Strategic Outsourcing in Ecommerce Fulfillment

by Rakuten Super Logistics | eCommerce Strategy, Outsourced Fulfillment

We’ve all heard the old saying that “if you want something done right, you have to do it yourself!”

However, in the complex online marketplace of 2018, successful American businesses are all too aware of just how challenging it can be to live up to the demands of that adage; the reality is that rising costs, fierce competition and ever-evolving technologies have all contributed to the growth in popularity of outsourcing in the ecommerce space.

In a nation that values entrepreneurial spirit and encourages “risk takers”, in years past, outsourcing had been viewed with considerable skepticism by some; after all, when a company opens its doors (online or in-person) for business, it’s naturally assumed they will be able to handle the multitude of responsibilities associated with selling their goods or services.

However, over the last quarter century, outsourcing a cross-section of business operations has become a more common and accepted business practice; pointing to the need to control costs, and ensuring that operational expenses remain competitive, outsourcing is now commonly viewed as a necessary aspect of doing business for a growing percentage of America’s online business community.

The fact is that businesses in the ecommerce space confront a variety of unique challenges that often makes outsourcing an appealing option; not the least of those demands are ecommerce customers’ expectations that they will receive their orders on time, and in perfect condition.

That’s why it’s not surprising that a growing number of online businesses turn to outsourcing order fulfillment, using a “3PL” (third party logistics) provider to help process orders, and deliver them on-time to their customers. In fact, 61% of respondents surveyed in the 22nd annual Third-Party Logistics Study indicate they are increasing their use of outsourced logistics services this year.

However, as is the case with most business decisions, there are multiple factors to consider before an ecommerce business decides whether or not outsourcing is a solution that will best serve its unique operational needs. You need to understand the benefits and drawbacks of outsourcing before making a decision.

Is Outsourcing a Viable Solution?

To understand the benefits and drawbacks of outsourcing, businesses should first fully understand what outsourcing involves; an honest assessment of the demands of growing a business, and an examination of the company’s ability to meet those evolving demands, is a first step on the path to deciding upon the role that outsourcing should play in an ecommerce business.

When weighing the benefits and drawbacks of outsourcing, an online business should ask itself:

1. Can we handle the current and projected rate of growth, without any additional support?  

While coping with a rapidly growing customer base is the kind of ‘problem’ most businesses welcome, the inability to scale to that growth rate can produce a complex assortment of challenges. In the age of viral social media, the very last thing an ecommerce business wants to confront are several unhappy customers–with active Facebook, Twitter or other social media accounts–willing to share their bad experience with countless online readers.

2. Do we have the internal expertise required to meet all the evolving needs of our company?

As an ecommerce business expands, its operational needs are almost certain to evolve. As a result, the expertise offered by its current staff may not have either the full range of skills or experience required to meet those needs. The cost of outsourcing aspects of its operations may present a more affordable, and viable, route to meet those evolving needs, as opposed to hiring additional full or part-time staff.

3. Are we providing customers with an optimal online experience?

Another result of an expanding customer base is its effect on the customer experience of each online client; as any ecommerce business owner knows, online customers have high expectations, and are unlikely to be sympathetic to excuses for a shopping experience that is suffering due to ‘growing pains.’ Often, examining the areas in which growth is most affecting the quality of your customer service can provide guidance as to where outsourcing can be of the most help; the end goal is to find the best, most affordable route to ensure customers complete their purchase with a high level of satisfaction.

Not a “One-Size-Fixes-All” Solution

While there can be little doubt about the many benefits offered by outsourcing some operational duties, it’s not always the optimal choice. For example, if a relatively young company is operating with limited funds, it may simply make more fiscal sense to—whenever possible–keep the function ‘in-house’ and rely on the available internal expertise, rather than hire (potentially pricey) external outsourced services.

In addition, there are instances that may arise in which the external vendor simply isn’t a ‘good fit’ for the needs of your ecommerce business.

“Although it’s not a common occurrence, there are occasions when the demands of a potential company are not optimally served by outsourcing their order fulfillment needs to a company such as ours,” explains Jonathan Grospe, Rakuten Super Logistics’ (RSL) Director of Sales. “Even though we’re a national leader in order fulfillment, we are not always the best solution for every business.”

“For example, a potential client may have special packaging or handling requirements that are difficult for a 3PL to take over,” adds Grospe. “For some businesses, there could also be an unwillingness to adapt to the requirements of using a fulfillment company, whose methods may differ greatly from their in-house solution. It’s also possible their business may require customization on individual orders, such as personalized thank you cards. The bottom line is that outsourcing is a great option for many businesses, but it’s not always the best choice for every company.”

Conclusion

For those companies that do choose to examine the outsourcing option for their order fulfillment requirements, there is the potential for discovering multiple advantages. The “pros” of using an outsourced order fulfillment company include:

  • Controlling expenses related to order fulfillment – using a 3PL can result in a reduction in long-term operational expenses, including employee salaries/benefits, payroll expenses, as well as warehousing maintenance and/or rental costs
  • The possibility of lower shipping costs – 3PLs ship large volumes of goods and often have access to better shipping rates)
  • Better and a wider variety of warehouse locations – 3PLs locate their warehouses in strategic locations that can decrease the time required to deliver goods to customers
  • Scalability – as an ecommerce business expands, many 3PLs will be able to offer order fulfillment services to meet the warehousing/delivery needs of a rapidly growing company
  • Better security – In recent years, one of the most distressing issues confronting businesses is the question of how best to secure company and customer information in an age of burgeoning cyber crime. While no company can provide 100 percent security, 3PL providers usually have greater ability and resources to utilize the latest tools available to secure valuable goods, as well as personal and business information.

While it’s often true that “doing something yourself” remains the best way to ensure a task is properly completed, the complexities of modern ecommerce often demand that a successful business consider seeking outside assistance when navigating the often choppy, uncharted waters of online business.

The fact is that outsourcing is not a ‘magic pill’ for all that ails ecommerce. Ultimately, the decision as to whether or not outsourcing is the optimal solution to ensure a company’s continued prosperity rests with those who best understand the unique opportunities and challenges of their ecommerce enterprise.