Part of running a business is learning how to delegate. Because let’s be honest: We can’t do it all — even if we try. This is especially true of order fulfillment, which is one of the most difficult, time-consuming parts of ecommerce.
But 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. You may feel constrained by your budget.
However, outsourcing fulfillment can help you grow your business and even save you money in the long run. Here, we'll discuss 8 game-changing benefits to outsourcing order fulfillment for your retail business.
Third-party logistics companies: Your partners in order fulfillment
Before we jump into the benefits, it’s important to know how outsourcing fulfillment works.
When you decide to hand off fulfillment, you’ll be seeking out a third-party logistics company, or a 3PL. These fulfillment partners will store your products in their warehouses. Once you receive an online order, the 3PL will then pick your inventory from the shelf, pack it, and prepare the product for shipment with a carrier like FedEx, UPS, or USPS.
All of this is usually made possible by a strong integration between the warehouse software and your ecommerce store. This connection streamlines the fulfillment process while allowing you to follow along as your new fulfillment partner ships out your orders.
Not all 3PLs are made equal. You need to find a fulfillment partner that matches your needs.
Whether it’s the cost, the proximity of the warehouses to your customers, their ability to support returns, or the strength of their software integration, finding the right partner is the key to unlocking the benefits of outsourcing fulfillment.
APPLY NOW: Shopify Fulfillment Network, Shopify's very own 3PL, was built with merchants in mind. We offer two-day shipping on most orders across the United States, simple pricing, returns support, full integration with your Shopify store, and so much more.
8 benefits of outsourcing order fulfillment
Outsourcing order fulfillment has many benefits that extend beyond simply not having to do that work anymore.
To run a successful business, you need to be meeting the needs and expectations of your customers. When it comes to fulfillment, those expectations are high. 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 you understand the advantages, here’s a breakdown of eight important benefits of outsourcing order fulfillment.
1. You can focus on selling (and more)
Let’s start with the obvious: the biggest benefit to outsourcing fulfillment is that you don’t want to do it anymore. The hours spent printing labels and taping boxes can be reinvested into your business.
While order fulfillment is more manageable for smaller businesses, this task becomes particularly challenging and resource-intensive as you scale. As the orders role in from multiple sales channels (in-store, online, sales events), you might find yourself without the time you need for other parts of your job.
But you can leave the heavy lifting to your third-party logistics partner and spend more time on impactful work like design, marketing, and sales.
2. Lower shipping costs
Many people will avoid outsourcing fulfillment because they see it as another expense. But third-party logistics companies can actually save you money in different areas, including shipping.
First of all, a fulfillment partner might have warehouses all over the country and even overseas. By balancing your inventory across this network of warehouses, they ensure your goods are closer to your buyers. Distributing inventory in this way can reduce shipping costs by 25%.
Also, as high-volume shippers, third-party logistics companies often receive preferable rates from carriers. While it depends on the company, you can typically save between 15% and 35% on 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 each order.
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.
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.
These are savings that you can absorb or pass onto your customer, offering them cheaper or even free shipping to help sweeten the deal and earn more sales.
3. Increase shipping speeds
The impact of having multiple warehouses across the country extends to shipping speeds. By placing inventory closer to your buyers, outsourcing fulfillment allows you to provide faster delivery.
This is a massive advantage for retail businesses. A remarkable 67% of US consumers expect their goods to be delivered in two days or less. A strong fulfillment partner may be the only way for you to meet those high demands and compete with the country’s biggest chain retailers.
4. Provide accurate shipping information to buyers
Consistency and transparency are so important for online buyers because it gives them the confidence to hit that buy button.
According to one study, just over 60% of buyers are more likely to purchase if they see the delivery times in their shopping cart. And that transparency works in reverse. Some 47% of buyers will avoid reordering from a business if there’s a lack of delivery transparency.
Outsourcing your fulfillment helps you provide accurate delivery information at checkout. When you self-fulfill, a busy day at the store, a snowstorm, or your car breaking down could easily impact your ability to meet a delivery promise. But your fulfillment partner should be rock solid. They have the experience, the man power, and the contingencies in place to provide accurate shipping information and deliver on time year-round.
5. Reduce operating costs
While outsourcing fulfillment comes at a cost, so does self-fulfilling. The man hours spent packing and shipping are only part of it. Retailers often forget to include inventory storage in their fulfillment expense calculations, but this represents 21% of logistics costs. And if you’re forced to rent warehouse space, your expenses can skyrocket.
By outsourcing fulfillment, you save on overhead and only pay for what you use. Third-party logistics companies usually charge for picking, packing, and shipping as well as the storage of your goods. Shopify Fulfillment Network even offers six months of free storage per item, so you may not even need to pay storage. But even if you do, you’re not paying for rent, utilities, gas for your trips to the post office, or other operating costs associated with self-fulfilling.
And while you may experience a seasonal increase or decrease in sales, that shouldn’t affect your base costs for outsourcing.
6. Extend your reach
Go national. 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.
When you self-manage shipping, it can be really intimidating to try and figure out shipping rates and predict shipping times (how much for Hawaii again?). International shipping rates are even more complicated because they involve different regulations, currencies, and best practices. As a result, many retailers keep their shipping options fairly local or regional.
But outsourcing fulfillment can help you extend your reach and unlock a wider market. Many fulfillment companies have the network in place to ship and deliver orders to any part of the world.
7. Organize and streamline your back office
Third-party logistics companies are often at the forefront of technology when it comes to ecommerce. Not only do their systems integrate with your ecommerce store, they frequently increase your visibility into core aspects of your back office, including:
- Inventory management
- Item tracking
- Security
- Shipping and handling
- Carrier selection
- Payment processing
Having access to all of this information in one place can actually help you stay more organized. You can spot inventory shortages, notice patterns about your buyers, and keep better track of the money.
8. More happy customers
It might seem obvious in retrospect, but it needs to be highlighted. Faster, cheaper shipping, accurate delivery information, global reach, and more time spent on marketing and sales leads to more, happier customers. This is the entire goal of your business, and outsourcing fulfillment can make a massive impact in helping you achieve it.
Moving forward with outsourcing order fulfillment
A lot of good can come from handing off order fulfillment to an external partner. From a more organized back office to an influx of customers, handing off this crucial part of your work to a professional can help you effectively scale the ecommerce side of your business.
If you do decide to move forward with outsourcing fulfillment to a third-party logistics company, take your time and do the research.
This is a big decision and you should weigh all of your options before deciding which partner is best for your business.
Read more
- A Retailer’s Guide to Reorder Points and the ROP Formula
- Replenish Stock, Increase Cash Flow: How Perpetual Inventory Works for Retailers
- The Retailer’s Guide to the Weighted Average Cost Method
- How to Centralize Your Inventory and 3 Benefits For Making the Switch
- Ultimate Retail Business Guide on Vendor Sourcing
- Keeping Up With Demand: Tactics to Boost Productivity And Get Orders Out on Time
- 10 Ways On-Demand Manufacturing Can Help Retailers Streamline Their Operations
- Purchase Orders: How to Create, Manage, and Use POs for Your Retail Store
