Order fulfillment is an obvious part of running an ecommerce enterprise. Orders come in, you pack items into envelopes or boxes, and you ship them out. It is not a big deal if you are running a small operation that ships fewer than a dozen packages per day. But as your business grows, order fulfillment becomes more demanding. Is there a point at which you should consider third-party fulfillment?
Third-party fulfillment has its advantages and disadvantages. Like anything else, ecommerce operators need to weigh the good against the bad to determine if it is right for them. If it is, third-party fulfillment could end up being a godsend. If it’s not, a growing ecommerce operation will have to think about expanding its current fulfillment capabilities in-house.
-
How It Works
Fulfilling ecommerce orders through a third-party partner is pretty simple in principle. All the inventory you order from distributors gets shipped to your third-party partner instead of your facility. You continue running the online operation of your business as-is. When orders come in, they are processed by your staff and then forwarded to the fulfillment partner. That company packs the items and ships them on your behalf.
If you sell abroad, it might be wised to look for a third-party fulfillment partner that also handles international shipping. Otherwise, you need to add yet another vendor to handle the shipping portion.
-
Third-Party Fulfillment Advantages
Third-party fulfillment does have its advantages. Here are just a few of them, compliments of Texas-based Preferred Shipping:
- No Overhead – By going third-party, you avoid having to invest in center fulfillment overhead. You do not have to rent a warehouse, buy computer equipment, and hire a fulfillment staff.
- Scalability – A good third-party fulfillment partner should be able to scale along with your company. As your company grows, they should be able to accept more inventory and fulfill more orders.
- Minimal Administration – Every part of your business requires at least some administration. When you choose the third-party fulfillment option, your administrative responsibilities to that particular aspect of ecommerce are minimal. Your vendor takes care of nearly everything.
The advantages of going third-party might work for you in the short term but not the long term. That’s okay. You can utilize third-party fulfillment until your business is able to financially support a dedicated fulfillment center of its own. Going third-party does not lock your company in for life.
-
Third-Party Fulfillment Disadvantages
There are disadvantages to going third-party. The biggest is cost. But here is the thing: your company will pay for fulfillment one way or the other. Even if you personally handle every order yourself, your time is worth something. And if you have a staff to help you, they need to be paid. So you need to determine which option costs more.
Another disadvantage of third-party fulfillment is not having direct control over how orders are fulfilled. That means there is some level of trust here. You need to trust your fulfillment partner to do right by you and your customers. If your partner fails, you need to find a way to extricate yourself. That can get messy.
Third-party fulfillment is an option for growing ecommerce companies in need of greater fulfillment capabilities. It is an option that some companies use temporarily, and others stick with permanently. In either case, third-party fulfillment outsources one of the most labor-intense parts of ecommerce. It outsources to a partner that already has the staff, warehouse space, and infrastructure in place. Orders are fulfilled and shipped without the ecommerce operator ever handling inventory themselves. It is a viable model that seems to work well.
