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 are 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 hire 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).
The Benefits
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 related to a physical facility—can be overwhelming.
A considerable cost barrier is a human factor. It takes much workforce 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 in the fulfillment business full-time is that the 3PL can scale in real-time. Even if these trends are predictable, hiring and downsizing to accommodate the demand during these periods is still a chore. And it’s not just paying these expensive workers; there are the matters of benefits, insurance, and hiring additional human resources staff to deal with these extra employees adequately.
What Does This Mean For You?
Freeing up this capital from the enormous 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) 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 company’s division in another industry altogether), top logistic companies are equipped to handle all sales reports and inventory reporting. They 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.
In Closing
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 a complex yet necessary aspect of business and allow you to free up capital and invest in your industry. 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.
References:
https://en.wikipedia.org/wiki/Third-party_logistics
https://multichannelmerchant.com/blog/need-know-changing-3pl-providers/