If you are having difficulty handling the challenges of increased volume and turnover during periods of rapid growth or you are operating a business with seasonal sales, which sees large spikes in orders during certain parts of the year and lulls during others, outsourcing fulfillment may help to bridge any shortfalls you have while ensuring you meet your demand on time.
Here are 4 signs you need to outsource fulfillment:
- Challenges Managing a Growing Inventory
It is unlikely that an inventory management system was on the top of your priority list early on and developing such systems is a costly and time-consuming endeavor. By outsourcing fulfillment, you can gain access to software and other tools for tracking your inventory that would otherwise cost you thousands of dollars to develop and maintain on your own.
Along with an increased inventory there inevitably will come an increase in returns as well. Many fulfillment companies have systems in place for processing returns and can satisfactorily deal with merchants or consumers who returned the product. There may be costs incurred for this service, but these companies have expertise in this area and can help to ensure it does not lead to lost business.
Be sure to ask prospective fulfillment companies about the tools and software that you will have access to as part of their services. Also be aware of any additional fees these may incur when determining whether to outsource these functions or continue doing them internally.
- Business Growth Functions Taking a Back Seat
Some people will see all of their orders being filled on time and think that outsourcing fulfillment is not right for them. But how much time are they spending on these functions and more importantly, what other things could they be spending their time on?
During periods of rapid growth, the demand on the directors of a business comes from all sides. If you find yourself spending more time handling orders than you are on doing the things necessary to grow your business, or even worse that you are neglecting other business functions, it is probably time to look into outsourcing.
Also be sure the investments you make in fulfillment infrastructure are not preventing you from investing elsewhere. When outsourcing your order fulfillment, you take many of the fixed costs involved and convert them into a variable model that allows you to maintain a more constant and predictable cost per order. It also works to free up capital to be invested in functions that will help to grow your business, instead of just using it to fulfill orders you have already received.
- Infrastructure Constraints Limiting Growth
Growing your business requires growing the infrastructure that supports your business. Whether that comes in the form of warehouse space or server space, to grow your business you have to increase your capacity. Unfortunately, when it comes to fulfillment functions it can at times be very costly to scale them effectively.
If you have found that infrastructure constraints are preventing you from expanding your business, outsourcing fulfillment may help to free up the resources you need. By outsourcing fulfillment, operations can be scaled as your business grows, whether that growth is rapid or slow. When demand is slow, your money is not sunk in excess capital stock, since operations can easily be scaled back as well.
- Increased Fulfilment Costs in Time and Dollars
As more orders come in, you may find your staff is spending their time filling orders which they could be using to perform other functions. Before hiring more staff, or working your current employees to the bone, it is important to examine whether scaling your operations through outsourcing could help to solve the problem.
Similarly, previous arrangements for shipping that may have sufficed at lower levels of operations may not suit the needs of your expanding business and could cause fulfillment costs to jump. This is especially true if your intentions are to expand to new geographical areas, and even more so if your expansion goals are internationally focused. Finding a new shipping company that meets your growing needs will take time and can potentially lead to lost business.
These new expenses are just a few of the many additional costs that can come as a result of expansion. Before making costly investments in staff, training, and equipment, consider the benefits of outsourcing your order fulfillment. Hiring a reliable company to take over this aspect of your business will allow you to focus on the functions that drive revenue and allow your company to expand.