With your e-commerce business, would you say efficient order fulfilment is the make-or-break success factor?
As your company continues to flourish, the question of how to handle fulfilment may become increasingly pivotal.
Two main approaches emerge:
- The hands-on DIY method and,
- The hands-off outsourcing to a third-party logistics (3PL) company.
In this blog we explore the differences between these approaches and shed light on when it's the right time to make the switch.
Hands-on DIY Fulfilment:
If you're about to start an e-commerce business or have relatively low order volumes on an existing business, the DIY option is often best.
It involves managing all aspects of order fulfilment in-house. This means independently handling inventory storage, order processing, packaging, and shipping.
While some businesses initially opt for this approach to maintain control and cut costs, it comes with its own challenges.
One of the main drawbacks of the DIY method is scalability. As your business grows, so do your fulfilment needs.
Managing a rapidly expanding operation in-house can quickly become overwhelming and lead to logistical bottlenecks.
Additionally, the upfront investment in space (unless it's your living room!), equipment, and manpower can be significant, especially for small businesses.
The other drawback is that you don't benefit from the buying power. The smaller your volume, the higher your per-unit cost on shipping, packaging, etc.
Hands-off 3PL Fulfilment
On the other hand (pun intended!), partnering with a 3PL company offers a hands-off approach to order fulfilment.
3PL providers specialise in managing various aspects of the supply chain, including warehousing, inventory management, order processing, and shipping.
By outsourcing fulfilment to a 3PL company, you can focus on core activities like marketing and product development while leaving the logistics to the experts...or you can enjoy a relatively passive income.
One of the key advantages of 3PL fulfilment is scalability. A reputable 3PL company can seamlessly accommodate increased order volumes and geographic reach as your business expands.
Additionally, 3PL companies have established relationships with shipping carriers, allowing for discounted rates and faster delivery times - savings and efficiencies that can be passed onto you.
Top Tip:
Ensure the 3PL company you consider can API their software into your e-commerce platform (such as Shopify or WooCommerce).
When to Make the Switch
Knowing when to transition from DIY fulfilment to 3PL fulfilment is not always an exact science, so as is often the best option - go with your gut!
However, these factors can indicate that it's probably time to make the switch:
1. Rapid Growth: If your business is experiencing rapid growth, managing fulfilment in-house may become unsustainable. A 3PL company can provide the infrastructure and expertise needed to scale seamlessly.
2. Inventory Management Challenges: Difficulty in managing inventory levels, stockouts, or excess inventory can signal the need for professional inventory management offered by a 3PL. The last thing you want to do is let valued customers down - it's so hard to gain customers but so easy to lose them.
3. Geographic Expansion: When expanding into new markets or regions, partnering with a 3PL with a global presence can remove the challenges of international fulfilment, and reduce the shipping costs.
4. Time and Resource Constraints: If fulfilling orders in-house is consuming valuable time and resources that could be better allocated to other areas of your business, outsourcing to a 3PL can free up bandwidth for strategic initiatives.
To Sum Up
Ultimately, consider, "Where is my time best invested?". Are you strongest at marketing, product development, driving profitability, growing a team or fulfilling orders?
Rank each element of your business and how it aligns with your strengths. Those at the bottom of the list should be delegated first (often by outsourcing).
In conclusion, while the hands-on DIY approach to fulfilment may offer control and cost savings initially, the hands-off 3PL solution provides scalability, expertise, and operational efficiency as your business grows.
Next Step
If you would like to talk to us about outsourcing your 3PL fulfilment, please do contact us today.
