When to use a fulfillment company

Congratulations! You are a new company, manufacturing a sensational product, and orders have begun to roll in. You may be like many newer businesses that start out thinking that they’ll be able to manage inventory, order management, customer communication, packaging, and shipping. This article would like to discuss order fulfillment using a third party solution instead of doing all the work yourself and answer a big question.

When is the right time use a fulfillment company?

In 3rd party fulfillment, you start out by having a certain amount of inventory on hand before any sales are made. As the seller you either manufacture or purchase products then ship the available inventory to a third party company. The proceeds may be used to sell and market other products. Each time you process an order, the 3rd party (NOT you) picks, packages and ships the order to the customer. The difference between the item’s retail price, your cost per product, and the amount you pay to a 3rd party provider will be your profit.

Using a fulfillment company to help grow your business

If you use 3rd party order fulfillment to outsource packing, picking, and shipping, this will free up your time so that you can focus on finding new customers, work on your marketing strategies, and nurture and grow your repeat customers. This is an ideal solution for small, medium, or large new companies that don’t have adequate inventory space, have a large amount of unique product, and want to use their time judiciously by focusing on acquisition and customer relations instead of picking, packing, and shipping.

Advantages, if you switch to a fulfillment company

First of all, you won’t need to invest in real estate, warehouse space, warehouse management software, or the personnel necessary to pick and pack any orders. You’ll be able to purchase your inventory in bulk, which is always a plus for improving profit margins. Outsourcing this portion of work to a trusted company is convenient and lessens stress. Finally, a 3rd party fulfillment company, especially if they handle a lot of orders monthly, will be able to negotiate significantly better shipping discounts with UPS or FedEx than your company would be able to do individually.

Will there be disadvantages to using a  fulfillment company?

There is a chance that the 3rd party fulfillment company you choose might have some quality issues, which might affect your relationship with the customer. It’s important to maintain oversight on this issue, and be open to changing third party fulfillment centers if this occurs.  Read more articles in our blog section. 

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