Home > Logistics Software, Order Fulfillment > To Outsource Order Fulfillment Or Not?

To Outsource Order Fulfillment Or Not?

For artisanal sausage retailer, Sausage Obsession, business is booming. With that growth comes a lot of challenges, such as maintaining the right level of inventory of all their products to fill customer orders and making sure to keep the right product mix of unique sausage flavors in their online catalog.
These issues are not unique for most internet retailers, but for a retailer storing and shipping fresh and frozen products like sausage, the challenges are even more complicated. How to store and ship a perishable product like sausage is a logistical challenge on a small scale but as Sausage Obsession’s business grew it became overwhelming.
What Sausage Obsession needed was a scalable storage and order fulfillment solution that could provide the service to get their orders delivered fresh and at the lowest cost possible. The options were to build out additional storage and packaging space, hire more employees, and continue to do their own order fulfillment work, or to figure out a way to outsource with a partner that could provide an equal level of service without adding cost. So what to do? The factors that go into making a decision to outsource packing and shipping orders are different for every online retail business but the following are the main cost considerations that need to be taken into account.
Storage – Not surprisingly, most companies selling products need to maintain some level of inventory. How much does it cost to maintain the space you are storing your products. Is it space you could put to better use in another way, or is the space going to go unused either way so there is really no cost to using it? If your product requires a temperature controlled space like Sausage Obsession then that cost is even higher.
Packing Orders – How about the time and space you are using for packing and preparing orders for shipment? Would your time be better spent working on marketing or improving your website? Items like boxes and packing materials are items that can be bought much more cheaply in bulk as most order fulfillment operations can – the cost difference is often 50% or more.
Cost of Shipping – Similar to boxes, shipping services are much cheaper when you can offer a company like UPS or FedEx a high volume of shipments each day. On its own a company may not qualify for a big discount for shipping, but many order fulfillment operations will share their pricing and pass on the savings.
At some point, creating a fulfillment process that is scalable and allows for growth becomes a priority for every type of online retailer and should be part of their business planning. Figuring out the tipping point that requires a business to go from handling online order fulfillment “in-house” to outsourcing the process to a fulfillment center partner is a decision that involves many factors. It is important to use your logistics software to understand the current operating costs to manage the ecommerce order fulfillment process, future needs to accommodate growth, and costs with potential outsourcing partners.
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