Maybe you’re a small business. It all starts with an online business idea — you have a product, do some marketing, the wheels of commerce start turning and now you find there are people out there buying what you are selling. Now you’re at a tipping point: the orders are coming in fast and furious, and some decisions have to be made about what’s next.
Or perhaps you’re a larger, more established company. The hassles and expense of handing the inventory, fulfillment and returns is taking up a big chunk of time, money and management. Shoveling resources into areas outside of your core competencies isn’t a winning business strategy. Fortunately for you, there is a Plan B — outsourcing your fulfillment by using a warehouse management firm.
What is Outsourced Fulfillment?
When you outsource fulfillment, you are hiring a third party to manage all aspects of your inventory fulfillment process. Third-party logistics (often abbreviated as 3PL or TPL) providers are strictly in the business of handling logistics and supply-chain services and management for other companies. This is usually an all-encompassing commitment, which includes receiving, warehousing and inventory of your product, all fulfillment tasks (picking, packing and shipping) as well as reverse logistics (processing customer returns).
There are numerous benefits to outsourcing your fulfillment to a 3PL warehouse company. One of the big reasons is cost. The cost of buying or leasing warehouse space, including all the associated fixed costs: equipment, warehouse management software and hardware, insurance, taxes, utilities and all the other expenses associated with a physical facility—can be overwhelming.
A huge cost barrier is the human factor. It takes a lot of manpower to handle the fulfillment process, and if your business has its up-and-down periods, there are times of overwork or downtime. Another cost advantage of outsourcing to a firm that is in the fulfillment business full-time is that the 3PL has the ability to scale in real time. Even if these trends are predictable, it’s still a chore to hire and downsize to accommodate the demand during these periods. And it’s not just paying these workers that’s expensive; there are the matters of benefits, insurance and hiring additional human resources staff to adequately deal with these extra employees.
What Does This Mean For You?
Freeing up this capital from the huge expenses of physical assets and the associated labor allows you to focus on your core competencies. Partnering with a 3PL company to handle all your warehousing, shipping and distribution (along with all the other logistical aspects of your business) is a far better option than sinking a boatload of capital into a large division of your business that is not revenue generating.
Because they’re in business full time to handle fulfillment (and not a division of a company that is in another business altogether), top logistic companies are equipped to handle all sales reports and inventory reporting, and are dedicated to streamlining the entire fulfillment process. This includes cost-saving measures, such as partnering with shipping providers to get a volume rate on all shipments.
A third-party fulfillment company is not merely another vendor, but a trusted partner, taking full responsibility for a vital part of your business. This partnership will liberate you from of a complex, yet necessary aspect of business and allow you to free up capital and invest in your business. You will avoid the additional burden of having to manage an entire fulfillment division. This will let you stick with your strengths and build on the aspects of your business you do best; branding, product development and marketing.
Author Chris Capelle is a technology expert, writer and instructor. For over 25 years, he has worked in the publishing, advertising and products industries.