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Warehousing & Fulfillment

4 Advantages of Outsourced Fulfillment

Warehousing & Fulfillment
October 28, 2020
7 min read
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Merchants report that outsourced fulfillment gives them faster, more reliable fulfillment and simplifies their day-to-day operations. Read this guide to learn why nearly 82% of merchants choose some or all of their fulfillment operations.

The Challenges of Insourced Fulfillment

A recent merchant survey revealed that most merchants currently handle at least some of their fulfillment operations in-house. Depending on a business’s size and supply chain operations, in-sourced fulfillment can look very different from one company to the next. It can mean anything from owning several full-service warehouses to picking and packing orders from a home or office.

20% outsource fulfillment, 21% insource but want to outsource, 31.6% hybrid, 50% insource

Interestingly, 21% of merchants indicated that they currently in-sourced some aspect of their fulfillment but wanted to move to an outsourced model. Their top fulfillment pain points are inventory management, order accuracy, and delivery speed.

44% of merchants cited operational efficiency as the greatest benefit to outsourced order fulfillment

Ahead we’ll discuss how outsourcing warehousing and fulfillment helps SMBs address these key fulfillment challenges with the following 4 advantages:

  • Frees up bandwidth to focus on business drivers
  • Expands their technological capabilities and delivery network
  • Creates operational flexibility
  • Increases top-line revenue

1. Outsourced Fulfillment Gets You “Out of the Logistics Business”

Among the benefits of outsourcing fulfillment, 44% merchants indicated that greater operational efficiency was one of the most important.

44% of merchants cited operational efficiency as the greatest benefit to outsourced order fulfillment

ECR4Kids, for example, is a children’s furniture and toy supplier that for many years operated with a traditional in-house fulfillment model to serve their largely B2B customer base.

When they branched into D2C marketplace sales, they found that their legacy fulfillment model was unable to meet consumer expectations for fast delivery. In order to meet this new expectation without putting additional strain on their internal resources, ECR4Kids chose to partner with an on-demand warehousing provider to fulfill their D2C marketplace orders.

After a short trial period with their new outsourced fulfillment service, ECR4Kids immediately saw an improvement in their internal operations. Namely, their talent teams had more bandwidth to focus on their areas of expertise: developing great products and providing excellent customer service.

This outcome led them to make a complete 180° in their fulfillment strategy, closing their internal distribution centers and moving all of the order fulfillment to their new on-demand warehousing partner.

Click here to watch ECR4Kids’ full story.

2. Outsourced Fulfillment Expands Your Resources

It’s no secret that consumers today expect fast shipping, and in order to stand out in a highly saturated market, merchants need to expand their 1 to 2-day delivery footprint. This kind of advanced service offering is often too costly and difficult for SMBs to build out internally, but 32% of merchant’s indicated that partnering with an outsourced fulfillment provider enabled them to provide faster, more reliable order fulfillment.

32% of merchants found outsourced fulfillment led to faster, more reliable fulfillment

More reliable fulfillment through a dedicated service provider also means fewer mistakes in picking and packing orders, which inevitably means fewer preventable returns and higher rates of customer satisfaction and retention.

An outsourced fulfillment partner should also enable high levels of inventory visibility, demand forecasting, and full integration with digital sales channels through a state-of-the-art fulfillment technology platform. This type of technology offers enterprise-level capabilities to businesses of all sizes for a more strategic approach to inventory planning and supply chain optimization.

3. Outsourced Fulfillment Creates Flexibility

Outsourcing to a full-service fulfillment provider also gives you complete flexibility in your supply chain, so you can scale operations up or down with changes in demand and respond quickly to new market opportunities.

O2 Natural Recovery found that flexibility in their supply chain was integral to their success during a time of rapid change in the economy. When their primary retail sales channel was shut down as a result of the COVID-19 pandemic, O2 quickly pivoted their sales strategy to cater primarily to direct-to-consumer ecommerce sales. Their relationship with a nimble fulfillment partner allowed them to adapt quickly and not only survive a tumultuous time but actually grow their business by five times overall.

4. Outsourced Fulfillment Drives Growth

Choosing to outsource your fulfillment services also lowers your investment in fixed assets, mitigating risk and poising your business rapid growth. Rather than adding on additional staff or equipment, this type of partnership allows you to leverage scalable technology, and flexible service agreements only require you to pay for the resources you need when you need them.

A scalable platform also lowers the risk of testing into new markets. Between your fully optimized digital sales channels and integrated fulfillment technology, you have the power to turn on and off sales channels at a moments’ noticed based on their performance.

Additionally, the improved delivery speed your business accomplishes through its outsourced fulfillment partner will increase your cart conversion rate and your customer satisfaction rate. Together, these two metrics will drive down your cost to acquire new customers and drive up your overall revenue.

Further, partnering with an on-demand warehousing and fulfillment provider allows you to share warehouse space and labor with other merchants, which can lead to significant cost savings. According to McKinsey, cost-sharing in outsourced fulfillment can drive cost savings of 5%-7% — a significant increase in margins.

Building a Lasting Partnership

Above all else, a fulfillment partner should be fully committed to the long-term growth of your business. Finding a partner that prioritizes upholding their SLA’s and making your brand look good through exceptional customer experiences will transform outsourcing your fulfillment from simply looking for a new vendor to searching for a valuable addition to your team.

To learn more about how Ware2Go is simplifying fulfillment for merchants of all sizes, take a look at our solution.

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