byrd fulfillment warehouse centre

The importance of reliable fulfillment

May 11, 2022

If you take a look at the most successful e-commerce companies, you will quickly see that they have one thing…
If you take a look at the most successful e-commerce companies, you will quickly see that they have one thing in common; an efficient and smooth logistics setup. The crises of recent years and overheating supply chains have made one thing even clearer to all retailers: professional and reliable logistics and fulfillment are key

In this article you’ll learn about the characteristics and benefits of the three main fulfillment strategies.

What is fulfillment?

After placing the importance of logistics in e-commerce in context, let’s take a closer look at what fulfillment means. Followed by a deep dive into the benefits of different approaches to managing your orders.

The terms e-commerce fulfillment or order fulfillment describe the entire logistical process of physical order processing. Fulfillment includes all operations, from warehousing, picking and packing, to shipping and returns management. The sale via your online shop, however, is not considered a part of fulfillment.

There are three major approaches to order fulfillment:

  • In-house fulfillment
  • Dropshipping
  • Outsourced fulfillment (third-party logistics)

Let’s describe each in more detail.

In-house fulfillment

Fulfilling your orders in-house means that you – as an e-commerce company – internally take care of all the processes that are triggered by an order. This strategy is most commonly used by young companies, startups, and e-commerce merchants shipping a limited number of orders per month.

Benefits of in-house fulfillment

Keeping control

There’s no doubt that the biggest advantage of in-house fulfillment is that you keep 100% of your logistics under your control. In a business area that is more closely tied to customer satisfaction than most other aspects, the decision to trust third parties is never an easy one to make.

Understanding your business better

When starting your own e-commerce business, taking care of your logistics in-house is a great way to learn and understand the processes that are involved in fulfilling an order. This can also help you at a later stage when you make the decision to outsource your logistics.

Understanding your customers better

The third benefit of in-house fulfillment is the increasing understanding of your customer’s needs and wants. Being in direct contact with your buyers provides an invaluable opportunity to get to know them better. That way you can understand their pain points, stay alert of increasing dissatisfaction, and improve your products and services accordingly.

Personalising orders

The fourth and final relevant advantage of orders fulfilled internally is that you can personalise the parcels you send out. This is mainly applicable if you sell only a few shipments per month. For larger volumes, some fulfillment companies like byrd offer individualised solutions for adding flyers, branded packaging, etcetera.

inhouse fulfillment byrd

Dropshipping

Dropshipping is a fulfillment method that could hardly be any more different than in-house fulfillment. Using the dropshipping approach, you cut the process of getting the products you sell delivered to your company in the first place. In fact, you purchase products from a third-party seller or the producer of the articles. This partner will then directly send the ordered products to your customers.

Benefits of dropshipping

Lowering overhead

Most online retailers will agree that overseeing the logistics of an online shop ranks among the most frustrating parts of working in e-commerce. Dropshipping is one option to free up resources that could be better invested in other areas, such as marketing or customer service.

Reducing startup costs

On the subject of freeing up resources, dropshipping is an attractive option if you don’t want to invest a lot of time and money into your logistics. Financing a warehouse, labour, machinery, insurance, and other fixed costs are not feasible options for many e-commerce companies. 

This is true first and foremost for growing companies, as a healthy cash flow is key to keeping the momentum. At the same time, be aware that the margin will be significantly lower when using this approach.

Facilitating the offer of a wider range of products

Another benefit of using the dropshipping method is that it is easier to offer a wider range of products without having to invest significant resources for the production, calculation, anticipation of sales, and storage of your inventory. As a tradeoff, however, the quality of these products will not be under your immediate control.

dropshipping byrd

Third-party logistics – 3PL

While most people in e-commerce have heard of the term dropshipping, the same is not true for third-party logistics or 3PL. A 3PL provider is a company that lets e-commerce retailers outsource their fulfillment by taking over all processes, from warehousing to reverse logistics. In doing so, a third-party logistics provider, often also referred to as a fulfillment company, takes over communication with warehousing partners, as well as delivery companies.

Benefits of outsourcing your fulfillment

Lowering overhead

Outsourced fulfillment allows you to reduce your overhead substantially. All you have to do is connect your online shop with the software of the 3PL. For most of the leading shop systems like Shopify, WooCommerce or Plentymarkets, fulfillment companies offer standard integrations. You’ll then just have to bring your inventory to one or multiple warehouses. From there, the 3PL provider will take over every step needed to fulfill an order.

Reducing costs through economies of scale

One of the strengths of fulfillment service providers is that they can aggregate shipment solutions from multiple retailers, which allows them to negotiate better prices with logistics partners like parcel delivery companies. The same is true for packaging material as well. All of that allows fulfillment companies to offer attractive conditions to retailers like you.

Benefiting from expertise and specialisation

Companies that carry out their fulfillment in-house get better at it quite fast. Still, there’s a big chance that they’ll never reach the same level of efficiency and expertise offered by fulfillment companies. 

After all, they put all their focus on logistics, they have many years of experience and are specialised in their fields. They also usually have the best equipment and sophisticated and proven processes in place. Your company, on the other hand, most likely has quite different core expertises.

Scaling with flexibility

Fast-scaling retailers will have to make strategic decisions to ensure a healthy cash flow. Keeping the operational flexibility is a main challenge. After all, fast growth means that a significant amount of resources needs to be allocated to buying new products to avoid stockouts. Investing substantially into building a fulfillment center, hiring warehouse workers etc., will lead to a big initial investment, as well as high fixed costs. 

Outsourcing your logistics will solve both problems. You’ll be able to use existing premises and costs will, in most cases, be turned from fixed ones into flexible costs. Of course, the margins per sale will shrink when using these services.

Benefiting from location advantages

One benefit that not too many merchants consider is that some 3PLs command a whole network of fulfillment centres. Many merchants are initially looking for a warehouse close to where they personally operate. Storing your inventory in geographical proximity to your main markets is an invaluable strategic possibility. 

 

outsourced fulfillment byrd

When is the right time to outsource your fulfillment?

As you may appreciate, there are multiple advantages and disadvantages to all three fulfillment methods. If you are considering partnering up with a 3PL, you should take various factors into account. Here are some examples of when it makes sense to outsource your logistics:

  • You want to offer two-day shipping
  • Your shipping volume is above 100 orders per month
  • You ship internationally

How to start outsourcing your fulfillment?

In case you are considering outsourcing your fulfillment for operations in Europe and worldwide shipping, the fulfillment services offered by byrd might be just the right solution for you. With 20+ fulfillment centres across Europe and individual solutions for your use-case, they could happen to be the right company to fulfill your whole potential. Besides a proper fulfillment setup, real-time inventory optimisation is key when using one or multiple warehouses. Optiply allows you to check your inventory at all times and helps to make informed decisions. That way you can make sure that neither dead stock nor stock outs negatively affect your business.

About the Author
As a content marketer and SEO, Phillip Pitsch joined byrd in 2019. byrd is one of the leading fulfillment companies in Europe and has numerous logistics centres in all major e-commerce markets in the EU and UK. Running his own online store, Phillip has first-hand experience of the opportunities and challenges in e-commerce and logistics in particular and seeks to help other online retailers.

logo byrd
Optiply-dashboard-laptop-2

Do you also want to purchase on the autopilot?

Optiply optimises the inventory management of many webshops and wholesalers.

Book your demo where you can see how Optiply works in your situation and where we can answer all your questions.

Recente artikelen

5 tips to optimise your purchasing process

5 tips to optimise your purchasing process

The purchasing process is one of the most crucial parts of your business. However, it often proves time consuming and difficult to control. If segments of...