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Is outsourced fulfilment for you?

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With the wealth of software available to help you dispatch your own orders, is it really worth the cost of outsourcing fulfilment to a 3PL? In most cases, the cost is much lower than you might think and the potential savings significant, but it's definitely not for everyone. This article is intended to give you an overview and help you decide what's best for you.

Postage and Packaging

The fulfilment house will always be able to beat your costs on these. Large postal and courier accounts mean the best price, and equally purchasing high volumes of packaging keep costs down.

Product Types and Mix

Packing one order correctly is easy, but the task can get very tedious and even with the best will in the world mistakes will happen. Doing it yourself, using a logical system you might expect to dispatch 1 in 100 orders incorrectly, an average fulfilment house will achieve 99.6-99.9% accuracy due to additional checks and systems such as barcoding (at the time of writing our accuracy is currently 100.0%). Every mistake is likely to be very costly in both additional labour and postage; but more importantly, customer loyalty - the best fulfilment houses will guarantee to cover the costs of their mistakes.

If you have clearly defined products, for example in regular consumer packaging, then outsourced fulfilment is likely to be cheaper than doing it in-house as the economies of scale in operating specialised picking and packing are generally large. Those selling bespoke, one off's or irregular items (for example, customised goods or vintage clothing) may find that the model simply isn't compatible. Fulfilment houses will request that every product is added to their system and clearly identifiable - something that is likely to add an additional level of administration when handling such products.

Heavy and large items are likely to attract additional handling fees, though the costs of handling these good yourself will be equally higher. If the fulfilment house manages heavy items on a regular basis then they may have more specialised equipment for dealing with it.

If you sell fairly standard items with a few customisations, it is still likely to be beneficial to outsource but this is something that will require more analysis.

Time is Money

Something that many companies don't appreciate until they sub contract their fulfilment to a 3PL is the amount of time it frees up, relieving not just the packing but also a lot of other issues such as storage, customer returns and dealing with tracking information. With a service such as that offered by James and James Fulfilment, all the data you need to respond to any query is available at a touch of a button and presented in a way that's easy to understand, making it much easier to just get things done.

Flexibility and Load

If your business ships 50 orders a day, every day then this is not an issue for you; but unfortunately, real businesses don't work like this! The ability to have additional staff to hand when you have peaks in demand not only mean that you don't have to scramble around trying to find additional packing space and labour, but also ensures the customer gets their order on time (We always aim to get all orders placed before 3pm out the same day). The more campaigns you run and the higher the fluctuation in your orders, the more cost effective outsourced fulfilment will be.

Date Sensitive Products

Again, if you're selling light bulbs it probably doesn't matter if some sit on a shelf for 6 months, but if you're selling food, cosmetics or electronics then there's always a real risk of stock becoming unsellable (or last seasons model) before you notice. Third party fulfilment houses vary quite widely on this one, but a good service will dispatch goods in a strict rotation. We go a step further and track every batch and best before date for you, giving alerts and reports on stock that's expected to be a problem in the future. For those storing date sensitive products, this alone could provide large savings in stock losses.

Conclusions

For the majority of companies, outsourced fulfilment to a 3PL is likely to be cheaper, especially when you consider the 'unseen' costs of time, returns, customer satisfaction and stock losses.

To find out if it's for you, why not let us put together a no obligation quote for you?

October 25th, 2010 by Hannah Newman

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