11 July, 2022 |

Logistics outsourcing in eCommerce is becoming more and more common. It is often the next big step in the development of medium-sized online stores that are starting to struggle with the proper fulfillment of many orders. At the same time, they do not necessarily want to hire new people or rent more space for storing their products. The dynamic development of eCommerce also means that there is a lot of competition on the market, and therefore stores are fighting for every customer. Failure to pay attention to topics such as proper packaging and shipping may result in the loss of the customer.

What is fulfillment and outsourcing?

Fulfillment for eCommerce is a process that can include elements such as:

• accepting placed orders
• order management
• preparation of ordered products for shipment
• packaging of products in accordance with the company’s policy
• storage and transport of products to the customer
• handling returns and complaints

Fulfillment is the handling of orders by an external operator. Depending on the type of contract signed, the online store owner may use the service to the full extent or the external company will carry out only certain parts of the process. Outsourcing, in turn, is simply entrusting tasks to a professional external company. Using external sources can relate to various aspects of running your own business. So we come to the point where we can say that fulfillment is simply logistics outsourcing.

Challenges for eCommerce in the field of logistics

ECommerce activity, especially B2C, brings with it many difficult challenges in the field of logistics. Handling multiple orders is very time consuming. What are the main challenges we can distinguish here?

• Proper matching of packaging for shipment. If an online store trades hundreds of products with different sizes and varying degrees of delicacy, it is not easy to match the right packaging. In turn, choosing one, large size of cardboard boxes may result in losses, as it becomes necessary to fill the empty spaces.
• Packaging aesthetics and branding. Companies are faced with the question of whether it is worth investing in personalizing cardboard packaging. On the one hand, it is a considerable investment, but on the other hand, the news about the brand can spread through the box itself, which will reach many hands. Branding can also have a positive effect on brand advertising during popular unboxing. \
• In the cosmetics or food industry, there is the issue of controlling temperature, use-by dates, etc. eCommerce companies must invest money in the correct storage and shipping of this type of sensitive products.
• Taking care of the appropriate infrastructure that will be tailored to specific types of products is another challenge. Without taking care of the infrastructure, the selection of products for shipment and the shipment itself will be too slow and will affect costs.
• Handling returns and complaints is often associated with the need to hire new people. It is estimated that in the clothing industry, returns can reach up to 60% of all orders. Therefore, it is a huge challenge for some stores that must ensure efficient handling of the entire process.

These are certainly not all the challenges that await online stores in the field of logistics. There are many tasks, so it is often much more profitable to entrust the above-mentioned activities to an external company that will present an offer tailored to the needs of a given eCommerce.

Why is it worth to outsource logistics?

A sufficiently large storage space is provided

The fixed costs in the eCommece industry often include the space in which the goods sold are stored. By using outsourcing, the company obtains its space for storing products. Thus, the cost becomes variable, because in the pre-holiday periods or periods related to promotional campaigns, e.g. on Black Friday, you can easily enlarge a given space and pay more only when it is necessary. Entrepreneurs also do not have to worry about a very overcrowded warehouse and logistic problems that result directly from it. The main benefit is of course getting rid of the fixed cost for the space, e.g. if it is rented. In addition, the second large cost, which is employment and training of employees, disappears. Companies that specialize in fulfillment often offer fees only for the space used at a given time. The amount payable is based on the range of services provided within a certain period of time.

Storage space adapted to the eCommerce type

A warehouse tailored to your industry is an important issue that can be costly. If you run an online store with products that require special attention to temperature and other factors, it is worth considering outsourcing even more. For example, such delicate and demanding products are natural cosmetics, food products, pet food and electronics. Often, also seemingly not very demanding products may turn out to be problematic, e.g. toys and other goods dedicated to children that require approvals. Thanks to an external company, you do not have to worry about permits, approvals and maintaining optimal temperature or humidity in the warehouse. In addition, a specialist external contractor will control and manage the use-by dates of the products.

Properly trained employees

The cost of acquiring a new employee to handle orders and then training him is high. What counts here is both the time that the employer must spend on preparing contracts, ensuring appropriate working conditions, materials or controlling the quality of the tasks performed, as well as the payment of the salary due. By hiring an external company to manage logistics, we get rid of all these tasks. It is not you who have to search for and train employees, but an external contractor.

Automation of the logistics process

A lot is said and invested in the automation of logistics processes. Thanks to it, errors are eliminated and the performance of individual activities is accelerated. Thanks to the integrated systems of the online store and an external company, data is quickly transferred to the warehouse, and important documents are generated automatically. Many companies specializing in logistics use modern systems that facilitate real-time task reporting or indicating the shortest path to the rack by the system. Thanks to this, a company specialized in logistics will perform its tasks much faster and more accurately than when automation is not available. The scope of automation also includes product marking, faster order picking or immediate notification of upcoming stock shortages. Everything happens automatically, and you don’t have to do the tedious tasks mentioned above.

A wide range of external company services

The undoubted advantage of using the services of an external logistics company is the ability to adjust its tasks to your needs. Before you start cooperation, of course, all matters should be discussed in great detail in order to avoid any unexpected surprises. Such additional services may include packaging according to strict guidelines, e.g. using ecological packaging materials, inserting a customer thank you card or advertising gadgets. Such activities have great image benefits, because many customers ordering a product over the Internet start to form their minds about it the moment they see the package. Empty spaces in cardboard boxes may remain properly filled, and the box may be covered with e.g. stickers with the company’s logo.

Big time savings

All the aforementioned benefits generate one basic one, i.e. saving time. By outsourcing shipping companies, you can be anywhere in the world and not worry about what is happening in your warehouse. The third party may offer services such as same day or next day shipping. It is also extremely time-consuming and difficult to handle the returned goods, which are not rare. The time saved can be used to creatively develop your business.

Some facts and figures?

Finally, as a summary, let’s go through some interesting facts about the eCommerce industry:

• it is estimated that currently as many as 30% of online stores use logistics outsourcing and it is expected that this data will continue to grow
• eCommerce market in Poland is developing very quickly (in this respect we are the thirteenth fastest growing market), which will generate more and more challenges and struggle for the customer
• On average, online stores outsource 40% of their logistics operations
• As many as 77% of people buy online, which was largely due to the pandemic
• It is estimated that until 2026, the average annual growth of the eCommerce industry will remain at the level of 12%.