6 Benefits Of Outsourcing Your Order Fulfillment

6 Benefits Of Outsourcing Your Order Fulfillment

Benefits of order fulfillment providers | Shopify Retail blogPart of running a business is learning how to delegate. Because let’s be honest: We can’t do it all — even if we try.

Letting go of certain tasks is important. It frees up your valuable time and allows you to focus on building your retail business. It may be hard to trust other people to work on your "baby" with the same passion as you. Or, you may have budget constraints. However, if you can afford to, there are certain tasks that are easier to let go of — and one of those is order fulfillment.

What is an Order Fulfillment Service Provider?

Order fulfillment providers essentially warehouse your goods (i.e. your products) and fulfill orders on your behalf (they could come from in-store shoppers or online customers).

To accomplish this, fulfillment services typically integrate their software with your ecommerce store to streamline the entire fulfillment process. Once they receive an order, they pick, pack, and prepare the product for shipment.

Fulfillment providers also coordinate and schedule shipment pickups with carriers such as FedEx, UPS, and USPS.

Fulfillment providers typically charge a flat monthly storage fee. The flat fee is determined by the number of bins/palettes you warehouse in their facility. Then, once they ship an order, they charge additional fees.

FURTHER READING: Learn more about order fulfillment providers in our article on how to outsource your order fulfillment.

The Why Behind FulFillment Services: The Benefits of Outsourcing Order Fulfillment

Outsourcing order fulfillment has many benefits, such as lower shipping rates, reduced operating costs, and a broader reach to help you grow into new markets. And working with a fulfillment service provider allows you to focus on other aspects of your business and continue to grow.

"Fulfillment is an area of business that requires a team with a different set of skills," says Brendan Heegan from Boxzooka.

Heegan recommends that retailers focus on their strengths and to consider delegating tasks that don’t fall within their skill sets.

"Retailers should outsource anything that is not their core competency,” he says. “Their core competency could be designing, sourcing, marketing, and selling of their product(s). Wasting overqualified resources to keep order fulfillment in-house becomes more expensive than outsourcing, in some cases."

Your success does not only depend on the quality of your product — it also depends on the quality of your order fulfillment service. While you may offer a high-quality product, order fulfillment plays a crucial role in whether your business excels. Delayed, missing, or incorrect shipments are all surefire ways to alienate your customers — which is why it’s important to get order fulfillment right.

To help retailers better understand how fulfillment services can be advantageous for your business, we'll look at six benefits of outsourcing order fulfillment that can help you offer a better customer service experience while you focus on growing your business.

1. Lower Your Shipping Costs

Many order fulfillment providers have facilities all over the country and overseas. This creates a solid foundation to offer lower shipping rates — resulting in bulk delivery discounts that you can take advantage of.

While it depends on the order fulfillment provider you choose, on average, you can save around 15% to 35% off published shipping rates. Fulfillment providers also have software that allows them to browse shipping rates from various carriers and select the most cost-effective rate.

For example, if you pay $6.00 per shipment that you fulfill in-house and you ship 100 orders per month, that's $600 per month, or $7,200 spent on shipping in a year.

  • $6.00 (per shipment) X 100 (orders per month) = $600 (monthly shipping costs)
  • $600 (monthly shipment costs) X 12 (months per year) = $7,200 (annual shipping costs)

Based on the example above, if you take advantage of bulk delivery discounts from your order fulfillment provider — even if it's only 15% — you will save $90 per month or $.90 per shipment. If you continue to ship 100 orders per month, you will save $1,080 on shipping over one year.

  • $600 (monthly shipping costs) X .15 (15% discount) = $90 (monthly savings)
  • $90 (monthly savings) X 12 (months per year) = $1,080 (annual savings)
  • $7,200 (annual shipping costs before discount) - $1,080 (annual savings after discount) = $6,120 (annual shipping costs after discount)

2. Reduce Your Operating Costs

According to IBISWorld’s Public Storage & Warehousing market research report, the warehousing and storage industry in the U.S. alone is valued at $22 billion and employs more than 600,000 people. Warehousing and fulfillment is a thriving industry partially because more businesses recognize the potential cost-savings.

With fulfillment services, you only pay for what you use. Fulfillment services usually charge a flat storage fee for your products that are being warehoused. After that, you’re only charged for picked, packed, and shipped orders.

And while you may experience a seasonal increase or decrease in sales, that won't affect your base costs. Your storage expenses only change when the number of units you warehouse changes.

3. Extend Your Reach

Go global. Whether you receive an order from another state or from another country, with the right order fulfillment provider, you'll be ready to take your business to the next level.

Many fulfillment companies have the framework in place to ship and deliver orders to any part of the world. You can use their global platform to extend your reach and grow into new markets.

4. Improve Your Customer Service

Reliable customer service support is an essential part of running a business. Many order fulfillment providers offer 24/7 support through email or phone. This includes executing easy returns, exchanges, and refunds.

FURTHER READING: Learn more about how to make more sales with a flexible return policy.

Fulfillment services can also help retailers meet evolving customer expectations. According to recent data, about half (49%) of shoppers say same-day delivery options are enticing enough to get them to shop online from a specific retailer. Almost two-thirds (63%) want estimated or guaranteed delivery dates, and companies with same-day delivery tend to gain an advantage over 85% of their competitors.

Same-day delivery projections | Shopify Retail blog

Image: MarketingProfs

And same-day delivery is just the tip of the fulfillment iceberg. Customers also demand a breadth of other delivery options such as buy online, pick up in-store (also known as click and collect); reserve online, pick up in-store; and buy online then ship from store. And more retailers are offering these options to keep their customers happy.

Delivery options | Shopify Retail blog

Image: Statista

But offering all these delivery services can turn into a logistics nightmare for retailers. The good news is that order fulfillment providers can help. Fulfillment services can help retailers offer these delivery and pickup options for retailers to meet those evolving demands and keep customers satisfied.

5. Using Technology to Streamline Order Fulfillment

Many fulfillment companies use the latest technology to process and ship your products. Their systems integrate with your ecommerce store, and the result is a streamlined order fulfillment process that often includes the below services:

  • Inventory management
  • Item tracking
  • Security
  • Shipping and handling
  • Carrier selection
  • Payment processing

6. You Can Focus On Selling (And More)

Another advantage of outsourcing your order fulfillment is the efficiencies it creates for your retail business. While order fulfillment is more manageable for smaller businesses, this task can become difficult as you scale your business. As you receive an increasing number of orders from various sales channels (in-store, online, sales events), order fulfillment can significantly eat into your working hours.

But you can leave the heavy lifting to your order fulfillment center and spend more time doing what you love — growing your business. Focus your time and effort on design, marketing, and selling your product.

Moving Forward with Outsourcing Order Fulfillment

Now that you know the benefits of outsourcing order fulfillment, it's a good idea to get a better understanding of the costs involved. Ultimately, you need to do what is best for you and your business.

Do you already outsource your order fulfillment? What benefits have you experienced? Share your experiences in the comments.

 

About the Author

Alexis Mera Damen is a​ ​product developer with 10+ years of fashion industry experience. She launched her own activewear line on Shopify in 2015 and works as a​ consultant,​ freelance writer​,​ and photographer in Brooklyn and Seattle.

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