If you’re just starting off with your own e-commerce business, then you’re most likely to choose either the drop shipping or self-management retail fulfillment method. But if your business is growing quickly, it would be better to hire a third-party logistics company that will manage your inventory and warehousing processes.
First of all, here are some signs showing you that it’s high time to outsource your fulfillment:
- Lack of time on business promotion. If you spend the most of your time fulfilling orders, but have no time on marketing efforts, outsourcing will be the best solution here.
- Not enough infrastructure. If your business is growing too fast, it may outgrow your current infrastructure, so handing it over to a third party may help.
- Irregular sales. You may have the best sales levels in winter but almost no sales in summer. If you’re managing your warehouse on your own, you may suffer financial loss, whereas a third-party logistics provider will handle this issue for you.
Pros of Third-Party Fulfillment Services
- Good for businesses that grow quickly. While an outsourced company will handle your order fulfillment and inventory management processes, you may focus on more important tasks.
- No effort on staff search and management. A third-party company will be fully responsible for hiring and managing the warehouse staff.
- Cost-efficiency. For startups, it’s typically cheaper to self-manage their fulfillment or use drop shipping. However, for a growing business with growing cash flow it would more cost-efficient to outsource the fulfillment processes.
Cons of Third-Party Fulfillment Services
- Not good for highly specialized businesses. If your company has unique specialized needs, e.g. you need special equipment to fulfill highly customized orders, then it would be easier to manage the fulfillment on your own.
- Less control over inventory. If you manage your own warehouse, you can use inventory management software to manage all your logistic processes. When outsourcing, you won’t be able to do so, and will depend on data provided by your 3pl partner.