Outsourcing E-commerce Order Fulfillment

A low-capital way to increase your operational capacity

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Outsourcing E-Commerce Orders. Martin Barraud / Getty Images

When your e-commerce business grows to the point where you can no longer package and ship the orders yourself, it's time to consider outsourcing your order fulfillment. Fulfillment warehouses offer small business the opportunity to compete with the "big dogs." Let's take a look at the benefits most fulfillment warehouses offer to small business owners.

Inventory Storage and Management

Inventory is stored off-site, enabling the small business owner to store a larger variety and quantity of inventory.

The fulfillment center will receive and organize your inventory. Most have a web-based application where you can log in and view your current inventory, as well as, the history of each item.

Automatic Order Fulfillment

Fulfillment warehouses usually accept shipping requests via a web-based application, by emailing your invoices or an order spreadsheets e-mailed directly to the warehouse. When the shipping requests are received, the items are automatically packaged and shipped to the customer. Most fulfillment warehouses have a web-based application where you can log in to view the status of an order. Some warehouses even notify your customers of their order tracking numbers.

Return & Exchange Processing

In the world of e-commerce, where consumers aren't able to examine products before they are purchased, returns and exchanges are commonplace. Fulfillment centers manage returns and exchanges by examining the returned items.

Then the items are placed back into inventory or into the damaged item bin.

Free You Up To Grow Your Business

The time that you normally spend packaging orders, tracking inventory, and dealing with returns, can now be focused on growing your business. Use this time to expand your product line, enhance your website, promote your business or expand into new markets.

You can find fulfillment centers online or in your local phone directory. Although all order fulfillment centers offer the same basic services, their individual methods and costs will help you choose one over the other.

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When selecting an order fulfillment service, keep the following in mind:

Location

Order fulfillment warehouses are located all over the country. It's more important to select a warehouse that is close in proximity to your customers than to select one that is close to your business. For example, if your warehouse is located in California, and most of your customers are located on the East coast, your shipping rates will be higher than if you had a warehouse located in Kansas.

Fulfillment centers located in the middle of the country will be able to ship to both the East and West coasts for similar prices.

Size

Fulfillment warehouses range from small businesses with just a few employees to large companies such as UPS. Select a fulfillment service that can meet your daily order fulfillment needs. Do you have consistent orders each day or do your orders spike? If you have orders that spike, be sure to choose a fulfillment center that can handle the extra workload and still ship the orders within the agreed timeline.

Shipping Options

Most fulfillment centers offer a variety of shipping options. Make sure the fulfillment service you select offers all of the shipping options you currently offer your customers and the shipping options that you may want to offer in the future.

Turn-around Time

Each fulfillment warehouse has its own policy regarding order processing. For example, some fulfillment centers will ship all orders that arrive before 1pm on the same business day.

If you miss the 1pm deadline, the order is shipped the next business day. This could impact your customers if a next-day order is placed after 1pm. In this case, next-day shipping turns out to be two-day shipping.

Order Entry

Order entry methods can be very important when considering a fulfillment service.

The most common methods include:

  • Forwarding individual order invoices to the warehouse
  • Entering each order on the fulfillment center's web-based system
  • Emailing an Excel spreadsheet with all orders once a day

Each method has a different effect on your business. For example, you may save money by manually entering orders into a web-based application, but it can be tedious if your business grows to the point where you have more orders than you have time to enter. You may pay a higher price to automatically email each individual invoice to the warehouse, but it may be worth the extra costs to have orders shipped as they arrive. Same-day shipping could give you the edge over your competitor. On the other hand, if you have a high volume of orders, you won't want to individually enter each order into a web-based system, and you may not want to pay the extra charge of having individual orders emailed to the warehouse. If you don't mind shipping the next business day, you can send a spreadsheet containing all of your orders once a day. Choose a warehouse that offers an order entry method that meets your business needs and fits your budget.

Communication

Communication is an important part of every business.

There will be times when you need to contact the fulfillment center to modify a customer's address or cancel an order. Select a fulfillment center that is available via phone and email. You should not have to wait more than a few hours for a return email or call from the fulfillment center.

Error Rate

Mistakes will happen. Some customers will receive the wrong items or the items will be shipped to the billing address rather than the shipping address. When interviewing potential fulfillment centers, ask about their error rate and their process for remedying the situation. For example, do they issue UPS call tags to pick up the incorrect item and pay to ship a replacement item? Will they ship the replacement item at a faster rate to compensate the customer?

Costs

Each fulfillment center operates under a different payment schedule.

Some use sliding scales and require contracts while others charge per order or per item with no contracts. You will also be charged a base fee to store your inventory at the warehouse and an additional fee per pallet or per item. Be sure you have a clear understanding of the fulfillment center's costs and any contracts.

When choosing a fulfillment center, create a checklist of the features you would like. Interview a member of the warehouse staff as well as the company's references to make sure the warehouse will meet the needs of your growing e-commerce business. When you outsource order fulfillment, the time that you normally spend packaging orders, managing inventory, and dealing with returns, can now be focused on growing your business. Use this time to expand your product line, enhance your online image, promote your business or expand into new markets.

About the Author
Danna Henderson started ZIP Baby in order to provide parents with comprehensive potty training information and a large selection of potty training products. For more information visit www.zipbaby.com.

Copyright 2004 Danna Henderson. All Rights Reserved.