When you’re starting a subscription commerce business, taking on the responsibility of managing order fulfillment internally might seem overwhelming or like a complete impossibility. Initial lack of expertise, resources, infrastructure and dollars drive many early stage subscription box businesses to outsource fulfillment operations to a third-party logistics (3PL) provider.
However, as the business grows, the cost-effectiveness and control of taking on order fulfillment in-house begins to look more appealing. While 3PLs are great for getting your business off the ground, like with any third-party vendor relationship, it’s important to closely evaluate if working with a 3PL is the right fit long-term.
Are you thinking about taking order fulfillment into your own hands? The following are a few reasons why this move may make sense for your subscription commerce business.
Upping the Ante on Order Volume Kills Your Bottom Line
First sign it’s time to stop outsourcing, when your order volumes sky rocket and the cost to fulfill those orders sky rockets too. One hundred orders a day can quickly escalate to 1,000 and you’ll pay a premium for that growth.
Aside from order volume, any shift in business models causes complexity for the 3PL, which in turn will cost your business more money. For example, let’s say you began outsourcing with 100 SKUs and then decided to expand to 1,000, your 3PL provider is operating under such tight margins that they are going to use this change to charge you more.
Customer Experience is Your Main Priority
Aside from better cost control, managing order fulfillment in-house also improves quality control, and ultimately the customer experience for many sub-comm companies.
This isn’t to say that 3PLs don’t offer quality service, but at the end of the day, they serve a number of different businesses and no one is going to pay as much attention to detail when packing your customer’s order than you and your team.
And attention to detail matters. Order accuracy and the unboxing experience carry a lot of weight with sub-comm customers. One poor experience could send them to a competitor.
You See Value in Owning the Order Fulfillment Process
Ultimately, taking order fulfillment in-house gives you ownership and greater visibility of the process. You can identify errors and make changes more nimbly than you could working with an outsourced provider.
Yet, given these points, some sub-comm businesses are wary about managing order fulfillment in-house because of the upfront costs of purchasing warehouse space, staffing and implementing technology. It’s comparable to renting a home versus owning one. Short-term, it might make sense to rent, but later down the road you realize you have no equity.
Taking the reins is more realistic than many think and you can find ways to reduce your spend. From a technology perspective, finding a scalable cloud-based warehouse management system (WMS) with a No Capex model and fast implementation speed is a great start. Using this type of solution will reduce your operational and labor costs quickly. An advanced WMS is also a great quality safeguard when it comes to order accuracy, saving you from losing customers.
Doing What’s Right for Your Business
Deciding to forgo a 3PL and manage order fulfillment in-house is great for some companies, while outsourcing will remain the right choice for others. Either way, maintaining the highest levels of visibility and control are key considerations to keep your customers happy and your cost to serve to a minimum.