Different Fulfilment Strategies for eCommerce
by Emma Bragg on 16th August 2023
Online sellers have several options for order fulfilment, depending on their business size, resources, and specific requirements. If you’re unsure which is best for your business then this post is for you. Learn more as we dive into the different options and the pros and cons of each strategy.
Some online sellers choose to handle order fulfilment in-house, where they manage all aspects of the process themselves. In-house fulfilment includes receiving, storing, picking, packing, and shipping orders using your own facilities, staff, and resources. In-house fulfilment provides maximum control over the process but requires significant infrastructure and labour resources.
Typically this is where most eCommerce businesses start their journey before outsourcing to a third-party fulfilment provider however, as the business grows, some choose to bring fulfilment back in-house.
Ultimately, the decision to pursue in-house fulfilment depends on factors such as business size, available resources, operational capabilities, and growth plans. You should carefully consider the pros and cons to determine if in-house fulfilment aligns with your specific business needs and long-term objectives.
In-house fulfilment pros & cons
- Control: In-house fulfilment provides maximum control over the entire order fulfilment process.
- Customisation: In-house fulfilment allows you to customise the fulfilment process according to your specific needs and brand requirements.
- Cost Savings: Depending on the scale of operations, in-house fulfilment can be cost-effective compared to outsourcing to third-party providers.
- Customer Experience: With in-house fulfilment, you have more opportunities to directly interact with customers.
- Scalability: In-house fulfilment can be more scalable in the long term. As the business grows, you’re able to adjust your infrastructure, staffing, and processes to accommodate higher order volumes and changing demands.
- Infrastructure and Resources: In-house fulfilment requires significant infrastructure, including storage space, packing materials, shipping equipment, and dedicated staff.
- Time and Expertise: Fulfilment operations can be time-consuming and require expertise in inventory management, logistics, and shipping. When dealing with international orders you also need to consider customs and taxes.
- Limited Reach: In-house fulfilment may have limitations in terms of geographic reach. Shipping costs and delivery times may be higher for customers located far from your in-house fulfilment centre, such as international orders.
- Seasonal Fluctuations: In-house fulfilment can pose challenges during peak seasons or periods of high demand due to the need to scale up resources and staffing.
- Returns and Reverse Logistics: Managing returns and reverse logistics can be more complex with in-house fulfilment. You’ll need to establish clear return policies, process returns efficiently, and manage inventory effectively to handle returned items.
Dropshipping is a fulfilment model where you don’t need to hold inventory. Instead, when a customer places an order, you transfer the order details to a supplier or manufacturer who directly ships the product to the customer. With dropshipping you act as a middleman, handling the sales and marketing aspects while relying on the supplier for inventory management and shipping. Dropshipping eliminates the need for inventory investment but reduces control over the fulfilment process.
Dropshipping can be an attractive option for entrepreneurs seeking a low-risk, low-investment business model. However, it’s essential to consider the limitations and potential challenges associated with reduced control and lower profit margins. Thoroughly researching and selecting reliable manufacturers is crucial to mitigate risks and provide a positive customer experience.
Dropshipping Pros & Cons
- Low Startup Costs: Dropshipping requires minimal upfront investment since you don’t need to purchase inventory in advance.
- No Inventory Management: With dropshipping, you don’t need to worry about inventory storage, tracking, or managing stock levels. The supplier or manufacturer handles these aspects, saving you time and resources.
- Wide Product Variety: Dropshipping allows you to offer a wide range of products without the need for physical storage space. You can work with multiple suppliers and offer diverse product selections.
- Location Flexibility: Since you don’t need to handle physical products, you can operate a dropshipping business from anywhere with an internet connection.
- Scalability: Dropshipping offers scalability without the need for significant infrastructure investments. As your business grows, you can easily add new products or suppliers to your catalogue without worrying about warehouse space or fulfilment capacity.
- Lower Profit Margins: Dropshipping often involves lower profit margins compared to traditional retail models since you’re not purchasing products at wholesale prices.
- Limited Control: Dropshipping means you rely on the supplier for inventory availability, product quality, and shipping speed. You have less control over the fulfilment process and may face challenges if your supplier experiences delays or issues.
- Branding Challenges: Dropshipping can make it difficult to establish a unique brand identity since you’re selling products from various suppliers and they’re directly sent to your customers.
- Inventory Management Issues: While dropshipping eliminates the need for inventory management, it can present challenges if suppliers have inadequate stock levels or discontinue certain products without notice.
- Shipping Complexities: When working with multiple suppliers, customers may receive separate packages for different items ordered, resulting in multiple shipments and potentially longer delivery times.
- Returns and Customer Service: Managing returns and customer service can be challenging in dropshipping. Since you’re not physically handling the products, you rely on the supplier to handle returns and address customer inquiries, which may affect response times and customer satisfaction.
Order fulfilment providers
Online sellers can partner with third-party companies that specialise in order fulfilment, sometimes known as third-party logistics (3PL). Order fulfilment providers offer services such as warehousing, inventory management, picking, packing, and shipping. You send your products directly to the fulfilment warehouse, and the provider handles the rest of the fulfilment process on your behalf. This option allows you to outsource the operational aspects of order fulfilment, benefiting from the expertise and infrastructure of the fulfilment provider.
Before choosing an eCommerce fulfilment provider, it’s crucial to thoroughly research and evaluate providers, considering factors such as their reputation, service level agreements, pricing structure, technology capabilities, and customer support. This allows you to make an informed decision that aligns with your specific business needs and goals.
Third-party pros & cons
- Scalability: eCommerce fulfilment services are designed to handle high order volumes and can scale up or down based on your business needs. They have the infrastructure, resources, and expertise to accommodate growth and seasonal fluctuations.
- Time and Resource Savings: Outsourcing fulfilment to a service provider saves you time and resources that would otherwise be spent on tasks such as warehousing, inventory management, order processing, and shipping.
- Specialised Expertise: eCommerce fulfilment services specialise in order fulfilment and logistics. They have knowledge and experience in efficient inventory management, picking and packing, shipping, and optimising the fulfilment process for cost and time efficiency.
- Faster & Cheaper Shipping and Delivery: Fulfilment services often have multiple fulfilment centres strategically located to reduce shipping time. They can leverage their network and partnerships with shipping carriers to offer faster, cheaper and more reliable delivery options, enhancing the customer experience.
- Cost Savings: While there are costs associated with using an eCommerce fulfilment service, it can be more cost-effective compared to in-house fulfilment for many businesses. By outsourcing to a specialised provider, you avoid the need for investing in warehousing space, equipment, and staffing.
- Integration and Technology: eCommerce fulfilment services typically offer integrations with popular eCommerce platforms and order management systems. This enables seamless synchronisation of orders, inventory, and tracking information, streamlining the fulfilment process and reducing errors.
- Reduced Control: Outsourcing fulfilment means you have less direct control over the process. You rely on the service provider for inventory management, order accuracy, packaging, and shipping.
- Cost Considerations: While outsourcing fulfilment can save costs in certain scenarios, it may not be cost-effective for all businesses, especially those with lower order volumes. Fulfilment service fees, including storage, pick-and-pack, and shipping charges, should be carefully compared.
- Branding and Customer Experience: Depending on the service provider, it may be challenging to maintain consistent branding and deliver a unique customer experience.
- Dependency and Risk: By relying on an eCommerce fulfilment provider, you are dependent on their performance and reliability. Any disruptions or mistakes on their part, such as inventory inaccuracies or shipping errors, can directly impact your reputation and customer satisfaction.
- Integration Complexity: Integrating your systems and processes with an eCommerce fulfilment provider can sometimes be complex and require technical expertise.
Fulfilment by Amazon (FBA)
FBA is a service offered by Amazon to its sellers. You simply send your inventory to Amazon’s fulfilment centres, and Amazon takes care of storing, picking, packing, and shipping the products when orders are placed. FBA also provides customer service and handles returns on your behalf.
This option is particularly beneficial for sellers leveraging the Amazon marketplace, as it offers access to Amazon’s extensive fulfilment network and Prime membership benefits.
FBA pros and cons
- Extensive Fulfilment Network: FBA leverages Amazon’s vast network of fulfilment centres worldwide. This allows you to store your inventory in Amazon’s facilities, strategically located to enable faster shipping and broader market reach.
- Prime Membership Benefits: FBA products are eligible for Amazon Prime’s fast and free shipping, which can significantly enhance the customer experience.
- Trusted Brand and Reputation: Amazon is a well-established and trusted brand, known for its reliable shipping and customer service. Utilising FBA can boost customer trust and confidence in your products.
- Enhanced Customer Service: FBA handles customer service inquiries, returns, and refunds on your behalf. Amazon’s customer service team is trained to provide support to buyers, relieving you of these responsibilities.
- Scalability and Flexibility: FBA is designed to handle high order volumes and seasonal spikes. It allows you to scale your business without worrying about storage space, fulfilment capacity, or hiring additional staff during peak periods.
- Multi-Channel Fulfilment: FBA offers the option to fulfil orders not only from Amazon’s marketplace but also from other sales channels. You can integrate FBA with your own website or other eCommerce platforms.
- Fees and Costs: Using FBA involves various fees, including storage fees, order handling fees, and fulfilment fees based on item size and weight.
- Inventory Management: FBA requires you to send your inventory to Amazon’s fulfilment centres, meaning you relinquish direct control over your inventory.
- Labelling and Packaging Requirements: FBA has specific labelling and packaging requirements that must be adhered to. Non-compliance with these guidelines can result in delays or additional charges.
- Limited Customisation: With FBA, customisation options for packaging and branding are limited. You have less control over the unboxing experience and may struggle to differentiate your brand from other sellers.
- Dependency on Amazon: By relying on FBA, you become more dependent on Amazon’s infrastructure and policies. Any disruptions in their operations, changes in fees or policies, or account issues can directly impact your business.
- Competition and Buy Box: FBA products often compete for the Buy Box, which is the default “Add to Cart” button on Amazon’s product listing page.
Some online sellers adopt a hybrid approach by combining different fulfilment methods. For example, they may handle order fulfilment in-house for certain products while using order fulfilment providers or FBA for others. This approach allows you to customise your fulfilment strategy based on product characteristics, sales volume, and specific business needs.
When considering a hybrid fulfilment model, it’s crucial to thoroughly evaluate the specific needs of your business, the characteristics of your products, and the associated costs and complexities. A well-planned and properly executed hybrid model can offer flexibility, cost optimisation, and risk mitigation, allowing you to tailor your fulfilment strategy to meet your unique business requirements.
Hybrid fulfilment pros & cons
- Flexibility: A hybrid fulfilment model allows you to leverage the advantages of multiple fulfilment options. You can combine in-house fulfilment with order fulfilment providers, dropshipping & FBA.
- Cost Optimisation: By adopting a hybrid model, you can optimise costs by utilising the most cost-effective fulfilment method for each product or order. You can choose in-house fulfilment for high-margin or high-demand products while using dropshipping services for lower-margin items or specific geographic regions.
- Scalability: A hybrid model offers scalability as your business grows or experiences fluctuations in order volumes. You can adjust your fulfilment strategy based on demand, leveraging in-house resources or external providers to accommodate increased or seasonal order volumes.
- Reduced Risk: Diversifying your fulfilment strategy through a hybrid model helps mitigate risks. If one fulfilment method encounters issues or disruptions, you have backup options to ensure uninterrupted order fulfilment and minimise the impact on your business.
- Customisation and Branding: With a hybrid model, you have more control over customisation and branding. In-house fulfilment allows you to tailor packaging, include personalised marketing materials, and create a unique brand experience for customers, while still benefiting from the convenience of outsourcing for other products or regions.
- Increased Complexity: Adopting a hybrid model can introduce complexity to your fulfilment operations. You need to manage multiple systems, processes, and relationships with different fulfilment partners.
- Higher Administrative Burden: A hybrid model requires additional administrative work to manage multiple fulfilment channels and providers. This includes coordinating inventory levels, updating systems, and communicating with different partners.
- Integration Challenges: Integrating different fulfilment methods and platforms can be technically challenging. Ensuring seamless data synchronisation, inventory accuracy, and order management across various channels and providers requires investment in integration solutions and ongoing maintenance.
- Potential Inconsistencies: Using different fulfilment methods can result in inconsistencies in packaging, shipping speeds, or customer experience. It’s important to maintain consistency in your branding and quality standards across all fulfilment channels to avoid confusion or customer dissatisfaction.
- Increased Costs: While a hybrid model can optimise costs in some cases, it may also lead to increased overall costs. Managing multiple fulfilment channels and providers involves additional expenses, such as system integrations, warehousing, or coordination efforts.
Fulfilment the Whitehouse way
At Whitehouse Solutions we know the pros and cons of all the different fulfilment strategies out there which is why we try to incorporate all the best bits from each strategy.
At Whitehouse, you’re in full control of your branding and have access to endless customisations. We can pack your products in your own uniquely designed packaging and you can use our value-added services such as kitting, rebranding and contract packing to further customise your products and the unboxing experience.
We also help you manage the costs for your order fulfilment with transparent pricing and invoicing so you know exactly what your pick and pack, shipping and storage costs are each month. We also don’t enforce any minimum order volumes so you can start small and scale up as your business grows.
We have a wide range of eCommerce integrations for all the major platforms and they have been designed to be plug-and-play, removing the need for costly developer or set-up fees to get going. All you need to do to get started is to send us your products and integrate your eCommerce platform.
What will you choose?
With so many different fulfilment models to choose from it can be a challenge to decide what will work best for your business. Ultimately your choice of order fulfilment option depends on various factors, including your business model, scale, financial resources, time constraints, and the desired level of control and scalability.
It’s important for you to assess your requirements and consider the pros and cons of each option before deciding on the most suitable fulfilment strategy. If you’re unsure what will be best for your business or if you have any questions on outsourcing your fulfilment then contact the team at Whitehouse who can offer expert advice and support so you can make the right decision for your business.