Can Order Fulfillment Save You Money? (Sometimes.)

Picture this: it’s your peak season, and your orders have skyrocketed. Your current storage space is bursting at the seams, and your staff are working overtime to keep up. You’re incurring hefty overtime wages and struggling to manage the chaos. Conversely, during your off-peak times, you’re paying for underutilized storage and idle staff. The inefficiencies are clear as day.

Enter a third-party fulfillment service. Here’s the beauty of it: they flex with your business needs. When order volume ramps up, they’re equipped to handle it, with no additional strain on your part. When orders wane, you’re not stuck with excess capacity.

But wait? Isn’t that really expensive?

You might be surprised to hear that the answer is often “no.” In fact, hiring help on shipping can actually save you money in the long run.

And I’m not just saying this because I’ve been bought off by Big Warehouse. In this video, I’m going to get into the math to show you exactly why outsourcing fulfillment works so well for so many businesses.

My name is Brandon, here on behalf of Fulfillrite. If you need help shipping your business’s orders, go to fulfillrite.com and request a quote. We’ve shipped for thousands of eCom shops and crowdfunding campaigns and we’re happy to help you ship yours too. The quote doesn’t cost a thing, so if nothing else, you get some good information about pricing. Link in the description.

But enough self-promotion. Let’s dive in and set you up for shipping success!

1. Why Hire Help With Order Fulfillment?

Why would a business invest in outsourced order fulfillment? It seems counterintuitive, right? Paying more to eventually save money. But as with a lot of things in business, it’s not quite that simple.

With that in mind, here are six key reasons why you might consider outsourcing order fulfillment:

1.  
2. The volume of your orders has reached a level where you’re either falling behind or errors are creeping in.
3. Your staff are working overtime due to shipping demands.
4. Managing fulfillment has added a layer of complexity to your business operations that’s becoming unwieldy.
5. Your storage is at capacity, with no room to expand.
6. And lastly, and perhaps most compelling, you want to reduce costs.

Yes, you heard it right. The goal to save money can indeed be a driving factor to outsource order fulfillment, especially in tough economic times. Surprisingly, this topic doesn’t get as much airtime as it deserves.

This is largely because the economics of order fulfillment isn’t as simple as stating, “the service is cheaper than the cost of postage and supplies.” It goes far beyond that. Outsourcing fulfillment services can eliminate various incidental costs – those pesky additional expenses that are simply part and parcel of day-to-day business operations. Outsourcing not only makes these costs someone else’s problem but, over time, can lead to substantial savings that contribute to your bottom line.

2. How Fulfillment Centers Price Their Services

To really get to grips with how outsourcing order fulfillment could mean big savings for your business, we first need to decode the third-party fulfillment pricing model. Of course, we always recommend getting a personalized quote, so the numbers truly reflect your unique situation. However, to simplify things for this discussion, let’s look at a basic formula:

Fulfillment Cost = Account & Storage Fees + ((Postage + Supplies + Pick and Pack Fee) * Packages Shipped)

Let’s pull this apart, element by element:

1. Account & Storage Fees: These are baseline charges you have to pay for us to hold onto your inventory. Think of it as your storage rent.
2. Packages Shipped: This refers to the total number of packages that you ship in a given month. The more you ship, the more costs it involves.
3. Postage: This is the cost you incur to ship an item. It can vary widely depending on size, weight, destination, and shipping speed.
4. Supplies: This is the cost for any special materials needed for packaging. Good news though – basic materials are included in the pick and pack fee, so this only applies to anything extra you might require.
5. Pick and Pack Fee: This is the per-order cost of retrieving items from your inventory, getting them ready for shipping, and printing and applying postage. It’s a key part of the process and an integral part of the costs.

When you consider all these factors, it becomes clear how a third-party fulfillment center prices their services, and how by leveraging their efficiencies, you might just find a solution that benefits your bottom line.

3. Postage Prices vs. Warehouse Charges

So, we’ve looked at the breakdown of costs involved with third-party fulfillment services. But, let’s put the magnifying glass over two significant factors: Postage Prices vs. Warehouse Charges. This is where the potential for savings becomes quite fascinating.

Fulfillment services, like ours, can often negotiate far lower postage rates due to the sheer volume of orders we manage. On top of that, we can secure supplies at lower costs because we purchase in large quantities. So, if you’re shipping a considerable number of items through a service like ours, the money saved on postage and supplies could offset account/storage and pick and pack fees. The result? You save money, and we still turn a profit. It’s a win-win!

But, hold up, there’s a caveat here. To enjoy these savings, you need a large, consistent volume of orders. If your orders are sporadic or less in number, your savings on postage and supplies might not outweigh the pick and pack or storage costs. But don’t lose heart just yet.

4. When Should You Hire Help?

So, now that we’ve covered the cost elements and potential savings of outsourcing order fulfillment, you may be asking: “When should I actually take the leap and hire help?”

The rule of thumb here is relatively straightforward. Generally, once your business reaches a point where you’re shipping at least 100 orders per month, it might be time to consider outsourcing.

“But wait!” I hear you say, “What if it doesn’t necessarily cut down my expenses?” Good question! While financial benefits are often a major motivator for outsourcing, the value of third-party fulfillment isn’t restricted to cost-savings alone.

Consider this: as your business scales and order volume grows, your time becomes increasingly precious. When you outsource, the time you’d typically spend on order processing, handling, and shipping can instead be redirected to key growth areas of your business. This could be strategy development, marketing, customer service or product development.

In essence, it’s about efficiency as much as it’s about cost-savings. By unburdening your team of fulfillment tasks, you’re freeing up capacity to focus on what really matters – nurturing and growing your business. And ultimately, isn’t that priceless?

5. You’ll Save On Labor, Training, & Overtime

So, let’s focus on two specific areas that can really highlight the cost benefits of outsourcing fulfillment: labor allocation and reduced overtime and training.

Firstly, let’s talk about labor allocation. For many small businesses, labor is often the most significant expense. And rightly so, as employees need to earn a living. However, assigning your employees to non-value-added tasks like packing and shipping can quickly become a drain on resources.

Even if you’re only shipping two orders a day, the time it takes to pack items, print postage, and drop them off at the post office quickly adds up. For an employee earning, say, $15 an hour, this could amount to between $60 and $120 a month. And remember, that’s not considering additional labor overheads like healthcare, taxes, and worker’s compensation which can easily add another 40-50% to the cost to keep an employee on-board.

Now, if you could save your employees this time and allow them to focus on generating revenue, the benefits would be twofold: reducing costs and increasing productivity.

Next, let’s consider the issue of overtime and training. Many businesses begin shipping orders with a home-spun process, perhaps buying supplies on Amazon, printing postage via PayPal, and arranging USPS pickups.

However, even this simple method requires training. Your employees need to learn how to purchase the right supplies, navigate the PayPal postage printing process, and coordinate with USPS for package pickups. Each step is time-consuming and can lead to overtime when inevitable glitches occur, like a printer malfunction or running out of packaging materials.

In the grand scheme of things, these tasks might seem minor, but they quickly accumulate. By outsourcing your order fulfillment, you’re saving on these hidden costs, not just in dollars but in time and effort, helping your business to run more efficiently and ultimately, more profitably.

6. You’ll Save On Storage & Supplies

Let’s shift gears a bit and look at two more aspects where outsourcing order fulfillment could lead to significant savings: supply costs and storage costs.

First, consider your supply costs. Each roll of bubble wrap, every non-USPS box or padded mailer, even the seemingly minor items, can add up to substantial expenses over time. One nickel here, a dime there… before you know it, you’ve got a significant chunk of change going toward packing materials. By outsourcing, these costs become part of a much more predictable and stable pick-and-pack fee, unless you require special packaging, of course.

Next up, let’s talk about storage. If you’ve got a ton of items to store, you’ve essentially got two options: either keep them in your workplace, eating up valuable space, or rent a storage unit.

Storing items in your workplace might seem cost-free, but let’s be clear: you’re sacrificing usable real estate, and that comes with its own cost, even if it doesn’t have a clear dollar sign attached.

On the other hand, renting a storage unit comes with a very visible price tag. Storage units aren’t cheap, and on top of that, you’ve got the additional labor cost of fetching items from the unit for shipping. Time is money, remember?

So, when you take a step back and look at these factors, the financial advantages of outsourcing become even more compelling. Not only can it save you money directly, but it can also help you use your resources more efficiently, freeing up time, space, and mental bandwidth so you can focus on what matters most: growing your business.

7. You’ll Fix Inefficiencies & Retain More Customers

Next on our journey, we’re diving into the realms of efficiency and customer retention. So, let’s talk about how outsourcing can help reduce business complexity and boost process efficiency.

Business can get complicated quickly, and an over-complicated business is like a ship lost at sea. It becomes a struggle to prioritize, and your mind becomes swamped with a never-ending list of tasks, leaving you little room for strategic thinking and revenue generation. It’s hard to quantify, but this chaos can cost you significantly in the long run.

Outsourcing fulfillment to a third party can alleviate this burden. It simplifies your operations, making your processes more efficient and freeing up mental energy for revenue-generating activities.

Now, let’s discuss the financial impact of shipping speed and accuracy on your business. If you’re struggling to fulfill orders accurately or on time, you risk frustrating your customers. Some might demand refunds, others might decide not to return to your store. Either way, poor customer service is costing you revenue.

Partnering with a third-party fulfillment company can ensure your packages are shipped domestically within two to three days, offering a high level of customer service. Plus, having seasoned professionals handle shipping minimizes the likelihood of damages or errors.

Lastly, let’s not forget about customer retention. Good shipping experiences can boost repeat purchases. Let’s say a positive shipping experience makes your customers 5% more likely to buy again. That might not sound like a lot, but over time, that’s a significant increase in revenue from customer retention. Technically, this isn’t saving money, but it is capturing money that you could be leaving on the table otherwise. Outsourcing fulfillment can help ensure you’re not missing out.

Final Thoughts

By now, it’s abundantly clear that you can save money by hiring help with shipping. But remember, it’s not just about cost savings; it’s also about the value of your time, the growth of your business, and the happiness of your customers. Make sure you factor that in if you’re on the fence!

If you need help shipping your business’s orders, go to fulfillrite.com and request a quote. We’ve shipped for thousands of eCom shops and crowdfunding campaigns and we’re happy to help you ship yours too. The quote doesn’t cost a thing, so if nothing else, you get some good information about pricing. Link in the description.

And last but not least, if you have any questions, leave a comment below. I will personally answer as many as I can.

Thanks for watching!