business continuing to grow abroad?
If these questions spark a realization that it’s time to consider an international fulfillment partner, your first step will be to project your needs. Figure out what your company will need to make international customers happy in the coming months and years. From there, start figuring out which international fulfillment center can grow with you.
The first aspect of a fulfillment center to consider is their capacity. A fulfillment center starts with a warehouse and if they don’t have warehousing space to expand to, you may soon find yourself in trouble. Instead, international fulfillment partner Sourcify recommends finding a fulfillment partner who can scale with your business.
The second most important aspect to consider is your fulfillment partner’s integration ability. You usually don’t want to change your tech stack just to fit with a partner’s. The international fulfillment partner you work with should be able to integrate with your Shopify store and any omni-channel software you currently use.
You may also want to ask if your international fulfillment partner handles any value-add services like importing your product from your factory to their location. This tends to fall under a logistics partner’s responsibility, but working with a fulfillment partner who could handle both is a plus.
Likewise, ask about a 3PL’s ability to bundle items. This type of capability can help you quickly adapt your business to crises like COVID-19 when people are more likely to buy in bulk or stock up on inventory.
International fulfillment partners
Resilient supply chains often spread manufacturing, fulfillment, and shipping risk across multiple vendors and locations. This positions brands to continue operating during a pandemic or some other black swan event that cripples a portion of the supply chain. However, diversification and resilience in the supply chain can also add costs that may seem unnecessary in times of economic prosperity.
Consider the impact international fulfillment operations will have on your company’s cost structure in both good times and bad, and weigh that against the risk of not diversifying and being unable to optimally fulfill international orders during the next crisis.
With that cost-benefit analysis in mind, the main benefits of working with an international fulfillment partner include:
Optimized international shipping
Chances are you’re producing your products in Asia. If you have to import your products from there to America and then ship them back out to Europe, you’re losing money on every single transaction. The right way to do this would be to ship from your factory in Asia to a fulfillment partner in Europe who then handles the shipment to your European customers.
Avoid owning a lease on a warehouse
While owning your own warehouse can enable you to have full control over your inventory and customer experience, it often isn’t worth the cost. During slow times you may be overstaffed, and it will be hard to cut this fixed cost if you need to downsize.
Priced to grow
The more you ship, the more you pay. It’s simple math. Except when it’s not. A fair fulfillment partner can reverse that equation as you scale. Pick-and-pack fees in particular (discussed more below) should lower as you increase volume.
If you handle your fulfillment in-house, you need your own team to manage that. Working with a fulfillment partner avoids all that. Internationally, this can be a huge win, as dealing with employees in a foreign country is complex.
Minimize shipping errors
When you start fulfilling orders in-house, you often aren’t ready to scale up. If your current team won’t be able to handle a 10x increase in order volume, imagine what would happen at a 100x. If you choose the right fulfillment partner to work with, you’ll be able to grow with them.
Decrease costs over time
I don’t want to sugarcoat this: starting out with an international fulfillment partner isn’t cheap. Not only do you need to dedicate inventory abroad, you will also have to pay for setup fees. Over time though, the cumulative effect of the above-stated benefits leads to major cost reductions.
And on that note …
Main costs to consider
International fulfillment is becoming more expensive because of COVID-19. Ensure any 3PL you partner with prioritizes warehouse worker safety. Investigate how potential fulfillment partners acted when one of their warehouse employees tested positive for COVID-19. Did they help affected employees financially? Did they provide workers with the appropriate personal protective equipment (PPE)? Did they do a deep clean to protect workers and consumers who’ll ultimately receive packages?
When interviewing potential partners, ask to see their business continuity plan (BCP). This will help you determine how thoughtful the partner may be, what they prioritize (people vs. profits), and how they might behave during future crises.
But pandemic-related matters are just a small portion of the total costs associated with international fulfillment. Compared to an in-house setup, where you’re balancing out a warehouse employee’s salary, the cost basis of a fulfillment center is relatively clear-cut.
The main costs include:
Image from FitSmallBusiness
In addition, be wary of duty costs when importing products to certain countries. This is almost always paid by the receiver and can vary widely per product. To create a smooth relationship, ensure your end customer knows the cost of receiving your product in their country.
As a jumping off point, The International Trade Administration’s (ITA) Country Commercial Guides contains the “market conditions, opportunities, regulations, and business customs for over 125 countries prepared by trade and industry experts at U.S. embassies worldwide.” They’re organized on a country-by-country basis:
Once again, however, if you’re shipping domestically within another country—i.e., from manufacturer to warehouse to customer—your end consumer won’t have to pay any import duty. This is just another reason to ship smarter and optimize your supply chain by working with an international fulfillment partner.
The cost of international fulfillment
International fulfillment has been suspended in a growing number of countries due to COVID-19. In regions where fulfillment is still occurring but experiencing delays, it’s crucial to understand the likelihood the goods you sell might be deprioritized in favor of items deemed essential. On-demand warehousing, which allows you to scale up and down based on demand, is an alternative to consider when plotting your global fulfillment footprint.
If you’re preparing to negotiate with a global fulfillment partner or have already established global fulfillment capabilities and:
- Sales have declined materially
- Fulfillment time has increased significantly
- Fulfillment of your goods is being deprioritized
…then negotiate with your fulfillment partner. Inquire about discounts on pick fees or zero cost receiving in which your 3PL receives inventory directly from your manufacturer at no cost. If you have direct relationships with carriers, talk to them about discounts or arrange new mutually beneficial pickup methods or frequencies.
Supply chain diversification efforts in a post-COVID-19 world could impact globalization in ways that may change how and where we operate our businesses. However, some argue that the globalization genie cannot be put back in the bottle. As long as international consumers demand goods from American brands, you’ll likely need to consider establishing global fulfillment operations.
This rise in global commerce should expand the horizons of your ecommerce store. Don’t limit yourself to one location; it’s time to focus on international growth. Prior to the COVID-19 crisis, cross-border online consumer purchasing was expected to reach $1 trillion in 2020. On top of that, total worldwide ecommerce sales were predicted to hit $6.5 trillion in 2023.
That moment when an international customer has the same experience as a domestic one is when your business will have truly crossed borders. That’s when you’ll really be able to spark an international brand and create seamless customer relationships across the world.