Many aspiring ecommerce businesses start out in someone’s garage or kitchen. You store, pack and ship from a home base and control all activities. But even established sellers sometimes opt for in-house fulfillment.
The benefits include:
- Quality control for packaging, presentation, shipping, surprises.
- Increased customer experiences for speed, communication and support.
- Branding and materials for custom packaging.
- Better control of stock levels and avoidance of stock-outs.
- No barriers between you and the customer.
In-house fulfillment is best for one or more of the following:
- Order quantities of less than 20 per day.
- Custom orders or unique customer requirements.
- New product lines and suppliers.
- Alternative picking and packaging processes.
- Local customers.
- Available capacity (warehouse and employees).
- Sufficient funding to invest in technology.
What is involved
The order processing includes the picking of the articles, the quality inspection, the packing and labeling as well as the dispatch. Inventory management means receiving and recording the goods, monitoring inventory levels, and otherwise organizing and accounting for them. If inventory is left unmanaged, it means stock shortages, damaged goods, and waste. Additionally, inventory management costs don’t end with renting space and hiring staff. This includes administration, technology, and overheads such as: B. Insurance.
- Find and secure suitable storage areas. Consider starting with a secure storage unit or location in an existing facility. Try to allow flexibility if growth is faster or slower than expected
- Research and procurement of equipment and software for packaging and labeling and possibly for automation.
The automation of routine tasks accelerates and synchronizes the order fulfillment process. Choose a software provider only for the features you need. Look for software that:
- Automatically loads new orders from your e-commerce platform, but also allows orders to be entered and processed manually.
- Tracks incoming and outgoing inventory movements and warns of low inventory levels.
- Integrates with your existing software – accounting, customer management, e-commerce.
- Processes product returns and credits
- Run reports as needed
- Tracks historical volume to anticipate staffing needs and inventory.
There are four main cost centers for internal fulfillment: warehousing, personnel, packaging and shipping. Shipping will likely be outsourced unless deliveries are made on site with your own transport.
Here is a hypothetical framework for estimating potential compliance costs.
By estimating the average fulfillment cost per order ($ 18.80 in our hypothetical example), merchants can compare with outsourced vendors and decide on the best option for their business. There are no standard pricing for third party fulfillment, but the cost will likely include a monthly administration fee plus fees for:
- Receipt of the incoming inventory, per working hour.
- Storage, usually either by pallet or container, per week or month.
- Picking, packing and labeling (per item).
- Special services, including returns processing.
An onboarding fee may also apply. Remember to add shipping when comparing the total cost per order. An outsourced supplier could likely offer lower shipping costs due to volume discounts they receive from carriers.