Outsourced Fulfillment vs In-House: Which Is Better?
When your subscription service is just beginning, it is not unusual to handle fulfillment by yourself. However, as your subscriber base grows, the complexities of warehousing, packaging and shipping will also increase. Eventually you will need to decide between outsourcing fulfillment or keeping it in-house. Asking yourself the following questions can help you decide which is best for you.
How much time can you give to fulfillment?
Handling everything yourself can reduce expenses in the very beginning, but later on, the time you spend on fulfillment may take you away from other tasks that keep your business strong and your subscribers engaged. Every few months, ask yourself if you are spending enough time on activities such as sourcing exciting new products, promoting your business, and interacting with your customers. These growth-focused activities should come first, and outsourcing fulfillment can be a good way to keep your focus on them.
Are you ready to grow your staff?
One reason why some business owners prefer to keep their staff in-house is so they can personally check on how the boxes are being filled. They may also derive a lot of satisfaction from building their own team. If you choose to hire your own staff, be sure you have enough people to receive shipments, inspect and count items, track inventory, pick and pack boxes, print labels, meet delivery drivers and handle any customer issues that may arise.
One of the biggest advantages of outsourcing fulfillment is that you do not need to deal with all of the legal and managerial issues that come with hiring extra employees. Maintaining your own staff becomes especially complicated with subscription box services, where a surge in demand for labor happens once a month or once per quarter. A third-party fulfillment partner will already have a dependable, experienced staff on hand, and they will know how to work around busier and slower times.
Do you or a partner have warehouse management experience?
If you want to handle fulfillment in-house, you or someone on your staff will need to know how to run a cost-effective, efficient, and safe warehouse (a good collection of tips can be found here). Be prepared to scale up your operations as your subscriber base grows!
The benefit of outsourcing is that your fulfillment partner will not only take the responsibility of warehouse management off your hands, but they may also have their warehouses geographically located where your customers will get their subscription boxes faster for the same shipping costs.
How lean can you make your packaging?
If you are packing boxes yourself, you will have an easier time if your items are small, durable, and always have the same general shape. Then you can select one regular way to arrange the contents of your box and ship it out without much special handling.
Otherwise, a good third-party fulfillment partner should be able to help you find space-saving and attractive arrangements for your items. They should also provide you with boxes that will minimize empty, wasted space (which can cost the same to ship as a full box of the same size), and give advice on branding your packaging.
Do you have the leverage to negotiate good shipping rates?
If your company is very large, you may be able to arrange a good deal with delivery services. Until you reach that size, a fulfillment provider who already has those deep discounts in place will be able to get you better shipping rates. They will also help you navigate complicated international shipping procedures.
Are you ready to handle complications?
Sometimes packages get lost or arrive damaged. You can either have your own staff track errors, accept returns and send out replacements or refunds, or you can choose a fulfillment provider who will take care of it for you. Compare the cost of both options to help make the best choice for your business.
Have you compared the numbers?
Finally, interview different fulfillment providers and get real-world figures based on your specific business, and then compare the per-box cost they offer with the expense of keeping everything in-house. (Tips for choosing a good fulfillment partner can be found here.) Be sure to add in the cost of your time and mental energy. In many cases the cost of outsourcing fulfillment will be close to, or even better than, the cost of keeping everything in-house.