Outsourced Order Fulfillment Services: What’s Your ROI?
Outsourcing logistics is a growing trend, according to the annual Third-Party Logistics Study, with 73 percent of shippers saying they are increasing their use of outsourced logistics services. More often than not, retailers and manufacturers outsource their logistics operation in an effort to focus more on core competencies. Statistics show that shippers are getting value from partnering with a fulfillment provider, but at the same time, the 2018 study shows that satisfaction with these services has dropped by 9 percent.
Omni-channel retail can be complex. When it comes to fulfillment, outsourcing your order fulfillment services can turn a complex fulfillment operation into a competitive advantage. However, the value your order fulfillment partner provides should be anything but complex. It should be transparent and fully accountable.
And it should help you achieve a healthy ROI. Here are some ways to get what you want.
Understand your outsourced order fulfillment costs
First, it’s important to understand what goes into your costs. At a basic level, a fulfillment provider devotes three types of resources to your order fulfillment:
- Warehouse space
Are you aware what aspects of each contribute to a successful fulfillment operation?
Recognize behind-the-scenes order fulfillment activities
Within these three aspects of a fulfillment operation, many behind-the-scenes activities make up your fees, including:
- Receiving the order into the warehouse management system (WMS)
- Processing the order in the WMS (sorting, workflow, logic)
- Generating pick tickets
- Picking items at each pick face location
- Verifying complete pick ticket and order accuracy
- Updating inventory
- Printing necessary labels (including BOL)
- Gathering and preparing shipping box and void fill
- Placing items in the optimal box and securing with void fill
- Printing and applying all shipping labels
- Sealing the box and sending it to the appropriate staging lane for outbound shipment
- Closing out the order in the system
Your needs could dictate additional order fulfillment processes, too, such as kitting, custom labeling, order inserts, custom packing slip generation, returns label generation, bagging/tagging of items, or serial number capture.
Use proven fulfillment processes that lead to value
In today's world, convenience, speed and visibility are driving our behaviors. Providing a high level of service drives sales and customer loyalty. Are your customers receiving exceptional service? Is your fulfillment partner clearly articulating the work and resources that go into your service? The service that you, and your customers, are receiving should align with your fulfillment costs. It's not just performing these functions - but performing them effectively and efficiently - that defines value. Having proven and repeatable processes, the right talent, and robust systems and technology in place can turn a complex operation into a competitive advantage.
In many cases, refined systems and processes develop through expertise, experience, infrastructure, and economics of scale. These are prime attributes to look for in a fulfillment partner. Furthermore, technology is crucial. Just how efficient and agile are the systems behind your fulfillment operation? How quickly do orders reach the customers, and at what cost?
Have a conversation with an expert
If you're not sure what the true ROI on your fulfillment operation is, why not sit down with an expert and do some analysis? Or if you haven't outsourced yet but are exploring, this is a great place to begin.
You want to be able to compare cost breakdowns to the service you and your customers are receiving. Meeting SLAs, fast delivery, achieving competitive shipping rates, reducing working capital, and providing visibility into your data all play into the bottom line. Want more information? Check out How to Measure Your Fulfillment Partner's Performance.
Order fulfillment is a critical piece of the supply chain and is changing rapidly due to consumer behavior. You'll want to make sure the performance of your fulfillment operation is helping to drive your business forward. We're here to help.