The demands of modern consumers have never been higher, particularly when it comes to ecommerce. Logistics companies and retail giants have raised the standards to the point where smaller businesses are struggling to keep customers satisfied. Order fulfillment is a critical part of the process.
For a small business owner to compete with a global retail outlet, they must optimize every step of the supply chain. Fulfillment processes need to maximize efficiency and productivity. This allows the business to manage its order volume, expedite delivery times, and reduce shipping costs.
While improving fulfillment might seem like a worthwhile goal, it can get very complicated. Not only do you need a comprehensive logistics strategy, but you also require warehouse space, equipment, and staff. At a certain point, outsourcing order fulfillment can be the best option.
Before taking the plunge, here is everything you need to know before you outsource order fulfillment.
What is Order Fulfilment?
Order fulfillment is the process of purchasing goods, managing the inventory, and delivering it to the end customer. Depending on the type of industry that businesses operate in, order fulfillment can involve a number of different processes.
However, several core functions are involved in all order fulfillment processes, such as:
- Warehousing: This involves storing and managing all items in your fulfillment center. It includes on-demand items as well as unsold goods that need to be stored long-term.
- Picking: An ecommerce business usually generates a pick list. This is a document that details order information. Fulfillment staff collects the items from inventory storage to get the fulfillment process started. It is one of the first and most important steps of ecommerce fulfillment.
- Packaging: Gathering all items for an order and packaging them by following the appropriate steps. Attaching a shipment label is also part of this process.
- Shipping: Organizing for carriers to collect and deliver items to customers. Most businesses use an electronic order tracking device to give customers real-time information on the whereabouts of their order.
- Returns: Processing returned goods, registering them, and reintroducing them to the available inventory.
Businesses can perform fulfillment in-house or outsource it to a third-party logistics company.
What is a Third-Party Logistics Provider?
A third-party logistics provider (3PL) is an outsourced service that manages a specific area or all areas of logistics and transport for a company. Essentially, a 3PL handles order fulfillment for a company that can’t or doesn’t do it in house.
Although 3PL’s have been around for some time, they are now more relevant than ever. With the continued growth of ecommerce and the coinciding rise of customer expectations, outsourcing fulfillment to expert companies is becoming the norm.
Many 3PL’s can help businesses operate more efficiently and cost-effectively without worrying about managing a fulfillment service.
Benefits of Using a 3PL
There are many benefits attributed to outsourcing order fulfillment to 3PL’s. Here are some of the key advantages:
No Need For Fulfillment Facility and Equipment
Businesses may aspire to someday own their own fulfillment centers and logistics equipment. However, this involves a tremendous cost. Apart from renting or buying a premises, a company must cover the costs of equipment, a fleet of vehicles, security, and staff.
A 3PL allows you to grow your business without the need to spend big on upfront fulfillment costs.
Adaptability and Scalability
Seasonal sales and fluctuations are standard for any online store. Using a 3PL allows a company to scale up or down for warehouse space, labor, and transportation needs.
Most 3PL’s provide shipment consolidation to maximize the efficiency of their operations. This involves combining various orders at fulfillment centers to utilize the space in shipping containers better. It can lead to reduced rates and more shipment opportunities for smaller businesses.
Fulfillment is complicated and expensive. Outsourcing order fulfillment is far more cost-effective for some businesses rather than having to ship orders in house. It also allows them to concentrate on the core functions of their business.
Industry Experience and Expertise
A 3PL service has knowledge and expertise that helps it to perform optimally. A reputable provider can produce advanced reports, manage inventory effectively, and deliver an efficient logistics plan that you may not be capable of.
Utilize the Latest Technology
Technology is having an increased influence on order fulfillment. From warehouse management systems to advanced analytics, technology is one of the main drivers of this industry. The main drawback of this trend is that the technology is very expensive.
By outsourcing order fulfillment, your company can benefit from advanced technology.
How to Know if You Need to Outsource
For a lot of businesses, order fulfillment is completed in-house until it is no longer sustainable. Here are some signs that your business requires some outside help:
- Fulfillment has become one of your biggest overheads and is beginning to cost the business a lot of money.
- You’re struggling to keep up with fulfillment demands.
- You don’t have enough staff to effectively manage fulfillment.
- Customers are reacting negatively because fulfillment isn’t meeting their standards.
- Order fulfillment is taking time away from growing and operating the core aspects of your business.
- You don’t have enough warehouse space for inventory.
- The business is struggling with seasonal demands or sales fluctuations.
- You wish to expand your business internationally.
How to Choose a 3PL Provider
It’s important to note that not all 3PL providers are the same. Ensure you do thorough research before choosing where to outsource. Some factors to consider include:
Opt for a 3PL that has experience in your industry. Research the clients that each 3PL has worked with and is currently working with. Experience in handling and distributing similar goods often leads to better service.
Focus on Value Over Price
While it’s important to stay within your budget, you must focus on value over price. Choosing a provider solely based on the lowest price can lead to poorer distribution that can ultimately cost you in the long run.
Logistics companies that utilize the latest technologies typically have a competitive advantage over less technological competitors. They also make for more seamless integration with ecommerce businesses. Consider what systems and software that your 3PL uses.
Data and Analytics
Data and analytics are critical in modern fulfillment. A 3PL that focuses on data can help you to make better-informed decisions. Metrics can be analyzed and used to improve the overall fulfillment process.
While you don’t want to waste an opportunity to pounce on increasing sales numbers, you don’t have to rush into investing in a comprehensive in-house fulfillment service. Outsourcing the process can help you to manage demands while steadily growing your business. However, you must consider all options before making your decision.
For further information or help regarding fulfillment and distribution, contact one of Asiana USA’s expert team today. Call us for a quote or to discuss your business needs at (855) 500-1808.