Are you spending more time packing boxes than growing your business? You’re not alone.
Approximately 60% of online retailers have streamlined their operations by choosing to outsource fulfillment, at least partially. Among them, about 20% have completely handed off the entire process to specialists.
This strategic shift isn’t just about offloading work—it’s about smartly reallocating resources to focus on core business activities.
By deciding to outsource fulfillment, companies enhance product development, improve customer service, and expand into new markets.
Now we will explore both the advantages and challenges of opting to outsource fulfillment.
Our aim is to equip you with the necessary insights to assess whether this approach can effectively complement your business strategy, helping you make well-informed decisions that could transform your operational dynamics.
What is Outsourced Fulfillment?
Outsourced fulfillment is the practice where businesses entrust third-party services with the responsibility of managing their inventory, packing orders, and handling the shipment of products to customers.
This process involves a specialized provider that operates fulfillment centers equipped to store a wide range of goods securely.
These providers ensure that products are properly packed and shipped out according to the specific requirements and timelines stipulated by the business.
By engaging outsourced fulfillment services, companies can offload the complex and resource-intensive tasks of warehousing and logistics, allowing them to focus on other critical business operations without directly managing physical inventory or distribution logistics.
Outsourcing Fulfillment Challenges
Outsourcing fulfillment is a strategic decision that can simplify your business operations.
However, while the benefits are substantial, there are also several challenges that companies must navigate to ensure smooth operations.
Here are three key challenges often encountered when you outsource fulfillment.
1. Risk of Dependence
When a company relies heavily on a third-party logistics provider, it can become dependent on that provider’s systems and processes.
This dependency can become problematic if the provider experiences issues such as disruptions in service, changes in management, or financial instability.
Such dependence can leave a business vulnerable if the outsourcing partner fails to meet expectations or suddenly terminates services.
Teamship ensures reliability with a stable infrastructure to minimize any service disruptions and keep your operations smooth.
2. Integration Complexities
Integrating your company’s systems with those of an outsourced fulfillment provider can be a complex process.
There can be technical challenges in aligning your inventory management software, e-commerce platforms, and other operational tools with the third-party’s systems.
This integration is crucial for maintaining real-time data accuracy and operational efficiency.
Misalignment can lead to issues like incorrect inventory levels, delayed shipments, and poor data transparency, which can ultimately affect customer satisfaction and business performance.
Teamship’s user-friendly platform ensures easy integration with your systems, maintaining efficiency and accuracy without hassle.
Curious about Teamship WMS? Schedule a demo today. Get Teamship for just $79/month and watch your fulfillment troubles go away.
3. Higher Variable Costs
Managing variable costs is a major challenge when outsourcing fulfillment services.
These costs, which include storage and shipping, can fluctuate based on factors such as seasonal demand, shipping distances, and order volumes.
For instance, expenses may increase unexpectedly during peak seasons or with changes in carrier rates which may come off as hidden costs of outsourcing.
Additionally, special handling requirements for fragile or temperature-sensitive products can complicate the cost structure even further.
At Teamship, we offer transparent pricing with no hidden cost of outsourcing to help you manage costs effectively even during variable demand periods.
Benefits of Outsourced Fulfillment
Considering outsourcing your fulfillment? You’re on the right track! According to a 2019 study by Clutch, 37% of small businesses were already outsourcing at least one business function.
Whether you’re a small startup or a growing enterprise, opting to outsource fulfillment can take a load off your shoulders, allowing you to focus more on what you do best—growing your business.
1. Expertise
Big names like Amazon and Walmart have mastered the art of fulfillment, but many eCommerce businesses find it tough to develop the needed infrastructure and expertise to operate efficiently and enhance customer experiences.
Outsourced fulfillment partners are specialized in handling these processes and invest heavily to ensure they deliver top-notch results for their clients.
To make the most of this expertise, choose a partner with a proven track record in your industry and engage in regular performance reviews to keep fulfillment operations at peak efficiency.
2. Scalability
As order volumes increase, it’s no surprise that more companies turn to outsourcing their fulfillment.
The quickest way to scale up fulfillment isn’t to expand in-house operations by purchasing equipment, hiring staff, and managing more complex systems.
Instead, partnering with a provider that’s already equipped to handle the surge, and any future spikes are more efficient.
Moreover, if market declines or disruptions occur, scaling down is simpler with outsourced partners, as they can be released without significant financial losses.
Teamship seamlessly connects your brand with 3PL providers, ensuring that as your order volumes grow, you have the flexibility and support to scale your operations efficiently.
This partnership allows for swift adaptation to changing market demands, enabling your business to expand or contract fulfillment resources as needed without the complexities of managing it all in-house.
3. Seamless Returns Management
More than 60% of customers review a return policy before making a purchase, highlighting the importance of a seamless returns process.
An advantage of dedicated fulfillment is enhanced returns management. Handling returns can be a complex and often daunting task for businesses.
A reputable third-party logistics (3PL) provider simplifies this process by overseeing every aspect, from authorizing returns and conducting thorough product inspections to efficiently restocking items and processing refunds or exchanges.
This comprehensive management helps in reducing the burden on your team, allows for quicker turnaround times, and improves overall customer satisfaction.
By delegating these tasks to a dedicated 3PL with Teamship, you ensure that returns are handled professionally and efficiently, minimizing disruptions and maintaining customer trust.
Sign up for a demo today and experience hassle-free fulfillment for just $79/month with Teamship.
4. Cost Savings
Choosing outsourced fulfillment services allows you to bypass the significant capital investment required for infrastructure, such as warehouses and distribution centers.
By choosing Teamship’s outsourced fulfillment services, you gain access to an extensive network of over 1500 warehouses.
This vast network eliminates the need for significant capital investments in infrastructure like warehousing and distribution centers.
Instead of committing resources to expensive technology and maintenance, you can utilize Teamship’s established systems.
This shift not only frees up capital for other strategic investments but also reduces ongoing maintenance and operational costs, making it a financially astute choice for managing your logistics efficiently.
5. Better Shipping Rates
Unexpected shipping costs can really turn shoppers away—actually, 25% of customers say it would make them abandon their cart.
An advantage of dedicated fulfillment is that it helps businesses keep these costs clear and competitive.
By outsourcing fulfillment, you can easily compare shipping rates to avoid surprises at checkout.
Teamship takes this a step further, not just by helping negotiate better rates through established relationships with carriers but also by offering an RFQ wizard.
This feature lets you quickly find and offers the best shipping prices, keeping your customers happy and carts full.
When to Consider Outsourcing Your Fulfillment?
Deciding to outsource fulfillment can be a big move for your business, especially in the following scenarios:
1. When Your Service Levels Are Struggling
If keeping up with customer demands is becoming a challenge for your in-house operations, a fulfillment partner can help maintain the service levels your customers expect.
Outsourcing can ensure that orders are fulfilled efficiently and to satisfaction, without the stress on your internal resources.
2. When Fulfillment Costs Impact Your Profit Margins
High shipping costs, especially from expedited services like long-zone ground shipments or next-day air, can eat into your profits.
A specialized fulfillment partner can suggest strategic warehouse placements to cut down transit times.
This not only speeds up delivery but also significantly reduces your shipping costs.
3. When It’s Affecting Other Business Areas
If managing fulfillment in-house is pulling your team away from what they do best, outsourcing can be a smart solution.
By handing off logistics and fulfillment to experts, your team can redirect their focus to critical business areas like product development, marketing, and customer relations, optimizing overall business performance.
Teamship: Your Solution to Soaring Fulfillment Expenses
Are rising fulfillment costs cutting into your profits? It’s a common challenge in the eCommerce world, with over 51% of companies reporting an increase in expenses over the last year.
This is where Teamship makes a difference.
Our platform connects your brand with a network of 3PL providers to streamline your fulfillment operations, reducing costs and enhancing customer satisfaction.
Here’s how Teamship stands out:
1. Integrated 3PL Network
Teamship acts as a bridge to a vast network of third-party logistics providers.
By connecting you with experienced 3PLs, we ensure that your fulfillment process is managed by experts who use state-of-the-art technology and optimized practices.
This connection not only enhances efficiency but also scales your business needs without requiring significant upfront investment.
2. Scalable and Flexible Solutions
As your business grows, your fulfillment solutions should grow with you.
Teamship’s platform is designed to be fully scalable, offering flexibility in handling fluctuating order volumes and seasonal spikes.
We ensure that you can always meet customer demands efficiently, even during peak periods, without incurring unnecessary costs.
3. Centralized Warehouse Management System
Teamship Warehouse Management System (WMS) simplifies how you manage your brand by centralizing all your warehouses on a single platform.
With us you can keep an eye on every piece of your inventory, no matter where it’s stored, all from one convenient place.
It’s like having a control center for your entire operation, making it easier to track orders, manage stock levels, and coordinate logistics across multiple locations.
It not only saves time but also reduces the headaches associated with juggling multiple warehouse systems.
Choosing Teamship means opting for a partner who understands the importance of cost-effective, reliable, and scalable fulfillment solutions.
Connect with us for a demo and see Teamship in action for just $79 per month!
Final Thoughts
So, should you outsource your fulfillment? If any of the scenarios we’ve discussed sound familiar, it might be time to give it some serious thought.
Outsourcing can relieve your team, cut costs, and keep your service levels high—freeing you up to focus on growing your business.
Remember, the goal is to work smarter, not harder, and with the right fulfillment partner, you can do just that.
Frequently Asked Questions
1. What are 3 outsourcing examples I should know to understand fulfillment process?
To understand the fulfillment process better, here are three key outsourcing examples:
- Third-Party Logistics (3PL) Providers: Businesses use 3PL providers to handle the storage, packaging, and shipping of their products, allowing them to focus more on production and sales.
- Dropshipping: In dropshipping, retailers sell products they do not stock. Instead, when an order is made, the item is purchased from a third party and shipped directly to the customer, minimizing the retailer’s overhead costs.
- Fulfillment by Amazon (FBA): With FBA, sellers store their products in Amazon’s fulfillment centers, and Amazon manages all logistics, including shipping, customer service, and returns.
These outsourcing examples demonstrate different ways businesses can streamline their fulfillment operations.
2. What are FBA fees?
Amazon FBA, or Fulfillment by Amazon, involves a couple of key fees.
First, there are fulfillment fees, which cover the costs of picking, packing, and shipping each order.
Then, you’ve got inventory storage fees, which are charged for keeping your products in Amazon’s warehouses.
3. Is outsourcing more expensive?
It’s a common myth that outsourcing is always pricier than doing things in-house. But that’s not always true.
The costs of outsourcing compared to insourcing can differ based on a few things like how complex the job is, where your outsourcing partner is located, and what your own internal costs are like.