Outsourced E-commerce Order Fulfillment: When Is the Right Time?

December 20, 2022

Having an efficient and cost-effective order fulfillment process can help you stand out in a crowded e-commerce market and win customer loyalty.

65% of online shoppers are willing to pay more for faster deliveries; thus, with the growing demand for more efficient shipping services, you are left to decide whether to deal with complex order fulfillment in-house or to source it to a third-party fulfillment provider.

Outsourcing could be the way to go, according to 59% of business leaders in the USA, who claim that the practice allows them to cut costs, focus on core functions, and solve capacity issues.

Yet, companies often cannot decide when it is the right time to make a switch. So, in this article, you will learn how to improve your e-commerce order fulfillment process, when to engage with a third-party fulfillment services provider and the benefits of collaborating with one.

What Is Outsourced Order Fulfillment?

Outsourced order fulfillment is a business practice where a third party handles all or part of the order fulfillment process. This allows companies to benefit from lower operating expenses and greater efficiency since 3PL logistics providers deal with processes such as picking, packing, shipping, inventory management, and customer returns.

You simply need to enter into an agreement with a 3PL company like Phase V, which will integrate your e-commerce store with their proprietary order fulfillment software and handle the rest. This essentially means that when the order comes in, you do not have to do anything.

Benefits of Outsourcing Order Fulfillment

Your online store’s performance is directly related to the efficiency and effectiveness of your order fulfillment process. As such, outsourced order fulfillment allows you to optimize your operations and deliver consistent service to your customers.

Outsourcing order fulfillment to a 3PL provider has a whole lot of benefits, too. Here are just a few of them.

Lower shipping costs that increase your top-line revenue;
Greater operational flexibility;
Access to up-to-date order fulfillment technology and expertise;
Readily available order fulfillment infrastructure;
Relatively low risk compared to in-house fulfillment;
Streamlined supply chain process;
Accelerated order delivery to your customers;
More efficient returns process;
Easier to expand to international markets.

When to Outsource Order Fulfillment? 5 Signs to Look For

Now that we have established a strong argument for partnering with third-party logistics providers to deal with your orders, you may be asking when outsourcing order fulfillment makes the most sense.

In truth, there are no definitive criteria for determining the appropriate moment. However, consider the following five factors when deciding whether to outsource your order fulfillment or keep it in-house.

You Are Out of Storage Space

This can happen very quickly, especially if you choose to expand your product range. And, if you are storing your own inventory, you might need to hire an additional storage facility which can be costly and far from ideal.

Outsourcing your order fulfillment, including inventory storage and management, allows you to leverage the fulfillment provider’s facilities at no cost.

You Can No Longer Cope With an Increase in Shipping Volume

As a rule of thumb, if you are dealing with more than 100 orders a month, it might be time to plan for outsourcing. Being in a growth stage is a good problem to have, but not being able to manage an increasing shipping volume can kill your business. So, act on time and get an order fulfillment partner on board!

You Want to Offer Next-Day Shipping

Shoppers want to receive their goods fast—that’s a fact. But if you are slow shipping your orders and there are other inaccuracies, such as wrongly inputted addresses, your reputation (and revenue) will plummet in the long run. Studies show that the slightest hold-up in the shipping process can push 48% of buyers to change the retailer they shop with.

Thanks to outsourced order fulfillment providers, you can take advantage of their extensive network of warehouses and proximity to your customers. As a result, you can offer flexible, two-day, or next-day delivery options.

Your Costs Are Becoming Unmanageable

Your overhead expenses can quickly balloon. Warehousing, staff salaries, and the cost of packaging materials add up, subsequently eating your profits. But you are here to protect your profit margins, right?

If your order fulfillment costs are going through the roof, it might be time to outsource! Outsourced fulfillment companies have the best technology, expertise, and geographical locations, allowing them to offer more affordable shipping solutions.

You Want to Expand Into International Markets

The beauty of an e-commerce business is that you can sell to international audiences, growing your customer base and reaping higher profits. However, there is one but.

Fulfilling international orders comes with a certain complexity. It is a balancing act to ensure smooth and reliable international order fulfillment. First of all, orders to foreign countries take longer to deliver. They might also require additional paperwork, such as customs declarations or insurance. And, if your customer wants to return goods, you have to deal with many new challenges.

However, outsourcing fulfillment means using their expertise and experience without worrying about delivering goods abroad on time and in one piece. The best order fulfillment companies also provide you with the technology and tools to track the progress of such orders, giving you complete peace of mind.

The Bottom Line

Getting your timing right and deciding when to switch to a third-party order fulfillment provider will depend on numerous factors. However, one is clear. You should strive to strengthen your order fulfillment processes to remain competitive in the ever-changing e-commerce market.

Partnering up with the right order fulfillment company can give you a competitive edge and remove the hassle, freeing up time and resources you can reinvest in growing your e-commerce business.