How To Outsource Inventory And Product Fulfillment Operations For An Online Store

One of the downsides of running our online wedding linens business is that we have to carry inventory and manage product shipping and storage. It is unfortunate, but there’s no way around it because we need to have our products on hand and ready to ship in order to fulfill orders in a timely manner.

My wife and I had thought about outsourcing our shipment and fulfillment operations for quite a long time but the personalization and customization portion of our business prevents us from doing so. In any case, before we came to this conclusion, we did a good amount of research in this area and thought that it might be beneficial to pass along some of our findings to other would be shop owners.

Can You Outsource Your Inventory And Fulfillment?

The answer is a resounding yes, but only if your business fits within the following parameters.
For example, your order fulfillment operations are a good candidate for outsourcing if…

  • Your products can be boxed and shipped as-is without complicated instructions. If your products require personalization or very specialized packing or fulfillment procedures, then outsourcing is probably not going to work.
  • Your products are not physically large. This is somewhat of a gray area, but in general having products that are large and require a lot of warehouse space may be too cost prohibitive to outsource.
  • You don’t have a ton of different products. Again, you have to check to see whether outsourcing makes economic sense but in general the more product SKUs you have, the more expensive it will be to outsource your order fulfillment.

Why Is It A Good Idea To Outsource?

If your products meet the above parameters, then your order fulfillment operations can be easily outsourced at a reasonable price. In general, outsourcing your order fulfillment offers the following advantages.

  • It makes your business inherently scalable. As your business grows, you don’t have to worry about adding new infrastructure and new inventory controls and equipment. As your shipments increase, it’s simply a matter of increasing the warehouse capacity at your product fulfillment partner.
  • It decreases your order fulfillment time. Often times, the companies that specialize in order fulfillment have multiple warehouses located across the country. As a result, all shipments to customers no matter where they live typically take only 1-2 business days. In addition, you save on shipping costs because on average, the physical shipping distance is less than if you shipped out of your home location.
  • You can concentrate on marketing and growing your business. Maintaining and organizing your own inventory can be a major pain and occupy a significant portion of your time. By allowing a third party to take over, you can focus your efforts on improving your business
  • You can easily expand your business into other countries. Making international shipments can be a major pain because there are additional hassles, costs and paperwork involved. By outsourcing your order fulfillment, you no longer have to worry about anything other than sourcing your products.

How Do I Outsource My Order Fulfillment?

My wife and I looked into many order fulfillment companies and we highly recommend ShipWire. In a nutshell, ShipWire has over 3 million square feet of warehouse facilities across the nation. You can have your vendors ship your products directly to Shipwire and Shipwire will pack and ship your orders as they come in.

There are two main ways to do this. One way is to pre-wrap and box your products and send them directly to ShipWire. As orders come in, Shipwire will simply place a shipping label on your box and ship it out to the end customer. Of course this method only works if you sell only a few individual products.

The other way is to send your entire inventory to ShipWire and they will pick and pack your orders as they come in. The costs associated with this service vary depending on the number products that you sell.

Using a service like ShipWire has many advantages. Here are the main ones that stood out from my research.

  • Shipwire can be easily integrated with all of the shopping carts I recommended in my article on Choosing the Right Shopping Cart Software. As orders come in, they can be automatically sent electronically to Shipwire for processing
  • Because Shipwire has warehouses across the country, shipping times are usually 1-2 days no matter where the customer is located
  • Your shipping costs will be reduced because Shipwire will automatically ship your products from the closest warehouse
  • Shipwire automatically verifies the customer’s address and ensures the deliverability of your orders.
  • Shipwire will handle returns for you and automatically restock returned items for you

What’s The Catch?

Of course all of this sounds too good to be true so what’s the catch? The main issue with using services such as Shipwire is cost. Depending on the number of products you sell, the amount of warehouse space you require and the number of shipments you make in any given month, the cost of the service can span a wide range.

In general, services like ShipWire are ideal if you

  • Sell high margin products
  • Sell products that occupy very little space
  • Sell only a small variety of products

Order fulfillment services like ShipWire are especially ideal if you are selling products that you’ve created yourself. If you know that your business is going to scale in the future, it pays to use a service like Shipwire even at the expense of increased profits. As long as you can still make a decent amount of money, why not outsource your headaches and focus on growing your business?

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13 thoughts on “How To Outsource Inventory And Product Fulfillment Operations For An Online Store”

  1. One other tip for people who produce info-products: http://www.vervante.com. I love those guys. They will produce whatever combination of CD’s, printed materials, DVD’s, and so forth POD, thus eliminating the need for inventory. They also do all the fulfillment, and just bill you per unit created and shipped – there’s not even a cost to set up your products with them.

    Blessings,
    Andrea

    1. @andrea
      I had never heard of that service before. Good to know incase I ever decide to sell informational products

  2. Wow, this was a great article. I’m always a little distrusting of these types of services.. I like to have all products in hand so I know what’s happening all the time. However, I guess you could order one of your own products to see the handling quality of the company perhaps.

  3. Thank you for the information and recommendation for a fulfillment company. I am not at that stage yet, but I will keep this post in mind for when I do.

  4. Jimmy says:

    Thanks for the amazing info – i would suggest anyone looking into outsourcing fulfillment to read this first. Although, i have one question why are you only suggesting ShipWire? i have seen a few great fulfillment services out there like FulfillRite Product Fulfillment, efulfillment, Xpert Fulfillment and Moldingbox fullfillment etc…

  5. I have a fulfillment company (www.customfulfillment.com) – we have been in business for 23 years serving large and small companies (from the make up industry to the media industry) and are seeking new customers. We do everthing and specialize in smaller companies that are expanding and can’t handle the growth themselves. Thanks Sean (973) 383-4488

  6. I’d recommend Landis Logistics in PA for smaller (500 to 1,000 orders/month) and Remar in TN for larger order volume requirements. There is a LOT that goes into fulfillment and their experts can help you.

  7. Hi Steve, we have been working with shipwire for few months now, our business is growing tremendously without bothering manpower, warehousing, shipping & return, paperwork etc. Although we have to pay certain monthly fee to shipwire, it’s reasonable when we compare with the cost of doing everything by ourselves, and cost per one item is decreasing when the volume is increasing, therefore it actually motivates us to sell more goods. Shipwire is highly recommended for business that is looking for long term sustainable growth and large scale in future

    1. Hey Cherry, I’m glad that Shipwire is working out for you. While the service is expensive, there’s nothing more time consuming that packaging and shipping out products. Business owners should be focusing their time on marketing and growing the business.

  8. Hi. Great article you have there. I just want to share my thoughts on this.

    A wise business owner leaves everything to his staff – the flow, process and manufacturing of his business. Because the owner is not a worker physically, instead he works with his mind basically – by thinking and planning on improving his business.

    So we have to leave everything on our staff, just personally monitor all the reports of developments and improvements, and work out the errors.

    If you have an extra load of work, outsource it ! It’s worth the risk!

    Thanks!
    -Rachel

  9. Informative article! Outsourcing the fulfillment process takes all the pain out of running a business. Fulfillment is so key to a business because shoppers expect products to be shipped to them in a timely matter, which isn’t always possible when you are doing everything yourself.

    -John

  10. Sidney says:

    Hi Steve,

    Thanks for the information.

    Please correct me if I am wrong, but to get the shipping time advantage of using a fulfillment company with warehouses across the country, don’t you need to have inventory in various warehouse?

    I’m just thinking that it might be more expensive to start up a business if I need to have inventory in different places??

    -Sidney

  11. Josef Fritz says:

    I’ve had a lot of luck using Selery fulfillment based out Dallas, TX. They mostly handle clients and have been prompt getting all of my orders out on time. They’re located in Farmers Branch which is pretty much central to all of the D/FW metroplex. You can check them out at seleryfulfillment.com

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