Logistics The first steps to in-house fulfilment
Many new, emerging e-commerce companies start out in a garage or kitchen. Products are stored, packed and sent from home which is where all operations are controlled directly. But even established retailers sometimes decide to process their orders internally.
Let’s take a look at what in-house fulfilment is all about:
- Quality control for packaging, presentation, shipping and any surprises.
- Better customer experience thanks to improved speed, communication and support.
- Branding and materials for individual packaging.
- Better management of stock levels to avoid shortages.
- No barriers between you and the customer.
In-house fulfilment is best suited to businesses that meet one or more of the following criteria:
- Order volumes of less than 20 parcels a day
- Customized orders or special customer requirements
- New product lines and suppliers
- Alternative picking and packaging processes
- Local customers
- Available capacity (storage space and staff)
- Appropriate funding for investments in technology
What’s it all about?
Order processing involves picking items, carrying out quality inspections and packaging, labelling and shipping orders. Stock management encompasses receiving and registering goods, monitoring stock levels and organizing and keeping records for all processes. Poor stock management leads to shortages, damage to goods and waste. And the costs of stock management don’t end with simply renting the space and hiring staff. Administrative and technological costs, along with overheads such as insurance, are also incurred. And let’s not forget the expense involved in the returns process too.
What expansion means in fulfilment
- Finding and securing suitable storage space. Consider starting with a secure storage unit or a storage area in an existing facility. Try to plan for flexibility in case your business growth is faster or slower than expected.
- Hiring and training staff.
- Research and procure devices and software for packaging and labelling — and potentially for automation too.
By automating routine tasks, you can speed up and synchronize the order fulfilment process. Make sure you choose a software provider only for the functionality you need. Look for software that:
- Automatically loads new orders from your e-commerce platform but still allows you to manually enter and process orders.
- Tracks stock level movements and alerts you when stocks are low.
- Can be integrated into your existing software — accounting, customer management, e-commerce.
- Processes product returns and credit.
- Runs reports as needed.
- Tracks historical volumes to predict what stocks and staff are needed.
There are four primary cost centers for internal order processing: storage, labour, packaging materials and shipping. Shipping is likely to be outsourced unless deliveries can be made locally using your own transport.
By estimating the average fulfilment cost per order, retailers can compare costs for external providers and select the best option for their company. There is no standard pricing model for third-party fulfilment but the costs may include a monthly management fee or additional fees for:
- Receipt of incoming goods per working hour.
- Weekly or monthly storage, usually either per pallet or per container.
- Picking, packaging and labelling (per item).
- Special services, including the processing of returns.
A set-up fee may also apply. Remember to take shipping costs into account when comparing the total cost per order. An outsourced provider is likely to be in a position to offer lower shipping costs, thanks to the bulk discounts they receive from carriers.
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