Tom Ashley, Chief Operating Officer
The decision to outsource your fulfilment to a third party is not one that any business takes lightly. At ILG we liken it to entrusting your children to a babysitter for the first time. There is a lot of reassurance required before you feel ready to let go.
Signs that it might be time to outsource
The most common reasons for choosing to outsource centre around either a desire to grow the business or a desire to get away from managing warehouses… or both. Here are some of the reasons cited by our customers.
Large forecasted growth
If business is booming, think about the demand on your existing stockholding and fulfilment capabilities. Assuming they have been running efficiently, there won’t be much slack to accommodate the extra workload. This is a good time to take on a fulfilment partner.
An existing relationship is coming to an end
Whatever the reason for the end of a relationship, it presents a golden opportunity to re-evaluate your needs and find a new solution that is better suited. A fulfilment partner should feel like part of your business, fully understanding your products and your customer needs.
A warehouse lease is coming to an end
You’re about to lose your warehouse facility and you need to ensure there is no disruption to your stock-keeping and fulfilment functions. Time to outsource?
Launch of a new product
Expanding your product portfolio means flexing your fulfilment capabilities. You will want this to be a complete success and it could be a good way to trial a new supplier without moving the entire business.
Your books show you can afford to outsource
This is a fairly easy one to evaluate. As a general rule, the cost of logistics ex carriage should not be more than 6% of turnover.
Storage and sales are matched
If your storage facility is up to capacity and you’re facing the need for extra space, outsourcing could be your best option.
Finding the right fulfilment partner
Choosing the right company to handle your goods is no easy decision. Firstly, make sure they offer professional fulfilment services and not just space. You’ll come across a lot of companies that have other core interests and only offer space and fulfilment services as a secondary revenue stream. We would recommend you steer clear of anyone that isn’t a fulfilment provider first and foremost, and ensure you appoint a professional company that shares your goals and objectives.
An activity based cost model is important. This gives you a cost platform whereby you’re charged as and when you’re selling product. Expect fixed costs for storage and some admin or management functions, but most of your costs should be restricted to activity. That way you ensure that your costs for fulfilment are kept in line with your business performance.
Try before you buy. When considering a third party fulfilment partner, make sure you try the service for yourself. Test the customer experience and see how they perform. What’s their communication like? How well do they handle returns? How good is their packaging? How well do they align with their client branding? Is the product you receive the one your ordered? See what you like and don’t like and consider these when discussing options.
Do they understand your brand? A good fulfilment partner should be invisible as far as the end customer is concerned. Any goods and communications your customers receive should look like they came straight from you. That includes everything from the condition of your products on receipt to the use of your branding in emails and other communications.
Do they give you confidence? This is the most important factor. You’re placing not only your goods but your reputation in their hands. A good fulfilment company will do everything they can to reassure you that your brand image is as important to them as it is to you and that they have the capability to make you look good.
Different fulfilment companies provide different levels of service and costs vary accordingly. Ultimately, the one you choose should be the most well suited to your products, your brand and the level of service expected by your customers.