A fulfillment center is a company outside of your business that can take on the warehousing, kitting, and shipping of your products. Fulfillment centers offer a suite of services, ranging from packaging all the way down to managing your inventory. When you keep fulfillment in-house, you maintain a higher level of quality control and gain invaluable hands-on experience. However, if your small business is growing at a pace where you keep up with fulfillment, it may be time to start outsourcing fulfillment to a fulfillment center.
Table of Contents
- Are Fulfillment Centers Different from a Third-Party Logistics Provider (3PL)?
- When Should I Work with a Fulfillment Center?
What Does a Third-Party Logistics Provider (3PL) Do?
A fulfillment center is sometimes also referred to as a third-party logistics provider, though the two terms don’t exactly describe the same thing. Fulfillment centers generally only handle warehousing your inventory, packaging your products, and sending them to your customers via shipping carrier partners. On the other hand, a company that handles all your inventory’s logistics as a whole. ShipBob is one of the most common 3PL’s out there for growing eCommerce brands and businesses that have outgrown the ability to fulfill orders in-house.
Despite their differences, these sorts of partners for your business take on the packaging, kitting, postage purchasing, and shipping of your product(s). On top of the suite of services that these companies offer, most of them also provide discounted shipping rates. Some of these partners will even deliver your products to your customers! However, you should keep in mind that most 3PL’s use USPS to complete their last-mile delivery.
Wait a Second—What’s Kitting?
Kitting describes the process of grouping several individual items into one consistent unit. Kitting occurs when each order you receive is the same. So, every package holds identical contents. We see this style of fulfillment most often in subscription box businesses.
An alternative to kitting is the pick and pack process. “Pick and pack” describes tailoring every package based on individual orders that you receive. Think of it a bit like Chipotle for packaging; every single order can be different! Obviously, pick and pack requires a lot more time, effort, and attention to detail than kitting. If you’re attempting to undertake picking and packing in-house, or if you’re receiving too many kitting orders to keep up with, you may want to think about outsourcing fulfillment.
When Should I Work with a Fulfillment Center?
In our experience, we believe it’s quite valuable for a nascent business to keep fulfillment in-house. This way, you get a better handle on that aspect of your business, and when it’s time for you to outsource fulfillment, you’ll have more knowledge of the process and be aware of any potential issues that may arise in your products’ supply chains. However, there are times when outsourcing fulfillment makes more sense. We’ve listed a couple of scenarios below:
Your Business Experiences Cyclical or Uneven Sales
Sometimes the number of orders your business receives can fluctuate throughout the year. If this is the case, it probably doesn’t make sense for you to run and staff a warehouse full-time. Warehousing your products costs money—even if your sales are in a lull period. A third-party logistics provider can adapt to your needs, and you won’t have to pay to maintain a warehouse.
You Don’t Have Enough Time
Time is money, people! If you’re so busy fulfilling orders that you don’t have time to focus on other core aspects of your business, it’s probably time to start outsourcing fulfillment. You need to devote time to sales, marketing, and customer service if you want your E-commerce business to be successful. Outsourcing fulfillment to a 3PL can help you do just that.
You’re Outgrowing Your Infrastructure
If your eCommerce business is experiencing rapid growth, you might outgrow your current infrastructure before you can adapt. While growth is a good thing, sometimes it’s hard for newer small businesses to keep up. When you outsource fulfillment to a third-party logistics provider, they’ll be better equipped to quickly adapt to changes so you can keep focusing on doing what you do best: running your business.