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9 signs it’s time to outsource fulfillment

illustration of a person with cardboard shipping boxes on a road to a fulfillment center. next to them is a sign that says ‘outsource’.

There’s a common saying amongst 3PLs that in-house fulfillment works – until it doesn’t.

When a business is newly launched and building its customer base, self-fulfillment offers a simple and cost-effective way to get orders out the door. But as order volumes grow and you begin expanding to other sales channels, fulfilling orders yourself becomes a bigger drain on your business’s resources.

Knowing when outsourcing fulfillment makes sense for your business is vital to keep order fulfillment cost-effective and maintain the level of service that meets customer expectations.

In this blog, we’re going to explore 9 signs that your business would benefit from partnering with an experienced 3PL.

What is outsourced fulfillment?

Outsourcing fulfillment is when a business brings in an external fulfillment partner to manage the steps of the order fulfillment process on their behalf. This includes inventory management, order processing, picking and packing, shipping, and return management. These steps are collectively referred to as e-commerce fulfillment services.

Outsourced fulfillment is the alternative to in-house fulfillment, where a business is responsible for managing order fulfillment and sourcing labor, packing materials, and warehouse space independently.

Fulfillment companies will typically provide their clients with both storage and fulfillment centers. The cost of fulfillment will encompass everything from labor costs, technology, and infrastructure needed to fulfill orders effectively.

The decision to outsource order fulfillment can be a tough one for businesses. By managing fulfillment in-house, brands become accustomed to having direct oversight of the order fulfillment process. But doing everything yourself can quickly become overwhelming.

So, how do you know when the time has come to outsource fulfillment and take this burden off your shoulders?

If one or more of the situations below is happening at your business, it’s a good sign that the time to outsource fulfillment has arrived:

1. You want faster delivery options

Every online retailer is under pressure to achieve a rapid delivery speed that rivals Amazon – but it’s much easier said than done.

Depending on where your customers are based, your shipping process may involve transporting orders from coast to coast across multiple shipping zones. Unless you’re using costly air shipping methods, this is going to slow down your delivery timeframes considerably.

If you’re wanting to meet customer expectations for next-day or even same-day delivery, you’re going to struggle to achieve this while managing fulfillment in-house; such short transit times require multiple warehouse locations close to metro areas, which is difficult for retailers to find independently.

Outsourcing order fulfillment to a 3PL provider with a network of fulfillment locations will put you within easy reach of your customers, allowing you to achieve rapid delivery.

2. You’re struggling to keep up with order volume

Every brand wants its orders to increase. But too much growth too fast can throw off even the most well-oiled fulfillment process.

Consumer demand can be both a blessing and a curse. While it’s exciting to have a flood of new customers, you need to be able to hold up your end of the bargain. If orders are constantly facing a backlog in processing or shipping, this is a sign that your operation is no longer able to cope with customer demands.

As order volumes rise, storage and staffing costs will need to increase in tandem to keep pace. This can lead to your fulfillment costs spiralling rapidly; footing the entire bill for additional labor, inventory storage, and inventory management software means that in-house fulfillment is unlikely to save money in the long term.

Outsourced fulfillment solutions carry much bigger cost savings because 3PLs can split the cost of infrastructure and utilities between multiple clients, meaning that a business is paying less per order than they would fulfilling orders on their own.

3. You want to expand to new markets

Expanding either domestically or internationally requires a big lift in your fulfillment strategy – and a whole lot of research.

Where are your prospective customers based? Are you using multiple sales channels? Where are you going to fulfill orders? Are there additional shipping/handling requirements? What SKUs are you going to make available?

These questions, and more, are pretty overwhelming when you’re also trying to run an online store and keep orders flowing out the door. Expansion offers some amazing opportunities for business growth, but there’s also room for damage to your brand’s reputation if you don’t deliver the service that customers expect.

3PLs aren’t just experts at moving things from A to B; they have years of experience in knowing what works and what doesn’t when it comes to expanding your fulfillment operation. Outsourcing fulfillment to a 3PL ensures that you have the support and know-how to make your expansion plans go smoothly.

4. Shipping costs are affecting your profit margin

Shipping costs are rising while the reliability of many carriers is faltering, especially during peak season. As expectations for free and rapid delivery increase, merchants are stuck between a rock and a hard place.

Getting orders to customers as quickly as possible requires more expensive shipping methods, which in turn affects your profitability. But not making this investment in the customer experience runs the risk of your cart abandonment rate skyrocketing.

Small to medium-sized businesses are affected the most by this quandary, as their order volumes aren’t large enough for them to qualify for discounts with major parcel carriers. Moreover, many in-house fulfillment operations aren’t equipped with the technology required to streamline DIM weight and rate-shop effectively between parcel carriers.

The result? Your business is likely paying far more for shipping than necessary. If you’re struggling to find a balance between offering free shipping and protecting your profit margins, a 3PL may be able to help lower shipping costs.

Thanks to the huge number of parcels they process daily, a fulfillment provider can give you access to wholesale discounts with major carriers. A tech-forward partner such as Ryder Ecommerce by Whiplash also offers a real-time rate comparison tool so that your business can find the optimum shipping options for your needs.

5. You need more storage space

This one is pretty simple. If your SKU count is increasing or you need larger volumes of product to meet demand, you need somewhere to put it until it’s needed to fulfill orders.

Yet managing and storing inventory is routinely one of the most difficult parts of running an online business. It’s easy enough to take out a lease on warehousing space, but managing peaks and troughs in demand can make this a poor investment.

For example, an ecommerce business will usually experience a jump in fulfillment activity from October-December in the lead-up to the holiday season, and a corresponding slump into the new year. Balancing both a glut and a scarcity of sales activity with the amount of warehouse space you require can be incredibly difficult, thanks to inflexible leases that could result in businesses paying for more than they need during parts of the year.

Thanks to their larger footprint, fulfillment companies offer scalable storage solutions that enable businesses to increase and decrease their warehouse space in line with their sales calendar, which means significant cost savings over the long term.

6. Your technology isn’t up to scratch

Modern ecommerce order fulfillment is no longer about how much warehouse space you have or the size of your labor force. Successful fulfillment hinges on whether you have the technology solutions in place to eliminate manual processes and gain full visibility over your operation.

When an ecommerce business first launches, they are usually managing the fulfillment process themselves – without the assistance of order management software or business intelligence systems. While managing inventory and orders via Excel spreadsheets may work while order volumes are small, this quickly becomes unsustainable as sales increase.

If you’re unable to easily answer the following questions, it might be time to outsource fulfillment:

  • How many orders do I have outstanding?
  • How many units do I have left of popular SKUs?
  • How many orders are past their estimated delivery date?
  • Are there orders with insufficient inventory to fulfill?

A technology-led fulfillment partner will be able to put the necessary systems at your disposal to achieve real-time visibility, such as OMS/WMS and seamless integrations with your e-commerce platform. This way, your business no longer has to worry about time-consuming inventory counts or data uploads; your 3PL will manage this on your behalf.

7. Customer service is going downhill

Customer service is a 24/7 job for an ecommerce business, especially when customers have multiple communication channels to choose from. But ensuring prompt and informative replies to customer queries is increasingly difficult as your business grows.

In the social media era, customers often expect brands to provide rapid service. If you’re struggling to meet these expectations with an in-house team, especially if they’re also responsible for printing shipping labels or taking orders to the post office, this is a good sign it may be time to outsource.

While not every fulfillment company will offer customer service as a fulfillment service, the automation and fulfillment technologies at their disposal will help you to streamline your customer service strategy. Integrations with self-service return portals, email confirmations, and order tracking hubs, will go a long way towards reducing support tickets, freeing up more time to focus on other areas of your business.

8. You’re missing out on resale opportunities due to slow return processing

Although often overlooked because of its undesirable status, returns processing and management play a crucial role in successful supply chain management.

A tight turnaround between receiving returns and having them ready for resale is essential to ensuring a business’s profitability. If a backlog of returns prevents items from getting back on the shelf while they’re still in demand, this results in excess inventory, and ultimately dead stock that never brings in revenue.

This is a very common problem in the aftermath of peak season, where a high volume of holiday gifts find their way back to warehouses – all within the same time period. This often marks a tipping point where brands find themselves needing some extra help to keep customers happy.

Having a fulfillment partner to assist you with reverse logistics will not only keep backlogs to a minimum; Outsourcing fulfillment also helps you to capture lost revenue and strengthen your bottom line via native integrations with return management systems. These equip you with capabilities like one-click exchanges and automated enforcement of your chosen returns policy, ensuring that reverse fulfillment processes are just as efficient as your outbound order workflows.

9. Opportunity costs are piling up

Your business doesn’t just have the financial costs of order fulfillment to worry about. If more of your team’s time and energy is being taken up by logistics concerns, that leaves far less bandwidth dedicated to growing your business.

Initiatives such as marketing, community engagement, and product development might be occurring behind the scenes, but they’re essential to keeping your customer acquisition costs low. Having these projects fall by the wayside due to a growing in-house fulfillment operation is a serious opportunity cost that can result in your brand losing ground to competitors.

By outsourcing fulfillment, you can ensure that your business can focus on what it does best – and leave order fulfillment to the professionals.

It’s all too easy for businesses to get overwhelmed by the in-house fulfillment process. Rising shipping costs, a sudden increase in order volumes, or difficulty keeping track of inventory can be all it takes to derail a fulfillment operation – and leave a lot of unhappy customers by the wayside.

By making the decision to outsource fulfillment when the above scenarios become apparent, you can protect your brand’s reputation and set up your business for more robust growth opportunities, better customer service, and faster, scalable fulfillment.

Contact Ryder Ecommerce by Whiplash today to find out how we can assist you with solving your fulfillment challenges.

Ready to start looking for a 3PL? Check out our list of 21 questions that all businesses should ask any prospective fulfillment provider.

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