Outsourcing e-commerce fulfilment, but properly
An own warehouse is of great importance for e-commerce companies: Shop operators retain full control over all ongoing processes. But having your own warehouse and shipping on your own is not always the best choice. E-commerce fulfilment offers retailers a variety of options to operate more efficiently.
The self-directed warehouse has its limits
With fulfilment, the entire logistics of storage, supply chain and shipping are outsourced to a provider. However, many retailers shy away from using this service. They prefer to operate their own warehouse with the promise of having more control over the processes involved. However, the plus in control is also offset by a higher risk. This is especially true when the shop grows and the demands on the warehouse processes increase.
Retailers who take over logistics on their own must manage the receipt of goods, clearance of goods, article maintenance in the ERP, preparation for dispatch and collection of orders and – to continue to be successful in competition – offer their customers excellent service at the same time. Added to this are the costs for a storage area that is as scalable as possible. At the very latest when the warehouse processes become so complex that an online shop operator can no longer devote enough time to other business areas, they should think about a fulfilment solution.
Resource efficiency and customer expectations are drivers
While big players in e-commerce in particular have been relying on fulfilment service providers for a long time, smaller online retailers have struggled with this so far. But they face pressure from their customers’ expectations and their own limited resources: according to a sale supply study, more than one third of German consumers say that fast delivery is a very important factor for them when buying online. The E-Commerce Delivery Compass 2020/2021 also shows that customers do not just want their products shipped quickly, but also cheaply. In addition, logistics costs account for between 20 and 40 percent of online shop turnover. Outsourcing your own warehouse via a fulfilment service provider can significantly reduce these costs.
Pros and Cons of e-commerce fulfilment
The use of service providers who take over fulfilment in e-commerce logistics offers advantages above all in terms of shipping and service to the end customer. This gives retailers more flexibility again. It also paid off during the Corona pandemic: Fulfilment service providers offer the necessary resources to compensate for seasonal and unexpected peaks. This way, retailers do not have to fear bottlenecks. In addition, outsourcing the warehouse has the following advantages:
- The costs for own warehouse space are reduced. Maintaining your own warehouse is usually more cost-intensive.
- International shipping is simplified. Many fulfilment service providers offer international shipping. For companies that want to expand or already ship internationally, service providers can offer more favourable shipping conditions.
- Investment in intralogistics is lower. Fulfilment service providers invest extensively in their intralogistics so that retailers benefit from the technical updates of the selected provider.
- Resources and capacities are freed up for the core business. Retailers can concentrate more on product development and customer care as well as other elementary business areas. The management of the warehouse processes falls to the service provider.
- Multichannel strategies can be implemented more easily. If a retailer pursues multi- or omnichannel strategies, outsourcing logistics helps to implement this more efficiently.
Overall, the scalability of the entire logistics improves with the use of fulfilment solutions. But where there is light, there is also shadow. It is a persistent myth that fulfilment is always more expensive than having your own warehouse. However, this results from various challenges in dealing with fulfilment service providers:
- Non-transparent costs: These are not an insignificant problem when working with fulfilment providers. A detailed comparison of offers helps to better understand the cost structure. In addition, traders should pay attention to whether, for example, they are billed based on articles or SKUs. A possible staggering according to shipment volume should also be examined. Another important point is to look at the service provider’s shipping partners.
- Lack in the level of digitalisation: The selected service provider should be highly digitalised so that the processes are also truly efficient, and the end customer receives the service they expect. Seamless package tracking, live order status notifications, flawless connection to the ERP, etc. are important features.
- Control of quality agreements: To be able to guarantee quality, shop operators should define precise criteria with their provider.
Finally, it is important to decide between standardised processes with favourable prices and customisation options at higher costs. E-commerce companies should consider what makes more sense for them in their current situation or seek expert advice.