Outsourcing ecommerce fulfillment: The complete guide

[Updated post from October 29, 2020]

Outsourcing of any kind can feel like a tricky decision for businesses. How do you find the right organization, and how can you ensure that it stays cost-effective? How do you know when it’s the right time to bring in a third party?

Online merchants face these exact same questions when it comes to ecommerce fulfillment - and more. 

Choosing to outsource ecommerce fulfillment is a big decision, and one that shouldn’t be taken lightly. That’s why we created this guide to help merchants with the transition from in-house fulfillment to partnering with a 3PL. 

We’re going to cover:

• How to define outsourced fulfillment
• The difference between in-house and outsourced fulfillment
• The benefits of outsourcing fulfillment 
• Signs that it’s time to outsource ecommerce fulfillment
• What to look for in an ecommerce fulfillment provider

What is outsourced fulfillment?

Outsourcing fulfillment is when an ecommerce business has a third-party logistics provider (3PL) manage some or all of the ecommerce fulfillment process on their behalf. This includes order fulfillment services such as warehouse management, order processing, inventory management, packing and shipping orders, and returns management.

A full-service fulfillment partner typically manages its own network of warehouse and fulfillment centers, as well as supplying the labor, materials, and technological infrastructure needed to fulfill online orders effectively. 

By entering into a partnership with an ecommerce fulfillment provider, merchants gain access to advanced fulfillment capabilities that would be too difficult or expensive to manage independently.

What is the difference between in-house and outsourced ecommerce fulfillment?

Ecommerce stores that are not partnered with a fulfillment service provider will typically use in-house methods (also known as self-fulfillment). This is where the merchant is responsible for managing their fulfillment operation - including all the steps we outlined above. 

Self-fulfillment for ecommerce is the usual route when a startup or online store is newly launched and trying to establish a brand presence. When order volumes are small, it’s much more cost-effective to fulfill in-house and manage inventory storage independently. 

But most successful ecommerce companies will reach a point where in-house fulfillment strategies can no longer keep pace with their growth. When this happens, you need to start thinking about outsourcing ecommerce fulfillment to an experienced order fulfillment company.

So, what are the biggest benefits of outsourcing ecommerce fulfillment?

5 ways that outsourcing can improve the order fulfillment process

1. Avoid the hidden costs of self-fulfillment

Outsourcing order fulfillment can come with a hefty price tag. However, in-house fulfillment also carries a large number of hidden costs – especially as your ecommerce business grows.

We can place these under two key groups:

• Financial costs
• Opportunity costs

The financial costs of self-fulfillment are obvious sources of expenditure that your business needs to make as you grow. As order volumes increase, you’ll need to invest in fulfillment solutions more heavily. 

This includes hiring more people to pick and pack orders and taking on additional storage space, needs which can be difficult to estimate when orders fluctuate throughout the year. 

But where financial costs can be measured, opportunity costs are more elusive - but these are just as critical to the success of your business.

For example, if a time-consuming order fulfillment process is taking away from building your brand and coming up with fresh marketing ideas, this can cause customer acquisition to stagnate further down the track. 

By outsourcing ecommerce order fulfillment, business owners can gain back valuable time to focus on refining their value proposition and capitalizing on key growth opportunities.

"Rad Power Bikes has seen massive growth every year since the company was founded, and as demand and interest for e-bikes has surged, we needed the ability to scale quickly. “With a Seattle presence and a nationwide operation, Ryder E-commerce by Ryder was a clear choice for a fulfillment partner that allows us to deliver an unrivaled customer experience.” 

Mike McBreen, chief operating officer at Rad Power Bikes

2. Outsourcing order fulfillment enables your business to scale effectively 

So-called ‘growing pains’ are all too familiar to ecommerce retailers experiencing rapid growth. As order volumes increase, merchants often find themselves struggling to scale their in-house operations to meet sudden changes in demand.

However, consumer demand typically experiences both peaks and troughs throughout the year. Brands can find themselves in the tricky position of investing in infrastructure which can't scale up and down with order volumes; warehouse space sits empty, while expensive automation goes under-utilized.

To avoid making expensive investments and long-term commitments that struggle to pay for themselves, consider partnering with a scalable fulfillment provider who can put their physical and technological infrastructure at your disposal.

3. You get to leverage top industry expertise

The vast majority of brand founders are not experts who live and breathe supply chain logistics. While it may be straightforward enough to direct fulfillment on a small scale, this becomes difficult as volumes increase. Peak season surcharges, a sudden change in routing, or an unexpected rush of returns can be enough to derail your operation. 

Having a 3PL partner on hand who is an expert on ecommerce fulfillment enables you to forecast and mitigate these challenges, preventing your business from running into costly mistakes that could limit growth and affect customer satisfaction.

“A major advantage for us from the outset was that Ryder E-commerce by Ryder are very experienced at working with major fashion retailers, both online and offline. Their in-depth understanding of the industry gave us confidence that they understood both our needs and desire to offer clients an enhanced level of service.”

Nikhil Soares, ecommerce supply chain and operations executive for Moda Operandi

4. Access to faster, cheaper shipping options

Ecommerce merchants know the drill; modern customer expectations are for orders to land on their doorstep as fast as possible - and preferably for free. But high DIM weights and peak season surcharges can drive up shipping costs to unsustainable levels, resulting in brands operating on razor-thin profit margins.

Moreover, offering fast, free shipping is extremely difficult for merchants with a geographically dispersed customer base. If you lack warehousing close to your end customers, it’s difficult to guarantee rapid delivery.

Most merchants will never reach the shipping volumes large enough to qualify for discounted rates with major carriers. But by outsourcing ecommerce fulfillment, merchants can leverage 3PLs’ ability to negotiate wholesale shipping rates with domestic and international carriers. This means faster, more cost-effective shipping options that increase customer loyalty and satisfaction.

5. Enhance the customer experience with best-in-class technology solutions

Ecommerce fulfillment isn’t just about packing orders and sending them to your customer. Without good communication and seamless touchpoints during the post-purchase stage, you’re setting customers up for poor experiences that could negatively affect your brand’s reputation. 

In today’s retail landscape, advanced ecommerce technology is a must to give customers the service they expect. Whether it’s real-time order tracking or notification of an item coming back into stock, consumers want brands to connect with them at every stage of the shopping journey.

Partnering with a fulfillment provider that boasts a powerful technology stack and advanced automation is the key to data-driven decision-making that refines your fulfillment strategy and reduces lead times.

When should you outsource ecommerce fulfillment?

You understand the benefits of outsourcing ecommerce fulfillment. So, how do you know when the time has come to begin outsourcing?

With self-fulfillment, it’s easy to embrace the motto “If it ain’t broke, don’t fix it.” But you can save your ecommerce business a lot of unnecessary pain by making the move before your in-house fulfillment strategy is no longer fit for purpose. 

Planning ahead means a more seamless transition into a 3PL partnership at a time that’s least disruptive to your operation.

Here are some signs that it’s time to outsource ecommerce fulfillment:

• Your order volumes are growing rapidly
• Manual processes are causing bottlenecks in the fulfillment process
• Your time is being taken up managing logistics
• You’re running out of storage space
• You need to hire more people to pick/pack orders

If you’re experiencing one or more of these situations, this is a good indication that you’ve outgrown self-fulfillment and need to find an ecommerce fulfillment company to assist you.

How to choose the right ecommerce fulfillment provider

Outsourcing ecommerce fulfillment allows businesses to scale faster, eliminate costly fulfillment errors, and improve delivery efficiency.

But how do you know which is the right 3PL for your business?

Every ecommerce business has different needs and goals for fulfillment. But in today’s rapidly evolving ecommerce marketplace, there are certain capabilities that every merchant should prioritize as they look for the perfect 3PL partner:

1. Multiple fulfillment centers

Shipping orders out of one central warehouse location is a disadvantage for merchants with a nationwide customer base. As well as unpredictable fulfillment costs, this means longer transit times and packages that cross multiple shipping zones. 

Partnering with an ecommerce fulfillment provider with a nationwide fulfillment network enables merchants to build a responsive, resilient multi-node fulfillment strategy that puts products much closer to the end customer. This keeps shipping costs down and opens up opportunities for rapid delivery timeframes, including two-day shipping.

Ryder E-commerce by Ryder boasts 24 state-of-the-art fulfillment centers at strategic locations across the United States, offering merchants the perfect solution to last mile delivery problems. Our relationships with all major parcel carriers help keep your shipping costs low, while maximizing short-haul deliveries for a smoother delivery experience 

“Ryder E-commerce by Ryder was able to scale up fulfillment activities at our West Coast location ten-fold within just two weeks, and then scale down just as efficiently when normal patterns resumed in May. Their capacity to meet our newfound needs so quickly made them an invaluable partner during such a challenging time.”

Robert Hedwall, Manager of Supply Chain and Logistics at SodaStream.

2. Advanced integration options

Whether you’re a Shopify advocate or a Skubana user, your 3PL should be able to offer seamless integration between their own system and your platforms of choice. 

Native two-way integrations enable fulfillment providers to respond swiftly to customer actions, whether that’s processing a new order from your ecommerce store, making changes to an order, or processing a return - all without needing a human operator. 

Ryder E-commerce by Ryder uses advanced open API programming to connect seamlessly with best-in-class platforms and technology solutions from across the ecommerce ecosystem. By integrating all of your sales channels into one intuitive interface, you don’t have to worry about updating multiple systems - making ecommerce fulfillment easier than ever.

3. Custom fulfillment services

It’s incredibly challenging for today’s ecommerce brands to stand out on price or product alone. This is where the fulfillment process can be a major competitive differentiator - if you outsource to an ecommerce fulfillment provider who offers custom fulfillment services.

While elements such as custom packaging or custom inserts might not be part of your fulfillment process right now, it’s a good idea to keep your options open. 

Partnering with a 3PL that offers sub-assembly and kitting services allows you to explore offering gift sets during the holiday season or limited-edition packaging, initiatives that boost the customer experience and set your brand apart from competitors.

Moreover, outsourcing ecommerce fulfillment to a provider who offers custom fulfillment ensures that your unboxing experience can scale effectively as your order volumes grow. Ryder offers a full suite of value-added services, including kitting and subassembly, allowing you to execute your brand’s vision flawlessly every time.

4. Superior returns management

In modern ecommerce, you can’t just worry about the orders going out - you also need to think about the orders coming back in.

Returns are just as important to the overall customer experience as the initial purchasing journey. Customers want to be reassured that the returns process will be seamless and easy to navigate. If returned items are piling up due to slow processing, you’re not just going to frustrate customers - you’re also losing valuable resale opportunities to recoup lost revenue.

Partnering with an ecommerce fulfillment company that can take charge of your returns workflow will help transform returns into a revenue-generator for your business. 

Faster, hassle-free returns are one of the most effective ways to boost customer loyalty and repeat purchasing behavior. Ryder E-commerce by Ryder offers its customers worry-free returns management and reconditioning for returned items, ensuring a closed loop of value-added fulfillment.

5. End to end operational visibility

If you can’t see it, it’s impossible to measure it. This has led many retailers to partner with the 3PL that’s physically closest to them, rather than the one most appropriate for their needs. 

Because unless you can see your operation first-hand, it’s impossible to know how fulfillment is really going.

But by outsourcing to a technologically advanced provider, it’s no longer necessary to be in the same room as your 3PL. Fulfillment software gives you transparency over the entire process of fulfillment, from SKU management to order management and drop-shipping, so you can feel confident that your partner is running a smooth operation.

Ryder E-commerce by Ryder gives customers full visibility over fulfillment from end to end via the Ryder platform, an easy-to-use interface that enables merchants to navigate and measure everything from SKU movements to the type of packaging used for customer orders - in just a few simple clicks.

“The Ryder platform offered us this unique interface where we could see what was happening in the warehouse in real-time. It made us really comfortable to make the switch because we knew that we didn’t need to be close by to monitor what was happening.”

Eric Girouard, founder and CEO of Brunt Workwear

Ready to outsource ecommerce fulfillment?

Are your order volumes on the rise? Now is the perfect time to start thinking about partnering with an ecommerce fulfillment provider who can turn your operation into a competitive advantage. Contact Ryder today to learn how we can scale and streamline your ecommerce fulfillment.