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Should You Outsource Order Fulfillment?

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By Delilah Obie
Co Author: Kelley Westrick

You might think it's out of the question to outsource order fulfillment because your product or your sales volume don't require it. Why not reconsider? In the end it's not always going to be more cost-effective to do your order fulfillment in-house.

A careful look at some of the factors that will make or break your company's fulfillment practices will enable you to make an informed decision.

Order Volume

Growth means your order volume will increase. The question is how fast this will happen and whether it will prevent you from filling orders within an acceptable amount of time. Even if your business has temporarily leveled off and you are now interested in spending more time on developing new secondary business opportunities, such as affiliate relationships or other marketing and business developing opportunities, outsourcing all or part of your fulfillment might free you to be able to pursue these opportunities.

Outsourcing options are abundant. Many fulfillment providers are geared to meet the needs of small businesses and can handle the entire process from shopping cart to doorstep. Or you might hire them for a specific task, such as pulling items from the warehouse shelves and packing them for shipment, or for managing returns.

Your Level of Expertise

Order fulfillment is a critical process and has many requirements. Do you have the expertise to integrate sales with order fulfillment so your business can handle shipping and returns?

Order fulfillment, on even a modest scale, requires some expertise to integrate back-end fulfillment systems with front-end sales mechanisms, set up a warehouse or a stockroom, or to handle shipping and returns. If you do not have experience or training in fulfillment, you should consider outsourcing or at least bringing in a consultant to help you get started.

Type of Product

If you offer customized products, such as monogrammed towels, you may be best equipped to fill each unique order, since your product will require additional manufacturing before shipment that only you can do. Simple, easily stored, nonperishable items that you sell by the hundreds lend themselves more readily to outsourcing.

You may have the order volume and products that lend themselves to outsourced order fulfillment. Your sales, however, might not justify it yet; outsourcing fulfillment will shave precious dollars off your profit margin. As your business grows, you can always reconsider your options.

In case you later wish to outsource some or all your fulfillment duties, be sure to use standard operating procedures to ease the transition. Eventually, outsourcing may be money well spent. Crunch the numbers to determine at what order volume it makes sound business sense to outsource fulfillment.

Scalability

Make certain that you and/or your vendors are equipped to handle seasonal spikes in sales. You want to be able to fill all the orders that come in.

Determine whether you will be able to handle expected increases in sales in-house. If you expect a jump in sales in the near future that will require outside help, it might be wise to begin preparing an outsourced vendor before it's too late.

Once the rush is on, you will be hard-pressed to make a smooth transition to an outsourced fulfillment system. Also, during peak periods such as the holidays, the fulfillment houses might be too busy to take on extra work at the last minute.

Order Status Reporting

A good fulfillment system will report on the status of any order to any department that needs the information. One benefit for many small businesses of performing fulfillment in-house is the proximity of data and inventory. But just because you have all the pieces of information available doesn't mean you will be able to make use of them.

A professional fulfillment house with its fully integrated order fulfillment system will be able to generate reports and verify order status easily. Your volume will determine how much emphasis you need to place on this issue.

Customer Service

Will you be able to provide sufficient customer service? It is a key ingredient to a successful business and one of the most important elements for retaining customers. Don't let filling your orders deplete your customer service resources. Likewise, many fulfillment houses have staffs to take care of customer service and might do a better job than you could afford to do in-house. Some customer service issues you will want to cover are:

    * Order tracking from shopping cart to doorstep.
    * Customer notification of orders received and filled.
    * ETA — estimated time of arrival to customer's address.
    * Special orders: shipping preferences, wrapping styles, or delayed delivery.
    * Returns: providing return labels and shipping instructions.

Will you be able to monitor your inventory sufficiently to know how many orders for a particular item you can fill? Likewise, a fulfillment system should ideally be able to halt a sale if the item is not available. With an insufficient system, orders may go unfilled for unreasonable lengths of time, frustrating your customers. Professional fulfillment houses are trained and prepared to avoid such situations. Are you?

The Basic Question

Some of the most important aspects to consider when deciding to outsource fulfillment include the basic question, "What is the best method I can afford?" No business has unlimited resources. It is a question of using them wisely. You must consider what your customers want most. Are they likely to tolerate a six- to eight-week delivery time since your products are so well priced? Are your items so fragile that they'll want to see a generous returns policy prominently placed next to the shopping cart? Balance your resources with your customers' requirements.

For a small e-commerce site with small order volume, in-house fulfillment probably will be the way to go. For an e-business with lots of orders of nonperishables, outsourcing might be the answer. You'll have to decide for yourself how you want to handle fulfillment. Just remember; getting the item to the customer is just as important as making the sale.

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