December 24, 2011: Fulfillment outsourcing is the process of entrusting a service provider with the functions such as receiving, packaging and shipping of goods. Companies that sell products to customers through different channels such as phone, website or through mail order must take care of fulfillment to process these orders. Certain firms opt to perform these services in house with the help of employees, while some other firms outsource this activity to a third party service provider who performs fulfillment activities.
Full service fulfillment service providers offer complete range of service starting from collection of products from the warehouses, packing them, transfer it to the shippers and confirming the shipment to the customers through emails and other communication channels. They will also take care of the client’s credit card processing, update current inventory level to the website, product reordering and so on.
As in the case of any outsourcing, fulfillment outsourcing too has pros and cons. The following are the reason why not to outsource fulfillment activities.
- The firm will be heavily dependent on the service provider in terms of reliability and speed.
- It is likely that the service provider might commit more mistakes than the staff of the client firm
- The return processing worker with the service provider may not be able to determine the marketability of the product that is returned.
- In some cases the cost of outsourcing might go up than performing it in house
- In some cases the service provider may not pack the merchandise properly
- The service provider will have to follow the common systems of the service provider than developing a unique system in house.
However there are many compelling reasons in favor of fulfillment outsourcing. The reasons are:
- Outsourcing of fulfillment can absorb seasonal variations in the shipping and returns volume
- Majority of the fulfillment service providers offer FedEx and UPS discounts
- All the leading service providers delivers what is promised
- Outsourcing converts fixed costs into variable costs which is dependent on the order
- It helps firms to concentrate on firm’s core competency by outsourcing unfamiliar tasks
There are some instances where firms are left with no choice than outsourcing and they outsource it without considering the cost. The reasons are:
- Foreign exporters offering expensive merchandise to the US customers
- Lifestyle choices prevents online merchants from order processing
- The online merchants not able to handle the physical workload
- The distance between the merchant and the customer may be large
In most of the cases the significant factor is the cost. Comparison is made based on the cost that will be incurred while performing the function in-house and the cost incurred in outsourcing the function to a third party service provider. The service record of the service provider is verified before selecting the service provider.