Invest in a Warehouse or Outsource eCommerce fulfillment to a 3PL?
Flowspace
Why do E-Retailers Manage Their Own Fulfillment?
In the era of same day delivery, it is not uncommon for e-retailers to manage their own fulfillment to maintain control over inventory and warehouse operations. Order fulfillment done in-house enables e-retailers to manage how their inventory is stored, picked, and eventually shipped to their customers.
In-house order fulfilment is advantageous because their business is the only one utilizing the fulfillment warehouse, enabling full customization of the space, and maximizing efficiency of your supply chain.
Unique packaging and order customization can also sway an e-retailer to manage their own fulfillment, as 3PL’s typically charge a premium for customized packaging like made-to-order packages and subscription boxes.
Why do E-retailers Outsource Fulfillment to a 3PL?
The first reason an e-retailer would outsource fulfillment to a 3PL is also the most obvious; for whatever reason they do not have the need or capacity to store, pick, pack, and ship their inventory.
Scale of Operations
eCommerce fulfillment is a large-scale operation with many moving parts and a high margin for error. Conducting eCommerce fulfillment in-house means that the business now needs a full staff of supply chain, warehousing, fulfillment and logistics professionals to manage their operations.
eCommerce margins are thin and rarely cover the cost of full-scale fulfillment operations. For many e-retailers it’s simply more efficient and cost effective to outsource their fulfillment to a 3PL.
Sudden Growth
Growth is good, but a sudden increase in volume can also play havoc on fulfillment operations. When e-retailers no longer have the capacity to meet the demands of their customers they outsource fulfillment operations to a 3PL.
Outsourcing to a 3PL also increases buying power, enabling e-retailers to respond to increased consumer demand with a larger, and an adaptive network of service providers.
Market Capacity
Forecasting doesn't catch everything and cannot often account for certain variables like shipping capacity, which is highly susceptible to market trends, seasonality, and even the weather. Outsourcing eCommerce fulfillment to a 3PL enables your business to adjust to sudden changes in capacity and maintain your shipping standards.
Expertise and Capability
An e-retailer may outsource ecommerce fulfillment to a 3PL for the expertise and capability they offer. As an e-retailer, fulfillment is only one aspect of their business. 3PLs, on the other hand, are experts in logistics, supply chain, and fulfillment.
Simply put, 3PLs are the experts, with capabilities beyond those of in-house fulfillment. They make it easier to swiftly process large shipment volumes. In addition, many 3PLs offer; discounted shipping rates to customers with higher volume; access to preferred carriers; and improved capabilities like JIT and 2-day shipping.
How do I Know if I Should Outsource Ecommerce Fulfillment?
It’s possible for you to determine if you should outsource ecommerce fulfillment to a 3PL by asking yourself several important questions about your business.
- What does your SKU volume look like?
- Do you ever struggle to cover freight?
- Do you run out of space during the busier seasons?
- Where is your supply chain struggling?
- Why do you think a third-party logistics provider can help?
- How do you want to interface with the 3PL?
- How important is technology to your supply chain?
More important than asking the right questions, however, is your understanding of your logistics; knowing where your supply chain can improve, and setting tangible goals for your operations to achieve.
Final Thoughts
If after a thorough evaluation of your logistics you’ve determined that your current supply chain does not have the capability to reach your business goals, then it is time to outsource your ecommerce fulfillment to a 3PL. Flowspace can help.
We only work with top 3PLs, and inspect each of our warehouses to ensure they meet security and quality standards. Our warehouses are staffed with workers who are available to receive your inventory, palletize your goods, and perform custom services like kitting or over labeling. We will always choose the right 3PL for you. Get started today!