Do a quick online search for a fulfillment company and you’ll be sure to find a long list of pages and articles dedicated to how wonderful outsourced warehousing and distribution operations can be for businesses of all shapes and sizes.
The main premise is that a fulfillment company alleviate the headache of processing back end storage and shipping functions, thereby allowing business owners to free up time and resources that can be used in other areas of the business to help propel the business forward to even greater success. And for many companies, outsourcing offers a worthwhile alternative to managing warehouse space, employees, picking orders and shipping packages internally.
But before you jump in with both feet, it’s important to understand both sides of the equation – including some of the potential challenges that could creep up on you should you decide to outsource.
Does A Fulfillment Company Really Free Up Your Time?
One of the greatest fallacies of outsourced fulfillment is that it will fully alleviate the pain of managing the warehousing and distribution process. In fact, many websites claim that, by using a fulfillment company, you can simply spend time in other areas of the business and not spend any time worrying about fulfillment and shipping.
This couldn’t be further from the truth.
Even in successful outsourcing relationships, it’s not only important but downright critical to “manage” the provider. Think of an outsourced provider as an employee – you wouldn’t let them work without supervision, training, and a degree of accountability, would you? Same thing goes for an outsourced fulfillment partnership – in order for it to be most effective, there will be a lot of back and forth communication, a great deal of accountability, and a meaningful amount of management time spent appropriately managing the partnership.
The investment of time into a fulfillment arrangement begins when the product is shipped to the warehouse. It takes quite a bit of time to transfer inventory, integrate systems, coordinate customer service functions, and many other set up functions. It’s almost as if you’re training a new warehouse staff.
But the time investment doesn’t end there. While it does diminish over time when the fulfillment company is handling everything effectively, there’s never really a point in time that you can put fulfillment on the back burner and “forget” about it.
If you don’t have adequate time to invest in the initial set up, and if you’re not committed to spending enough quality time each month towards the end of effectively managing your fulfillment partner, then you might want to think twice about using a fulfillment company.
Is Your Business Large Enough to Reap the Benefits of a Fulfillment Company?
For the most part, fulfillment services are billed as a cost effective solution for companies of all sizes – from Fortune 500 firms all the way down to start up e-commerce retailers.
There are a number of “big name” companies that offer fulfillment services for start-ups and small businesses, such as Amazon and Shipwire. But these services may not be a truly affordable option for growing small businesses. First and foremost, small and growing businesses oftentimes rely heavily upon founders, owners and key managers to “wear many hats.” For some small business owners, shipping product is a must, as the funds don’t exist to pay for outsourced services that can be performed with cash outlay.
Many would argue that the owner or manager of a small business might be better suited to spend their time on other, more sales oriented tasks – and in theory, they might be right. But if the company truly doesn’t have the funds to afford the use of a fulfillment company, then it might be better suited to hang tight and do what most small business owners do best – work extremely long hours in order to get the business off the ground. If your business is extremely tight on cash, you might be best suited to re-think outsourcing.
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Will Using a Fulfillment Company Mean an End to Mistakes?
Yet another fallacy regarding fulfillment services is that a fulfillment company is somehow immune to errors. While there are a number of technologies that can be implanted in the fulfillment process, it’s still a process that is subject to manual human labor to some extent. Therefore, there will be errors.
Professional fulfillment services will be able to operate at a relatively high level of order accuracy, in many cases pushing as high as 99.9%+ order accuracy. However, there will always be errors and these errors will eat up time and resources to correct.
If you’re outsourcing in order to completely eliminate errors, you may not be happy with the results. And keep in mind that the fulfillment company that uses more technology and has fewer errors will most likely cost more. But understanding that mistakes will still exist will temper your expectations and provide a proper framework for managing the outsourced fulfillment relationship.
Does Your Business Require Extraordinary Customization in the Fulfillment Process?
One of the last things that many fulfillment companies claim is that they can customize the process to meet your individual needs. In some cases this is absolutely true. However, many fulfillment companies don’t offer a great deal of customization.
Some businesses don’t have a great need for customization. For example, if you ship only a handful of products and you ship them the same way every time, then a fulfillment company will be able to process your orders quite easily.
However, as you add more and more complexity that you’ve presumably mastered through experience, it may not be as easily transferred to a fulfillment company – especially since their goal is to aggregate processes over multiple companies.
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In order to streamline operations, oftentimes a fulfillment company has to create strict standards. This helps it eliminate errors and cut down on time and costs. If your business needs a great deal of flexibility, then you’ll certainly want to explore the feasibility of using a fulfillment company.
By all means, outsourcing fulfillment can be an extremely beneficial option for many businesses. However, because of the misinformation out there on the Web, it’s important to understand both sides of the equation before you use a fulfillment company. In doing so, you’ll be able to make the best decision and have a successful partnership. And especially if you do decide to outsource, knowing the potential pitfalls will help you solidify a more secure partnership with your fulfillment company.
**Disclosure of Material Connection:
Some of the links in the post above are “affiliate links.” This means if you click on the link and purchase the item, I will receive an affiliate commission. Regardless, I only recommend products or services I use personally or believe will add value to my readers. I am disclosing this in accordance with the Federal Trade Commission’s 16 CFR, Part 255: “Guides Concerning the Use of Endorsements and Testimonials.”