Outsourcing eCommerce fulfillment is the business practice of contracting with an outside party to handle inventory management, shipping, and customer service for your products.
Outsourced fulfillment can save you time and money, and it can also help your business remain nimble and adaptive to changing customer needs and expectations. With so many opportunities available to small businesses today, it can be hard to know where to begin.
Outsourced fulfillment is a form of retail franchising, so many small businesses will also be familiar with this concept. If you’ve been considering opening your own retail store, consider outsourcing eCommerce fulfillment instead.
Check out the following article to learn what outsourcing eCommerce fulfillment means for your business, and get started outsourcing today.
What Is Outsourcing Ecommerce Fulfillment?
An outsourcing eCommerce fulfillment company will handle all aspects of your product’s logistics and customer service so you can focus on growing your business. Many companies will offer a full range of services, including but not limited to:
- Returned items
- Customer Service
How Does Outsourcing Ecommerce Fulfillment Work?
Outsourcing eCommerce fulfillment is essentially subcontracting a task that would previously have fallen under the purview of your in-house operations.
The outsourcing party in question will be responsible for purchasing all items that make up your product and then managing the flow of items within your entire supply chain.
Some of the key points to keep in mind when deciding how to outsource eCommerce fulfillment are as follows:
Be willing to modify your requirements when dealing with outsourcing companies. Be willing to adapt to the best advantage of your customers, suppliers, and business opportunities.
Be willing to set realistic expectations for the amount of work performed, and for the quality of work performed. Be realistic about your company’s capacity, as well.
Be willing and able to change your priorities, priorities, and processes as your business grows. Be willing to add additional functions or expand your existing processes as your business grows.
Be able to show up each day and follow through on commitments. Trustworthiness refers to having the ability to deliver while being trustworthy also means being reliable.
Types Of Outsourcing Ecommerce Fulfillment
There are many different types of outsourcing eCommerce fulfillment you might consider. Below are some of the more common ones.
Outsourced Fulfillment As A Service (OFAS)
This is a more general term that refers to any contract that involves purchasing items to be delivered to another location.
This is the most common form of outsourcing eCommerce fulfillment. The goods are purchased directly from the manufacturer.
Manufacturing Or Signing On As A Sub-Factory
In this model, you outsource eCommerce fulfillment to a third party, who will manufacture the goods and deliver them to your location.
Risks Of Outsourcing Ecommerce Fulfillment
The best way to protect yourself from the risks associated with outsourced eCommerce fulfillment is to carefully analyze each risk and determine if it applies to your situation. Some of the more common risks you’ll want to keep an eye out for include:
Poor Working Conditions
If you’re outsourcing your eCommerce fulfillment in a third-party country, you’ll likely be working there long hours and on weekends too. With no guarantee of overtime or a safe, healthy work environment, you may want to reconsider your outsourcing decision.
If your products are based in the US or EU, you may be able to claim an exemption from the World Trade Organization’s (WTO) rules. If your business sells to countries that are subject to trade sanctions, you may want to think again.
There are risks when it comes to handling major accounting and financial issues. If anything goes wrong during the course of your contract with the third party, you could be left holding the bag.
Disadvantages Of Outsourced eCommerce Fulfillment
In some cases, the advantages of outsourcing eCommerce fulfillment outweigh the disadvantages. Let’s take a look at the following advantages of outsourcing eCommerce fulfillment:
Better Control Over Costs
One of the best things about outsourcing is that you get to take back ultimate control over costs. If costs are rising, or you need to scale back your expansion plan, it’s because you outsourced eCommerce fulfillment. Now, that being said, there are some disadvantages to outsourcing eCommerce fulfillment.
One of the biggest concerns you’ll have when outsourcing eCommerce fulfillment is your employees’ confidence. If they feel like they don’t have a voice, or they aren’t following the company’s direction, it can lead to significant unrest.
An outsourcing eCommerce fulfillment company can help your business expand without taking on debt. The fees paid to the outsourced firm will be higher than if you hired a local fulfillment company, but they will deliver exactly what you order when you order it, and at a lower cost than if you handled it yourself.
By outsourcing eCommerce fulfillment, you’ll avoid the headaches and costs that come with managing an in-house fulfillment function. You’ll also have more time for your business to grow.
So, when is the right time to outsource eCommerce fulfillment? Now, of course. It’s never been a more advantageous time to expand your business through outsourcing eCommerce fulfillment.