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5 Signs It’s Time to Outsource Your E-commerce Fulfillment Operation

Kenco_Blog_E-Commerce_Fulfillment_r1_ E-commerce

E-commerce continues to dominate conversations, business strategies, and consumer preferences. In an ultra-competitive space led by giants with seemingly unlimited resources, smaller and mid-sized brands striving to keep up on their own may find this goal a daunting one. E-commerce is not only gaining speed because of typical consumer buying; it has become absolutely necessary with many of the country’s retailers unable to open brick-and-mortar stores. While improving e-commerce fulfillment capabilities is always the objective, looking to outsource operations to meet consumer demands is often overlooked by those most in need of support.

The following are 5 tell-tale signs that it is time to outsource your e-commerce fulfillment operation to grow your business and satisfy increasing demands:

Your average shipping zone is greater than 5

The areas surrounding warehouses, fulfillment, and distribution centers from where packages ship, are divided into zones numbered 1 through 9 – the lower the zone number (zone 1 or 2), the closer the area is to where the package ships from.

For shippers, 80% of spend is transportation and 20% is pick-and-pack and warehousing, which means shortening transit times by placing inventory closer to your customers is the biggest opportunity for cost savings. If your average shipping zone is greater than 5, then there is substantial reason to seek out alternative solutions from a trusted partner who can help place your inventory at other locations closer to customers. Instead of using multiple carriers, requiring time-consuming aggregation of shipping data, a 3PL like Kenco can take a holistic view of your operation to find the best solutions and providers to identify opportunities for cost savings.

Post-click supply chain costs have exceeded 10% of your gross revenue

When your post-click supply chain costs exceed 10% of your gross margin, there are likely opportunities to reduce your spending and increase profitability. With 80% of post-click spend dedicated to transportation, having a partner with proven synergies in this area will immediately increase your efficiency and reduce costs. Other driving cost factors include procurement of packaging material, fixed costs with real estate, and full time and temp labor. The right 3PL partner can help reduce these through their buying power, operational economies of scale, and lean operational management capabilities.

Internal resources are forced to wear many hats Kenco_Blog_E-Commerce_Fulfillment_r1_Wear Many Hats

There’s nothing wrong with everyone chipping in where needed when a company is in growth mode. It can build culture, tribal knowledge, and a great “we can do it” work environment. As a leader, you need to watch for when wearing multiple hats begins to take employees away from where they add the most value to your company.

In fulfillment/e-commerce organizations, managers usually have customer care under their umbrella of responsibility, and those team members are often reassigned to help get orders out the door, resulting in neglected customer service tickets. Having a team that rolls up their sleeves to tackle any sized mountain is an amazing feeling, just don’t let it affect the rest of your business.

Expansion to multiple sales channels

Most companies start selling products on their website or a single marketplace which can be managed internally. When you expand your addressable market by adding sales channels, complexity and integrations can become very challenging to manage. Partnering with retailers, either through a drop-ship program or brick and mortar distribution requires adherence to routing guidelines and specific IT integrations.

Unfortunately, no two retailers have the same policies which make it even more challenging, often resulting in costly chargebacks when not done right. Having a partner with proven success in systems integration will allow seamless expansion while avoiding unnecessary costs.

Inventory accuracy has become a pain point Kenco_Blog_E-Commerce_Fulfillment_r1_TW

Inventory is the core of any e-commerce operation and typically accounts for the greatest financial line item on a company’s profit-and-loss statement. Inaccurate inventory counts stem from a variety of things: manufacturing issues, receiving procedures, system errors, human errors, returns. The list goes on.

Regardless of the cause, the effects can have a major impact on any business including backorders, canceled orders, poor customer experiences, and loss of revenue. If your company is experiencing inventory accuracy issues, it’s time to explore outsourcing your fulfillment operation.

For many companies who have never outsourced, reaching out for support can be difficult, as feelings of giving up control and visibility may surface. But having a partner with a robust onboarding strategy that welcomes you into their facilities and engages you as part of the process can truly have a positive impact on your operation, allowing you to compete in an industry that waits for none.

Speak to one of our experts today about outsourcing your e-commerce fulfillment operation.

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Kenco Logistics

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Kenco provides integrated logistics solutions that include distribution and fulfillment, comprehensive transportation management, material handling services, real estate management, and information technology—all engineered for Operational Excellence.