October 18, 2022

How To Know When You Need To Outsource Fulfillment

Written by:
Brandon Rollins

Here’s a story as old as eCommerce. A business owner sets up shop online and, after countless hours of hard work, everything starts to  click. Your store is making money, and units are flying off the shelves.

Now that you’ve solved the demand side, somebody has to ship all the units to your customer.. And if you’re the eCommerce store owner in this situation and you haven’t outsourced fulfillment to a third party, then that means you. (Or at least someone on your payroll).

Shipping orders is a ton of work. For each individual order, you have to pull items from storage, update your inventory, pack boxes, print postage, and go to the post office and/or schedule a pickup. For every single order.

After a certain point, your work becomes unnecessarily repetitive and burdensome. Instead of shipping orders, you could be growing your business and making more money… or maybe get back to a normal sleep schedule Point is – you don’t always *have* to ship your own orders.

But knowing when to outsource fulfillment isn’t straightforward. Finding a fulfillment partner isn’t hard - finding a good one is - so you have to be thorough and deliberate in your decision making.

And to help you know when to make that call, we’ve put together this guide for you!

First, why you should *not* outsource fulfillment?

Before talking about how you can outsource fulfillment, let’s talk about why you might *not* want to at first. Yes, doing so can save you a ton of work and time. But implicit in outsourcing fulfillment is the fact that someone else will be handling an important part of your business without your involvement.

As soon as you send over your inventory to the warehouse, you will lose a considerable amount of visibility and control over your order fulfillment process. The trade-off is often worth it, and good fulfillment partners are also good communicators, sharing important information like:

  • how much inventory you have on hand
  • the status of your orders,
  • tracking numbers for orders in transit.

And other information you might want to know. 

But even still, you can’t literally walk to your stored inventory any time of the day and see it there, just to know it’s there.

This is why - when you do decide to outsource fulfillment - it is important to find a reputable and trustworthy 3PL partner, since it allows you to ship orders with confidence and return your attention to growing your business.

Outsourcing fulfillment usually doesn’t make sense until you have steady order volume.

The other major factor you should consider when deciding whether to handle fulfillment in-house or outsource is… cost. Fulfillment centers charge for:

  • account maintenance
  • storage,
  • per-order charges
  • pick-and-pack fees
  • postage
  • supplies. 

With enough orders, 3PL discounts on postage and supplies are often enough to offset or even exceed the storage and account fees, as well as the pick-and-pack fees.

But, at what specific order volume does outsourcing fulfillment make financial sense? That’s a much tougher question to answer. Many warehouses expect a minimum monthly order volume, often 100 orders per month or more. 

This, incidentally, is roughly when a lot of eCommerce stores break even on outsourcing fulfillment. However, some warehouses will accept lower monthly order volume or even have no minimum at all.

The only way to know for sure whether outsourcing fulfillment will make financial sense is to request quotes and run numbers. (You can learn more about that in this article.)

Outsource fulfillment if you’re feeling incredibly overworked.

Vetting fulfillment centers is, itself, a fairly involved process. But the clearest sign that you need to put in the work to find a fulfillment center is if you’re overworked!

Shipping your own orders can take hours of work every day. It’s a complicated multi-step process that involves juggling a lot of software and frequent fights with your printer. Your time and energy are your most precious resources as a business owner, and they must be guarded closely.

So, if you are – right now – feeling fried and spending more than 30 minutes on shipping per day, it’s time to outsource fulfillment. It’s time to outsource fulfillment even if it pushes your expenses up in the short term. Once you reclaim some of your lost time and energy, you will make up for the extra expenses, with further business growth.

Outsourcing fulfillment reduces your business complexity.

Running a business is complicated. With eCommerce, you need to know a little about a ton of different things. You have to be able to:

  • maintain a supply chain
  • market your brand *and* individual items
  • handle bookkeeping
  • manage employees. 

There’s a good chance you’re doing a little web design too with your Shopify, WooCommerce, BigCommerce, Magento, or Squarespace store. Maybe you’re managing multiple storefronts and fulfilling with Amazon as well.

This all requires the ability to think both on a big-picture strategic level and on a detail-oriented, operational level at the same time. But it’s cognitively tasking to switch from task to task to task throughout the day. So when you get order fulfillment off your plate, that’s one less thing you have to think about when you’re trying to fall asleep. It’s one less thing you can make mistakes on because you’re preoccupied with other tasks, or alternatively, it’s one less thing you have to delegate to an employee which you must then manage.

Outsource fulfillment if you’re out of space.

Here’s a short list of things you will need  to fulfill orders in-house. You’ll need:

  1. To store all your inventory somewhere easily accessible.  bulk supply of boxes, mailers, bubble wrap or similar void-filling materials. 
  2. Most likely a printer (taking up a lot of space) for the creation of postage labels. 
  3.  Spare ink for printing 

This can take up a ton of space, and easily take over your office, garage, or home. And if you’re running an eCommerce store from, say, a 1-bedroom apartment (we’ve all been there)... forget it!

Getting rid of clutter around your home or workspace is a good reason to outsource fulfillment too. Having boxes of stock just sitting around can really take a toll on your ability to focus, even if it’s not actually in your way.

Outsource fulfillment if you need to be ready to scale.

Sometimes success comes as a surprise, and sometimes it doesn’t. Maybe you have a battle-tested ad campaign ready to run for a large amount of money. Or perhaps you’re seeing steady month-over-month sales increases. Who knows – maybe you’re going to be on Shark Tank next week.

Whatever the reason may be, if you have a reason to suspect you’re going to be shipping many more orders than you’re used to, as in hundreds of orders per month or more, then it’s probably a good idea to outsource fulfillment a little bit before you need it. It might take longer than you expect to get started with a fulfillment center.

Think about it – if someone is shipping your orders for you, then the next most likely thing to hold your business back is the amount of inventory you have left to sell. That’s a much better situation to be in for long-term success because you can always order more and be confident  someone will be there to receive a massive order of your inventory.

Outsource if postage and supply costs are adding up.

Here’s a secret about postage prices: they can be discounted by up to 90% under the right circumstances. Given that postage is often the single largest expense from order fulfillment, the implication is profound. Fulfillment centers buy a lot more postage than individual eCommerce stores, so they have the bargaining power to get much lower prices, which they can pass on to you.

Can you get discounted postage on your own? For now, yes, and you absolutely should through postage reseller companies like Easyship and ShipStation if you need it. But fulfillment centers often provide you with even better discounts.

The same principle applies to supplies like boxes, polybags, and packing material. You can buy online through ULINE, which is what many fulfillment centers do. But you will likely notice supply costs decrease steeply per unit when you order truly massive quantities, which is what fulfillment centers do.

So, long story short: if you’re paying anywhere close to retail price on postage and supply costs, and you’re shipping a lot of orders, it’s a good idea to outsource fulfillment. You will wind up saving important money to reinvest elsewhere in your business.

Final Thoughts

When you outsource fulfillment, you will likely:

  • ave a lot of money, time and space
  • Reduce the complexity of your business
  • Obliterate the obstacles that so often stop eCommerce store owners like you from scaling your businesses how you  want to.

But, it’s still tough to turn over control of your business – your baby – to a third party company. Knowing when to make that call isn’t easy.

So to recap: if you’re shipping 100+ orders per month or feeling really stressed, outsource. Out of space? Outsource. Out of headspace? Outsource. Paying retail price for postage or supplies? Definitely outsource!

Get Help Requesting Quotes From The Best 3PLs

To get an accurate quote from 3PLs, it is important to provide as much detail as possible about your products. That means providing information on the size and weight of your items and orders, the number of SKUs you sell, the location of your customers, and your packaging requirements.

Most companies will let you submit requests for quotes on their website. But, you need to contact multiple (sometimes dozens of) 3PLs to find the right one, and that's a time-consuming process.

Want to skip the repetition and streamline your search? Get in touch with Overflow to start your search free of charge, and make sure you find the best 3PL for your business.