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Which Online Businesses Benefit from the Use of a Fulfillment Center?

Jake Rheude

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When a customer makes a purchase from your eCommerce business, they are not thinking about the steps needed to deliver a box to their doorstep. But the action that takes place in the background — eCommerce fulfillment — is what will make or break your business. You need to ensure that each of your orders has a fast and efficient journey from factory to fulfillment center to delivery truck. Running an eCommerce business requires a multitude of skills. Outsourcing your fulfillment to professionals ensures that this vital part of your operations runs smoothly. That is just one of the many benefits of working with a fulfillment center.

fulfillment center packaging

If you are still picking and packing your orders in-house, you could be setting your business up for failure. As your order volume grows, the benefits of a fulfillment center to boost that growth also increase. If you wait too long, you could find yourself overwhelmed and falling behind. Late shipments and incorrect orders could torpedo your growth and chew through your profit margin. This can slow your business growth and keep it from meeting its potential.

Running a growing business is always a balancing act. You’re looking for the sweet spot where your growth justifies the next step in expanded infrastructure. You don’t have to wait to outsource your order fulfillment; you can start small and grow with your fulfillment warehouse

Growth of the Fulfillment Center

Less than a decade ago, most people hadn’t even heard of an order fulfillment center. However, the search for strategically-placed national fulfillment centers has become part of the business development process for eCommerce companies of all sizes.

Amazon ships about 1.6 billion orders each day to customers around the globe. Amazon is responsible for 45% of all online sales and one-third of Americans have an Amazon Prime account. Online shopping continues to grow and now accounts for about 14% of all retail sales in the U.S.

With the increase in online shopping, the demand for eCommerce fulfillment has grown too. The number of fulfillment centers has increased and 3PL providers have become more sophisticated and specialized. Fulfillment warehouses have the expertise to handle even the most fragile or bulky items. For example, Red Stag Fulfillment is an industry leader in packing and shipping oversized, heavy, and high-value products.

shipping large products

In the past decade, fulfillment centers have gone from a narrow resource used by a few large corporations to an essential component of the retail economy. Even the smallest startups and crowdfunded product launches can outsource their fulfillment. In some cases, eCommerce platforms themselves offer options such as with Shopify fulfillment services.

Businesses that Will Benefit from the Use of a Fulfillment Center

Amazon uses its own network of fulfillment warehouses for Amazon FBA. However, most eCommerce companies aren’t big enough to support their own fulfillment operations. If you have a small or mid-sized company, outsourcing your order fulfillment to a third-party logistics company just makes sense. Outsourcing is particularly helpful for managing multi-channel fulfillment.

It can be hard to figure out the right time to make the leap from packing boxes in your own facility to using 3PL services to ship your orders. Here are some decision points you should consider.

How much time do you spend on fulfillment vs. marketing and business development?

Your time (and your staff’s time) is valuable. Customer service, marketing, and planning will grow your business. It doesn’t make business sense for you to spend your time picking and packing orders. If your sales have grown to the point where fulfillment, returns, and customer service are taking time from your business development, it’s time to outsource.

fulfillment center team

Can you handle your next big order?

A big wholesale order or a rush of business from a new sales channel is great for your eCommerce business. However, if you’re unprepared to handle the order volume, it could bring your operations crashing down. One of the major benefits of a fulfillment center is that it gives you the ability to expand quickly to meet customer demand. You don’t have to the time and expense of bringing on more staff or leasing additional space.

Do you need help with reverse logistics?

Your returns policy is one of the first things new customers want to know before they buy. But your reverse logistics can hurt your profitability if it isn’t done right. A fulfillment warehouse can process returns and quickly put your merchandise back in stock so it’s ready to sell to the next customer. Your 3PL can also help you develop a returns process that keeps your costs low. And, when you switch to a 3PL, you should see your rate of returns decrease. Accurate and professional order fulfillment is a great way to save money on returns.

Is your business ready for its projected growth?

Where do you want your business to be in a year? In five years? Outsourcing your order fulfillment operations can help you bring your expansion plans to fruition. Not only will your time be freed up, but you have a robust logistics operation in place. Your fulfillment center is ready to help your business grow.

Do you want to make the leap from brick and mortar to eCommerce?

It’s hard to run a 100% brick-and-mortar company today. Your customers also want the option to order from you online. But eCommerce fulfillment is not what you do. Outsourced fulfillment is the answer. When you work with a fulfillment center, you simply send stock to the warehouse, and the professionals handle the rest. You don’t even need to have any involvement in the day-to-day online ordering and shipping processes. What this means for small businesses who are new to eCommerce is that their day-to-day functions actually change very little, since the online sales and shipping portions of the business are delegated to a specialist. This makes adding an online component to your small business manageable and profitable.

fulfillment center

Financial Benefits of a Fulfillment Center

Your customers probably won’t notice whether you use a 3PL or not, but you’ll see the difference in your bottom line. Using a fulfillment center gives you the opportunity to reduce inventory and shipping costs, while still offering your customers a high level of service.

You might think about outsourcing your fulfillment as an added cost, but it’s more accurate to think of it as saving your business money.

  • While shelf space at the warehouse is an expense, the cost per square foot in a large fulfillment center is probably less than what you would pay to rent a smaller space by yourself.
  • Most fulfillment centers only charge you for the orders they pick, pack, and ship. You get helpers who work on-demand whenever you need them and then disappear when you don’t.
  • Shipping is still the highest fulfillment cost, but you might pay less for order delivery. Fulfillment centers are big volume customers for the major shipping companies and often qualify for discounted rates that they may pass on to you. Reduced shipping rates and more favorable DIM factors are two of the ways Red Stag Fulfillment helps our clients lower shipping costs. When you outsource your fulfillment, you essentially pool your shipping with other businesses to receive better shipping rates.
fulfillment partner

Your Fulfillment Center Is Your Silent Partner

Most consumers choose an online retailer for the quality of the products offered, not for its warehousing practices. Your customers aren’t aware of your packaging and shipping efforts unless there is a problem. But those problems can cost you goodwill and repeat business.

As an individual eCommerce business, you can only do so much to improve the value of your shipping services. Plus, penny-pinching in the order fulfillment department could decrease quality and increase customer complaints. And, no matter how much care you put into packaging orders, you probably can’t match the quality and efficiency of a 3PL.

Using a third-party logistics provider gives your online business a number of benefits, no matter the size of your operation. Your 3PL company gives you bargaining power that you, as a smaller company, simply would not have on your own. And when you delegate warehousing and shipping to a specialist, then you can go back to focusing on the more important parts of your business.

Online businesses of all sizes, and across all sectors, use fulfillment centers to save money and streamline their logistics processes. If you’re ready to find the best fulfillment services company for your business, Red Stag Fulfillment has created a questionnaire to help you ask the right questions. You can always contact us directly – we’d be happy to talk with you about how outsourced fulfillment can help your business.

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