This is a guest post from Jake Rheude, Director of Marketing at Red Stag Fulfillment, an eCommerce fulfillment warehouse.
This isn’t exactly groundbreaking news, but running an eCommerce business is a lot of work. Not only do you have to market your products and sell those products, but once the orders come in, now you have to get them out the door as quickly as possible. Order fulfillment requires patience, time, and attention to detail.
That’s a tall order for most growing businesses because you’ve got your time and attention split between so many other tasks—but something you can’t neglect. It’s absolutely necessary for the success of your business to get orders right and deliver them on time. So what do you do when that becomes one too many things to juggle? That’s when you should start considering outsourcing your fulfillment.
Here are seven signs that, yes, it’s time to outsource fulfillment so you can both focus your attention on all of your other responsibilities and deliver a better experience to grow your sales.
1. You can’t focus on running your business
It’s hard to imagine anyone getting into the eCommerce business because they really want to administrate a warehouse. When you’re spending the majority of your time focused on picking, packing, and shipping orders, you’re not looking at ways to expand or grow. Your work to meet today’s orders shouldn’t prevent you from lining up tomorrow’s customers.
When a business loses focus from its core activities, it can quickly stagnate and miss market signals or customer trends that are needed to thrive.
Sometimes, business owners have difficulty focusing on that growth because of the stress of the warehouse, too. It can require hiring staff, managing HR, tracking inventory, making sure costs don’t explode, keeping things neat and clean, and more—that’s a lot to handle while you’re simultaneously maintaining business operations, managing your site, developing products, and running your marketing.
When stress mounts and you’re lying in bed awake thinking about the backlog or if you missed an order, it’s time to think about outsourcing.
2. You’re ordering too much or running out of stock
It can often feel like there’s too much empty space or not enough shelving at all in a warehouse. When you hit either scenario more than a few times a month, it’s time to consider outsourcing to turn inventory management over to the experts.
A smart warehouse and distribution services provider will help you tackle these concerns in two ways. First, they use data to monitor orders and inventory levels, looking across everything you have to help you predict how much stock you need on-hand to meet demand. You get robust reporting that’s always accurate to help you plan ahead and not lose sales due to stockout concerns.
Second, your partner can identify slowdowns as they happen and give you the context behind those slowdowns. For instance, you might not sell as much during the winter and when a surprise cold-snap hits—like a snowstorm in September in Montana—you could experience a quicker decline than your CRM or eCommerce tools predict.
Warehouse partners also have more in-depth insights into returns because warehouse software needs to track these for accurate inventory counts and to understand where the problem with the product or sale occurred.
3. Your fulfillment costs become hard to predict or control
The concerns over inventory also relate to costs. It can be challenging to buy or rent the right-sized warehouse to meet year-round demands. Many businesses have months where fewer products move, so you don’t need as much physical space to hold your inventory.
However, if one of your products suddenly landed on Ellen, you’d need a significant surge in inventory to meet the current sales demand. How can your own warehouse grow overnight? Where are you going to store these additional products safely?
What about the cost of hiring more staff right away, buying more packing materials, and making all those extra trips to the carrier or arranging the logistics of getting them to send more trucks?
Shifts in demand, whether up or down, come with increasingly complex challenges and price variants. If your business is seasonal or you experience big swings in demand, fulfillment costs scale. By outsourcing your fulfillment, you’re also outsourcing those concerns. Not only can your fulfillment service scale immediately, but you’re also only paying for the growth you need. There’s no buying an entire new warehouse then leaving it half empty for months on end. You grow, get more shelves and staff, and pay just for what you’re using. And with fixed costs per package or order, you can also understand what you’ll pay at any moment.
4. Your team can’t handle the demand
Customers demand a lot from businesses—and rightfully so. But if you’re finding you don’t have a big enough staff to manage that demand, it can cause issues.
There are only so many hours in the day. If you can’t fill your orders, then they just have to wait until tomorrow. This causes delays in getting things out the door and can upset customers—especially in a world where Amazon has conditioned people to expect products to ship almost immediately. Over time, that could lead to fewer repeat customers and bad reviews—which can result in a loss of sales.
Consider outsourcing when your team is struggling to meet the demands of customers, whether that’s just filling your orders daily or ramping up to meet one-day processing and two-day shipping.
5. Your returns are starting to pile up
There are many reasons why a customer might return a product: it was damaged during shipping, the order is incorrect, or they just aren’t happy with the product. It can be a big job to process returns and take the necessary steps to make things right with the customer—and, over time, a backlog of returns can pile up.
A warehouse can handle things like taking in the return, restocking it, updating inventory management data, and sending out a replacement.
6. Your tech just isn’t keeping up
Whether it’s the systems you run or the people that run them, technology is at the center of every modern sales operation. When your tech becomes outdated, there’s a lot of useful information you’re missing and potentially many extra costs.
In the warehouse, technology can be costly to acquire and maintain. However, outsourcing fulfillment means your third-party logistics provider will run the technology, keep things up-to-date, and ensure integration with the platform you’re already using.
Instead of eating up your annual budget with a big software purchase—plus all the equipment and infrastructure to run it—you can rely on a partner to handle the upgrade and rollout. In a warehouse, these costs quickly add up when you think about everything you need, including:
- Handheld devices to scan barcodes
- Terminals to monitor orders and print labels
- Wi-Fi and connectivity to support tools in the entire warehouse
- Forklifts, trucks, carts, and other items to move materials
- Software to track orders and provide metrics on individual workers
- Extra equipment to load and unload trucks as they arrive on your site
For many small companies, getting access to the latest innovation is only feasible when you outsource fulfillment.
7. You know you’re not getting the best shipping deals
Carriers charge different prices based on the products you ship. Weight, box size, and distance all factor into the cost per shipment. That’s why many use DIM weight calculators to ensure that they’re picking the most affordable option.
However, you could save even more with leading carriers by negotiating discounts on their standard rates. To achieve this, you’ll need a high volume of orders. The more you ship, the more you save.
Unfortunately, many growing businesses won’t meet those volume requirements. When that’s the case, outsourcing can give you direct access to this additional savings opportunity. Carriers offer warehouse and fulfillment provides discounts based on their entire volume—not just your orders.
By working with a large provider or one who specializes in the types of products you ship, it can easily net you savings on every single order out the door.
While you may want to handle your own fulfillment as you’re getting started with your eCommerce business, over time, you’ll probably outgrow that do-it-yourself approach—and that’s when it’s time to start looking into a third-party solution.
So how do you know when it’s time? There are seven key indicators that you’re ready to have someone else handle your fulfillment:
- You can’t focus on running your business. When you find yourself spending so much time on fulfillment that you’re neglecting other important responsibilities at your eCommerce business, it’s time to outsource.
- You’re having trouble with inventory management. If you always feel like you have too much or too little inventory, you can turn the process over to a third party that’s experienced at gauging proper inventory levels and predicting sales fluctuations.
- Fulfillment costs get out of control. A third party fulfillment center can help if you find big shifts in demand for your product and you need the ability to scale quickly.
- Your team can’t handle customer demand. When your team gets behind on fulfillment, it can lead to dissatisfied customers and ultimately hurt sales.
- Returns are piling up. Returns can be a lot of work. When they start to pile up, it’s worth looking into a partner that can handle them.
- Your tech isn’t keeping up. Warehouse technology can be expensive. When you work with a fulfillment center, they handle the costs—from the latest order tracking software to barcode scanners and forklifts.
- You aren’t getting the best shipping deals. Warehouses can often get volume shipping deals—deals you may not be able to get on your own. As a result, you can instantly start saving on shipping by working with a third party fulfillment center.