Special Section: Pros and Cons of Outsourcing Your Fulfillment Operation

While the order fulfillment department of your cross-channel retail business isn’t the sexiest or most fun, it’s arguably one of the most important. Most customer complaints are centered around fulfillment issues, for example. And if your business has even the slightest fulfillment gaffe in today’s social media environment, it’s one tweet away from a public relations disaster.

The importance of logistics and order fulfillment has never been greater. In today’s post-Amazon world, most consumers are demanding that the products they order arrive as soon as they click the “Buy” button. What’s more, most don’t expect to pay for shipping.

Some cross-channel retailers choose to keep their fulfillment operations in-house with a staff of employees who receive orders, process them and ultimately ship the product to their customers. Others choose to outsource this function to a third-party, full-service fulfillment house.

Should you outsource your fulfillment department or bring it in-house? To help make your decision easier, we’ve compiled a list of the pros and cons of an outsourced approach.

Outsourcing Pros
1. The ability to concentrate on your core business. Since you won’t be involved in the day-to-day process of fulfilling orders, you’ll be able to focus on what you do best — marketing your products, improving sales and increasing revenue.

2. Staffing concerns are shifted from your company to the fulfillment service provider. Rather than spending large amounts of time hiring new employees or using temporary personnel during peak seasons, your fulfillment provider manages all of these concerns for you. Fulfillment houses are often equipped to handle peak seasons well in advance.

3. Controlled costs. Since you’re only paying the fulfillment house for the work they actually perform for your company — e.g., fulfilling orders, assembling products, storage, etc. — you can easily project costs and maintain the specific margins you need to ensure that your company is profitable.

4. Lower shipping costs. Most fulfillment solution providers have greater shipping volume and therefore can negotiate better rates with carriers.

5. Warehouse space is no longer a concern. Many companies today that outsource their fulfillment operations do so because most of the year they have to pay rent on large warehousing facilities with little or no inventory in them. Why? Because the space is needed to accommodate them when their busy season hits. Working with a third-party fulfillment firm, however, eliminates this need.

Outsourcing Cons
1. You’ll lose some control over your products and how they’re shipped. If you outsource, remember a key fact: You’re depending on someone else to take care of the shipping, handling and receiving of your products.

2. Be ready to be an expert communicator. Outsourcing means that you’re relying on a third-party provider for all of your fulfillment needs. It’s critical that you clearly communicate with your fulfillment provider regarding inventory details, such as when it’s coming and how you want it handled. Communicate your needs (e.g., “please label with hangtags,” “please repackage,” etc.) and get the proper agreement from the warehouse. This must be done at all times, whether it’s your first receiving or your 100th.

3. Costs. Yes, for some companies outsouring fulfillment lowers costs. But if you’re not careful, you could end up increasing your costs considerably as well. Before signing on the dotted line with an outsourced provider, read the contract’s fine print.