Operations & Fulfillment : 7 Signs You Should Consider Outsourcing Your Fulfillment

January 2009 By Steven L. Gregg

multipage

Hard times often require difficult decisions. Given the weak business environment and challenges facing multichannel marketers in particular, many have had to make tough choices to cut costs, with outsourcing being one of the options for doing so. Whether in good times or bad, however, outsourcing your order management, call center and/or fulfillment operations is one decision that requires careful consideration.

Here are seven signs that you should think about outsourcing fulfillment:

1. You’re beginning to lose focus on marketing and merchandising. Your products are the essence of your brand. They make you truly unique, while your effectiveness in marketing your business determines your success or failure. If operational issues and expenses are keeping you from focusing on what makes your company special in the marketplace and conducting successful marketing campaigns, that’s a sign that it’s time to consider outsourcing noncore competencies.

While service quality is also part of your brand experience, the right outsourcing partner will deliver service that aligns with your branding efforts and leaves your management team to focus on differentiating you in the marketplace.

2. IT costs continue to be a significant percentage of your operating budget. Technology and the capabilities it provides continue to evolve rapidly. Time spent assessing technological options is significant, and the cost of implementing them is even greater. What’s more, finding and keeping staff who know how to support your system, leverage existing capabilities and develop new functionality is a never-ending challenge that requires a large commitment of time and resources.

Third-party fulfillment companies must continuously upgrade their systems and capabilities to remain competitive. But they’re able to spread those costs over many clients. Marketers can take advantage of this by “leasing” appropriate capabilities at the high end of the technology curve.

By outsourcing, you’ll reduce your ongoing capital investment and free up money to invest in other areas of your business.

3. Outbound freight costs are growing, and you need to gain control. Outbound freight costs comprise a growing percentage of overall fulfillment costs. In many cases, they represent more than half of the total cost. Although gas prices have come down lately, you can’t expect shipping costs to follow anytime soon.

The good news is that volume can be leveraged to get lower outbound freight rates from carriers, and third-party fulfillment companies aggregate their total volumes when negotiating rates. In many cases, they’re willing to share some of the savings as part of their overall costs of service. This can serve as a competitive advantage for outsourcing companies.

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