May 28, 2020 is a daily online magazine covering small business news. We help entrepreneurs transform ideas and innovations into greatness.

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Pros and Cons of Outsourcing Order Fulfillment

Your small business is growing in leaps and bounds. So maybe it's time to outsource your order fulfillment function. Then again . . . maybe not.

Order fulfillment outsourcing is becoming more common than ever, especially now that small businesses are dipping their toes in the waters of online retailing.

But online selling isn't the only reason small businesses are turning to third-party order fulfillment providers. Rapidly growing companies and companies that are diversifying their product lines also prefer outsourcing because it lets management focus on more important aspects of the business.

If you're new to product fulfillment services, you will quickly see the benefits of contracting packaging and shipping requirements to a third-party provider. But there are also some drawbacks you need to know about before you commit to offloading product logistics. To help the decision process, consider the pros and cons of outsourcing order fufillment.

The PROs

  • Reduced costs. Order fulfillment outsourcing should always result in a cost savings for your company compared to in-house order fulfillment. You'll pay per-item and per-order fees, but bulk discounts and other factors should make it more affordable than doing it yourself.
  • Shipping expertise. Order fulfillment companies are experts at product shipping. They have close relationships with major carriers and know all the tricks involved with reducing shipping costs.
  • No labor requirements. One of the biggest advantages of a third-party order fulfillment provider is that you don't have to deal directly with labor problems. Seasonal staffing fluctuations and other issues aren't your problem but make sure your provider is equipped to handle any staffing challenge that comes down the pike.

The CONs

  • Loss of control. Some business owners struggle with the idea of ceding control of their product shipping to an outside company. A certain loss of control is unavoidable, so you'll need to make sure you're comfortable with handing over control before you sign a third-party contract.
  • No brand loyalty. Order fulfillment companies strive to deliver quality service, but they won't be as loyal to your brand or your customers are your own employees. When push comes to shove, they may not go the extra mile for customer satisfaction.
  • Potential service reductions. It's possible that the level of service your customers receive from your order fulfillment partner will be less than it was when you handled it in-house. Do your research and target providers with a reputation for customer satisfaction.

Related Articles

Want to learn more about this topic? If so, you will enjoy these articles:

How to Select an Order Fulfillment Service Partner
Freight Optimization
How to Lower Inbound Freight Costs
Managing Logistics/Warehousing Off-Site

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