There’s a somewhat common misconception that by outsourcing your order fulfillment needs to a third party independent provider, a business must cede some of its authority and autonomy to another organization or give up some of its control over its own operations. This is true to an extent, but not to the extent or in the respect that most people realize. The outsourcing agreement between a real-world or online business and its logistics management company more closely resembles a partnership working primarily for the benefit of the client business. In short, it’s a win-win situation for the business itself, providing an array of advantages while helping to diminish the business’ operating costs and obligations.
How The Outsourcing Structure Functions: Step By Step
When a business outsources its fulfillment needs to a third party company, the company accepts inventory and product shipment deliveries into its own secure, climate controlled warehousing facility. There the inventory is kept until sales information is forwarded from the client company, usually online using secure servers. (In some cases, such as ecommerce client business, the logistics company may have direct access to the client’s shopping cart software.)
Once an order is received, the fulfillment company works with state of the art efficiency techniques to process the order and have the product prepared for shipping in the fastest yet the most cost effective means possible. Once the package is shipped, the tracking number is relayed to both the customer and the client company, maintaining a clear channel of communication between both parties and helping ensure customer satisfaction.
How The Fee Structure Works
The logistics management company typically deducts a preset percentage from the cost of every product processed and / or shipped, as payment for its services. This amount is contractually binding, and may be sometimes be negotiated upon prior to the partnership’s creation.
Fulfillment service companies actually possess, by virtue of this arrangement, a powerful impetus to help all of their client businesses succeed. The more products they are able to successfully ship on the client’s behalf, the more their own profit margin grows. As the client business uses the extra revenue and reduced operating costs to grow and nurture its own front end, the amount of product inventory fulfilled also grows, enhancing the fulfillment company’s own profits. The partnership works out by virtue of its reciprocal nature, helping both sides prosper much faster than by working alone.