Outsourcing order fulfillment is a major operational decision that affects your business drastically. Having a clear understanding of the pros and cons and how it can affect your business is a must when making the decision of whether or not to outsource. Clients come to us for various reasons whether they are trying to save money, grow their business, or are unsatisfied with the current fulfillment services they are receiving. We have found that the problem that most clients have is that they don’t have the proper systems in place that creates the visibility necessary for effective order fulfillment analysis. This post takes a look at that tools needed in order for companies to fully understand and analyze the costs associated with this part of their business and to help determine whether outsourcing is the right decision for your business.

When making operational decisions with regards to order fulfillment and debating whether or not to outsource there are many things to take into consideration but the bottom line is whether or not outsourcing is going to help your business grow. If right now your order fulfillment is taking up so much time where you cannot focus on sales and your core competencies then it is very likely that your fulfillment is holding your business back significantly.

Why Outsource?

Visibility
It is important that a company has systems in place that create visibility where they have the ability to analyze their cost of fulfillment, cost of inventory, freight costs, kitting and assembly costs, among other things. Systems that can keep track of order trends and inventory levels are important when being able to forecast demand and making informed businesses decisions based on that. If the visibility is not there, then your business is most likely making decisions based on blind assumptions.

Cost savings
When looking for an order fulfillment center it is important to pay close attention to their cost structure. Many clients have come to us expressing frustrations with their current order fulfillment centers. Confusion about what they are actually being charged for and hidden fees are not uncommon. When looking at outsourcing your order fulfillment it is important to know what to expect. Some common costs that you may see include: storage fees, order charges, line item charges, receiving charges, kitting and assembly charges, and monthly minimums. It is extremely important to have a clear understanding of what you are being charged for before entering an agreement.

Pricing can look overwhelming when looking at quote sheets, but there are in fact several advantages to outsourcing your order fulfillment. In most cases, companies can save a significant amount of money even for small companies. The cost of the systems necessary to handle inventory and order fulfillment effectively can be extremely expensive. For that reason alone, many companies come to us looking for a solution. Other cost savings can be seen with freight and personnel. Since order fulfillment centers are constantly shipping, they often have negotiated rates with freight companies that give them large discounts that they can pass on to their clients. When it comes to personnel, paying a salary for one person to handle your order fulfillment is probably costing you over $30,000 conservatively. That $30,000 can go a long way when using outsourced fulfillment services. Order fulfillment centers normally have the ability to scale up and down with temporary employees which gives your company more flexibility to focus on growing business without the worry of hiring and firing personnel.

Value added services
Using an order fulfillment center that can provide more services than just fulfillment can be a big plus when it comes to convenience and quicker turn times that can be passed to your customers. Look to see if the fulfillment center you are using or looking at using can offer you services such as kitting and assemble, custom packaging, and any other services that could be valuable to your company.

Using order fulfillment centers that offer a complete solution meaning they have a solid warehouse management and inventory management systems in place, kitting and assembly capabilities, freight discounts, and good customer service is extremely important. Order fulfillment centers should want a good partnership with your company because when done right, the more successful the company is and the more orders coming in, the more money the order fulfillment center will be making. Have a clear understanding of not only the fulfillment center’s cost structure, but also their additional services that can bring value to your business.