Everything to Know About the Fulfillment House in Ecommerce
When you first look for potential side hustles, ecommerce options often loom large on the list. When you first get started and volumes are low, it’s often practical to handle everything yourself from your home or rented space. What happens if when your volumes go up though?
At a certain point, you start running out of room in that spare bedroom or your garage. You spend more time on fulfillment than you do working on your business. Enter the fulfillment house.
Not familiar with fulfillment houses and what they can do for your ecommerce business? Keep reading to learn all about them.
What Is a Fulfillment House?
A fulfillment house is, broadly speaking, a warehouse that handles packing and shipping inventory for other businesses. The business model goes by a few names, such as fulfillment warehouse, fulfillment service providers, and 3PL. Regardless of the name they use, they all provide very similar services.
They accept inventory on your behalf. Then, as your orders come in, you pass them along to the fulfillment house. The fulfillment house deals with fulfillment operations. If you want to learn more about fulfillment methods, we advise you to check out this strategy for more valuable information!
Warehouse vs Fulfillment House
You might wonder if there is a meaningful difference between a warehouse and fulfillment house. There is!
A standard warehouse operates primarily as a place where you store inventory. The typical warehouse doesn’t offer fulfillment services.
So, for a while, you might use a warehouse to store excess inventory. When you need that inventory to meet orders, it’s still on you to retrieve the inventory from the warehouse, pack it, and ship it. The warehouse staff won’t deal with that part of the process.
A fulfillment service provider will offer you storage for inventory, but also handle the packing and shipping.
With those basics out of the way, let’s jump into what a fulfillment house can do for your ecommerce business.
As an ecommerce business owner, you’re in the same position as any other business owner. You can spend your time working in the business or on the business.
In the early days, it makes sense to work in the business. Your total volume may not justify hiring another person or you may have most of your funds tied up in inventory. Wearing all the hats lets you keep things up and running while you establish the business.
If you get traction, though, more and more of your time must go to administrative tasks, such as securing inventory, negotiating with vendors, and dealing with marketing. As those demands grow, it becomes inefficient for your to spend time putting products in boxes and shipping them out.
It’s also a poor use of your time to worry about securing properly sized boxes, packing material, shipping labels, and tape. It will likely cost you more money to work in the business that way than you save by doing the work yourself.
A 3PL company takes all of that off your plate. You spend your time more efficiently working on the business.
When you keep fulfillment in-house, reliability can prove a difficult thing for you to maintain. Odds are good that anyone you hire for the work will get sick sometimes, call out at the last second, or simply quit for something else. That can leave you scrambling to get orders out the door promptly.
Many fulfillment service providers offer solid guarantees about performance. For example, some will guarantee that a package ships if you get the orders to them by a certain hour of the day.
While they may also face problems like someone calling out, they also have more flexibility in terms of getting another body in place to cover that work. They can guarantee reliability in a way that you simply cannot in the long term.
Reliability in terms of shipping is one of the things that customers will appreciate. It’s not true of every customer, but some customers will gladly pay a premium to a business they know offers reliable service.
It’s an easy customer service win for you and your business.
Smart business owners set shipping rates based on their most frequently used shipper and product weight, but they often set based on retail pricing. After all, when you first started out, you probably used something like the counter rate at the USPS or UPS for your shipping cost rates.
Even when your volume increased, you probably still paid retail rates on every box sent out the door.
Fulfillment warehouses, on the other hand, often move so much volume that they can negotiate better rates with major shippers. Those savings can help offset your costs for the fulfillment service, which makes the service an even more valuable part of your overall business model.
Reduce Inventory Loss
Inventory loss can come from a lot of places. There is, sadly, the possibility of in-house theft by your own employees.
Just as often, if not more often, inventory loss comes about as a result of poor inventory management and inventory damage. When your store all of your inventory in-house, you or an employee must keep track of it. As new inventory comes in, you must find ways to store it correctly.
A failure on either front means you “lose” inventory to mismanagement or improper storage ruins some of your inventory. A fulfillment service does tracking and storage all the time. That expertise means you face fewer risks of lost or damaged inventory.
There are more ways you can improve fulfillment which you can see here.
Is a Fulfillment House Right for You?
A fulfillment house offers you a lot of potential benefits at a certain point in the development of your ecommerce business. If you can still fulfill all of your orders yourself without dramatically straining the schedule, you’re probably better off keeping the work in-house.
If you’ve reached the point where you need employees for fulfillment or it eats too much of your time, then you can probably benefit a lot from fulfillment house services.
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