When to Consider Outsourcing Fulfillment

Tough times often require difficult decisions. Given the weak economy and the many challenges facing businesses these days, companies find themselves making harsh decisions to cut costs. However, whether in good times or bad, outsourcing your order management and/or fulfillment operations is one decision that requires careful consideration.

To help guiding you as to when to make the decision to outsource fulfillment, here are some guiding tips:

Loosing Marketing and Product Focus

When operational issues and expenses are keeping you from focusing on the uniqueness of company in the marketplace and conducting successful marketing campaigns, it is a good time to consider outsourcing. The right outsourcing partner will deliver service that aligns with your branding efforts and leaves your management to focus on making a difference in the marketplace.

Technology Costs  

Time spent assessing technological options is significant, and the cost of implementing them all by yourself is even greater. Third-party fulfillment companies must continuously upgrade their systems and capabilities to remain competitive. But they’re able to spread those costs over many clients. Marketers can take advantage of this by “leasing” appropriate capabilities at the high end of the technology curve.

Seasonal Peaks

When you have large seasonal peaks in your order volume, you obviously must maintain quality service during those times — particularly if your business is related to citrus fruit products. Third-party fulfillment companies often have a mix of clients that helps smooth out peaks. And if your peaks run outside of the fourth-quarter holiday season, you will be attractive to many outsource service providers that have higher volumes during that time of the year.

Outbound Freight Cost

Freight costs include a growing percentage of overall fulfillment costs. In many cases, they represent more than half of the total cost. Volume can be leveraged to get lower outbound freight rates from carriers by partnering with third-party fulfillment companies which aggregate their total volumes when negotiating rates.

Reducing Set Costs

If you want to lessen the impact of fixed expenditures and free up cash to drive the growth of your business, the last place you want to spend money is on infrastructure that may or may not be right for the business as it grows. Outsourcing gives you the flexibility to scale technology to fit the business as needed and only pay for the services required as the business grows.
By outsourcing, you will reduce your ongoing capital investment and free up time and money to invest in other areas of your business.

As with any business decision, carefully weigh the pros and cons of your specific situation, both short and long term. If you decide to outsource, research carefully to find the service provider that best meets your needs.