Benefits of Outsourcing Order Fulfillment

Can Outsourcing Fulfillment Services Help You Turn A Larger Profit?

When you consider all of the costs involved in maintaining your own warehouse and staff, as well as the new options a order fulfillment center may be able to provide you, you will be able to justify the fact that you will have indirect control over the order fulfillment process.

Options such as fixed costs, and flat-rate shipping, will help you to roll these expenses into your cost model. Especially if you ship sufficient volume to allow your fulfillment company to justify giving you a large discount.

If you weigh the costs of employees, benefits, insurance, taxes, unemployment, facilities, etc, to the fixed cost model provided by an order fulfillment provider, you should quickly see that making the switch is justified. You can often save 20-50% over your existing expenses when you compare the costs of outsourcing, and the costs of processing your own orders in house.

The inverse is true as well. If you are running a ecommerce company all by yourself, or with the help of friends and family, and your costs are down, but you are spending all of your time shipping out orders, purchasing packaging supplies, and reviewing your shipping records. Now, imagine if you took all the people that are working these remedial tasks, and turned them into your marketing / sales team. Send them to trade shows, have them make sales calls, have them negotiate better rates for the products you are selling…

4 Benefits of outsourcing fulfillment

Many merchants who start a small business dream of one day standing over a massive company that employs hundreds and has offices all over the world. The delicate part of growing your ecommerce business is dealing with issues which one has no prior experience dealing with. One such decision that has to be made is that of outsourcing order fulfillment.

    1) Focusing on Your Strengths

    “You can’t be good at everything and even if you are, you don’t have time for it all. If you are going to be spending that money anyway, outsourcing allows everything to be taken care of without you having to deal with any of the potential problems. This is the biggest benefit of outsourcing.”


    2) Gaining Their Expertise

    “The fulfillment house are experts at what they do so you are gaining access to all of their experience and wisdom. They will know the best, most efficient and cheapest way to store and ship something. This is handy if something has to be sent to a country where there are requirements you are unsure of. Also, due to the bulk numbers they deal with, they should be able to pass on the discounts they receive to you.”

    3) Less is More

    “If you have your own warehouse, this means hiring people to staff it. You will have to go through the whole recruitment process of interviews, checking references and the like and this is then followed by training them. You will need all of the equipment in the warehouse and this is expensive. What is also expensive is the insurance pertaining to the warehouse and people working in it. Once your warehouse staff starts working, you’ll have HR issues to deal with. All of this is one potential headache followed by another. Outsourcing allows you to avoid all of them.”


    4) We’re Going to Need a Bigger Boat

    “Success for a company is a double-edged sword. With that growth will be the problem of outgrowing your space. So you now need to find a warehouse with a far greater capacity. You will have to spend time scouting out new locations and this can be a very costly exercise. If you are growing and have outsourced fulfillment, the extra space isn’t something that you have to worry about.”
    Outsourcing fulfillment may not be for all. Some may try it and feel like they prefer the control of doing it themselves. Ultimately there is no over-riding right or wrong answer. Each company has to work out what is best for it. If you are going to outsource fulfillment, do your due diligence in advance so you are sure your fulfillment partner is on the same page as you.


Outsourcing your fulfillment can help by making the majority of your variable expenses become fixed costs.

This way, you know exactly what you require as a margin to effectively sell your products. This gives you a competitive edge. If you dropped your prices by 5% would it stimulate enough sales to offset the margin loss? This question is much easier to answer if you know exactly what your costs are.

Many of today’s most successful companies (including General Electric, Pepsi, Merck, Home Depot, Wal-Mart, McDonalds, Microsoft, Morgan Stanley) have discovered that outsourcing gives them a competitive advantage.

How can fulfillment help with buying power?

If you have a product that is selling great, you have struggled with the decision to purchase / manufacture higher volumes of the product. With fixed costs, you will be more free to purchase at higher volumes, which means a better price from your suppliers. Also, if you sell a common product, the fulfillment company may be able / willing to act as a consolidated purchaser for you. If they have other clients that sell the same items as you, they may be able to cooperatively purchase larger volumes, so that you receive a larger discount.

Don't underestimate the increased valuation of your company!

One of the often overlooked benefits of outsourcing, is that it makes your profit sheet more favorable. Because you typically only pay for the services that you use with a fulfillment company, your expenses will drop. This will help to lower your fixed assets, and improve your business equity. Most importantly, it frees up cash for use in areas where there is potential for a higher return on investment.

Improved accuracy?

It may be hard to believe, but a good fulfillment center will have all the right tools to ensure efficient and accurate order processing. They will have sophisticated inventory control systems, streamlined their pick pack methods, and optimized their receiving and returns methods.

A good fulfillment service will be able to improve the accuracy rate. Not only that, but if an error is made, they are accountable, so they should have methods to “make it right,” without an additional cost to you.

A good order management / inventory control system will allow you to look at the history or not only orders, but of skus. You should have access to various reports that can help you make wiser decisions on purchasing, which shipping methods to use, and more.

Can a fulfillment center help me increase sales?

That totally depends on the fulfillment company. Some fulfillment providers only care about profits, so they will take on a bunch of accounts, and turn themselves into a storage company. Others, would prefer to help you sell more of your orders, because they realize that the more orders you sell, the more orders they ship.

Fulfillment companies may also be able to help you directly with marketing. There are a number of options that may be at your disposal, depending on the company. For example, you may be able to place promotional materials inside orders that the fulfillment company is sending out for other clients. Or, you may be able to take advantage of marketing services that are provided by the fulfillment company itself.

Remember that fulfillment companies work with a ton of different businesses, and they have extensive understanding and resources when it comes to business development. You could benefit greatly from their experience.

Benefits of shipping orders to the US from another country

Shipping over international borders is expensive. If you work with a fulfillment company that is located inside the United States, you will drastically reduce your transportation costs.

You should also consider the benefit to your customers. Because the product is shipped within the US, they will not be required to pay customs, duties, or brokerage fees.

US fulfillment companies have negotiated rates with carriers such as UPS, and FedEx, who primarily market their services inside the US. This translates in a savings to you.

Also, if you sell a number of orders to Canadian customers, and you are shipping from another country, you should know that it is relatively inexpensive to ship to Canada from the US. Specifically, if you work with a fulfillment service provider that is geographically located in close proximity to Canada.The value of the USD is dropping,and it becomes even more beneficial to use an fulfillment company located in the US. Service and assembly fees are often lower than outsourcing in other worldwide destinations.

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