In-House Fulfillment: When it’s Better to Keep Fulfillment In-House and How to Maximize Performance

Many businesses struggle with the idea of outsourcing to a fulfillment center or 3PL warehouse to help save time and money. While many businesses find benefits to this option it is not for everyone. We will outline some reasons why this is not always the best solution, and give you some guidance on how to manage your own fulfillment better. We will also provide a couple of reviews for some products that help businesses perform better on their own.

In-House Fulfillment

What are Good Reasons for not Outsourcing?

The first thing that probably comes to mind is cost. When profits are not high yet it might be difficult to start outsourcing fulfillment. When looking to use a fulfillment center there are start-up costs involved, storage costs, charges for movements, charges for employees that they are using to fulfill all of your business needs, etc. When there is not a lot of extra cash flow these costs can be very daunting and to some just not an option at all – especially if you have to rely upon your own time in lieu of paying a fulfillment center. Of course shipping costs can be very high for companies with a smaller order volume which is where a fulfillment center could help you save money, as these companies usually do have a better rate. Look at what costs your company is incurring for all of these services and compare them to the rates of these fulfillment companies and 3PL warehouses and you will find your answer. As a start up, you might have to boot strap it a while until you can afford the cash flow expense of an outsourced solution.

Then there are the businesses that have specific needs that entail too much work to outsource without a large potential for problems. For example, there are many different businesses that rent out clothing on a monthly basis to their customer. When these boxes get returned the clothing needs to be dry-cleaned and inspected thoroughly. Not that this is impossible to outsource, but these unique services will more than likely not be provided by many 3PL warehouses or fulfillment centers. Most outsourced warehouses ship standard goods and anything out of the ordinary could become problematic. Odd sizes and unique requests will add to the cost of outsourcing your business needs. When it comes to these niche companies it will more than likely be better to keep this side of the business under your own control.

Speaking of control, there are also businesses (and their owners) that need a little more control over their process. Outsourcing to a 3PL warehouse or fulfillment center means letting go of part of your own business. If you’ve been handling your own fulfillment and have created a working procedure for yourself, it could be difficult to let go and hand this over to another company. Most fulfillment centers have a streamlined process in order for them to best handle fulfillment for many different companies using their services. It is very important for a business owner to find a company that meets their needs as well as a good partner to work with. This may be hard to find for certain companies so maybe the own fulfillment process could be streamlined better instead of looking for it elsewhere.

How to Manage Your own Fulfillment Better?

If outsourced fulfillment isn’t in the cards, then you need to make sure you are armed with the right processes and systems to do it effectively. Anything can be managed on a very small scale, but as you grow, additional sales will expose any problems in the fulfillment process and will result in potentially catastrophic errors.

So what are the most important things to help your business? In order to be successful with in-house fulfillment you will need well-trained people and the right technology and software. It’s what all of the professional 3PLs and larger companies use to ensure success. While you may not be able to purchase robots to pick orders, certainly bar code scanning and inventory software are affordable options to significantly reduce errors.

When you look around you will find quite a few fulfillment software platforms to help you manage your business better. These software platform companies know that not every business is going to fall in line with outsourcing to a fulfillment facility. As such it can be overwhelming for you to try to find something that works right for your business. One of our recommendations would be to seriously consider other alternatives before using any shopping cart plug-ins. While these do have their pros and cons, you may run into trouble with these in the long run. The positive aspects are reasonable prices, free trial periods, no selling limits and unlimited storage. On the negative side, they may lock you into inflexible work flow processes that either set your company up for errors to take more time to process, and the customer service is sometimes erratic. They also frequently charge you with transaction fees, something you’ll see add up dramatically as your order volume rises. In addition, many of these services don’t offer refunds, bringing nothing but a money-losing risk when you need to gain the most profit. You need to find something with dependability and experience, as well as scalability. Lastly, it’s smart to avoid any service locking you into a contract, despite seeming impossible to find.

In Hose Self-Fulfillment: Everything Ecommerce Merchants Need to Know

Self-fulfillment is when an eCommerce company maintains its own inventory, packs, and ships products to the customers themselves. Self-fulfillment is oftentimes used by companies at the extremes of the growth cycle. If a company is just starting out, then it may not have the resources to invest in third-party fulfillment services. Once a company has grown large enough, it will be able to open and manage its own warehouses and save on the overhead of contracting out to a middle man or offer more customized solutions to its customers. Especially large companies, like Amazon, may even use their warehouses to offer fulfillment services to smaller companies.

Self-Fulfillment - Everything You Need to Know

Some of the common reasons businesses decide to self-fulfill rather than use an outsourced fulfillment solution are as follows:

  • The business is just starting out and for any of a number of reasons prefers to simply handle the fulfillment internally
  • The business is cash-strapped - meaning they don't have the funds to even pay a fulfillment service and rather need to leverage their own labor, with is oftentimes not even expensed as they bootstrap the business
  • The business has such low order volumes (typically less than even 50-100) that outsourcing doesn't make sense financially
  • The business has very specific needs and customization requirements that make outsourcing an impracticality
  • The business needs warehousing and fulfillment in a local area where outsourced operations aren't available

In this post, we will assume that you are in the first phase. You are likely just getting your feet wet with eCommerce and need to start at the beginning. We'll teach you what you need to know about maintaining inventory and dealing with the different aspects of shipping products to customers. Thankfully, there are a lot of tools available to make this process easier that work just as well for small businesses as they do for larger ones. Let's get started with a brief overview of the process before taking a deeper look at how it all comes together.

The Self-Fulfillment Process

When you opt for self-fulfillment, you become your entire shipping department. There are a lot of responsibilities that come with this, but when you are just starting out and your order counts are low, it isn't hard to keep up with, as long as you know what you are doing. The basic steps that you need to take are listed below. In the sections that follow, we'll take a closer look at each.

  1. Shipping to your warehouse - You can't ship a product until you actually have the product in hand. If you are manufacturing your own product, then this is not a problem. If not, then you'll need the inventory shipped to your warehouse. You'll most likely be dealing with larger orders than standard package shipping services allow for. If your products are coming from overseas, you'll use freight forwarding. For domestic shipping, you'll rely on the small parcel or less than a truckload (LTL) shipping.
  2. Receiving inventory - When the order arrives, you will need to verify its accuracy. This means ensuring that you have received the right product in the right quantity. Once you are sure that the order is correct, you'll update your inventory software with the new stock.
  3. Stocking the warehouse - Next, you'll move the newly arrived product into the warehouse. Be sure to keep things organized so that it is easy to find the product when it is time to pick and ship it.
  4. Processing orders - Now you are ready to begin taking orders for the product from your website or other sales channels.
  5. Picking and shipping the orders - When an order arrives, you'll need to retrieve it from the warehouse, pack it into the shipping container, print the shipping label, and ship it to the customer. You can have the carrier come and pick up the item, or you can deliver it to them as part of your daily routine. When it is shipped, remember to send the customer their tracking information.
  6. Respond to customer inquiries - Customers may have questions about a shipment. You should always be prompt in responding to any inquiries that they have.
  7. Receive and process returns - In some instances, a customer may need to return an item. When they do, you'll need to receive the returned item and process their refund.

Storage of Good and Materials

In the very early stages of your operation, your warehouse may simply be a spare bedroom or your garage. Depending on the size of the items you will be selling, this option may last you for quite a while. As your business grows, you may find that you need to expand. An obvious first choice for expansion is to rent a public storage facility or small warehouse space, or even to jointly use a space with another business. If your shipments will be coming on pallets, make sure the facility has a loading dock if needed. In some cases for the smallest of home-based businesses, it may be best to use the storage facility as a backup and still keep some stock at home. That way, you will have easy access to the stock when orders come in.

If your business gets even larger, you may have to look into leasing actual warehouse space. In some markets, there is a shared warehouse space available that might make this option more affordable. Alternatively, you may be able to partner with a business that has warehouse space already.

Packaging and Supplies Needed

You will need to make sure that you are constantly stocked with the supplies that you need to package and ship products to customers. There are three main categories of supplies that you will need:

  1. Shipping containers - These include things like boxes, cartons, envelopes, or shipping tubes. Keep whatever sizes and types of shipping containers the products you sell will require on hand.
  2. Packing materials - Bubble wrap, tissue paper, and other packing materials ensure that the product arrives at the customer's house safely. Be especially careful when packaging fragile items.
  3. Embellishments - This is an optional category, but a common touch. You can put printed inserts or custom printed packing material into the package to help with marketing and branding.

You can find much more information about how to effectively package products for your eCommerce business in this previous blog post of ours. To see a wide variety of carton, packing materials, and embellishments available, you can check out popular websites such as Uline.

Sales Platform and Web Store Selection

Before you can ship anything to customers, you need to decide where you will sell to them from. We'll include some common platforms for web sales below but strongly encourage you to also have your own website. By selling directly from your own website, you'll be able to build your own customer base and gather data that can be used to improve your marketing efforts and conversion rates.

  1. Amazon - As you probably know, Amazon lets independent vendors sell their products directly from the Amazon store. This gives you an automatic audience with one of the largest retailers in the world.
  2. eBay - Individuals and small businesses have been selling on eBay for a long time and it is still a valid option for reaching customers looking for your products.
  3. Etsy - Etsy is focused more on handmade or vintage items, but if that fits your product offerings then it is a great way to find the type of customer who is looking for what you are selling.
  4. Facebook - Social media giant Facebook has been around for a while, but their Store option is a newcomer to the list. It can be a great supplement to your other sales channels because it puts your store directly in front of the people who follow you on social media.
  5. There are countless other online marketplaces, so be sure to research any of the specific sites that make most sense for your particular product types.

If you have decided to take our advice and operate a website of your own to sell your products from, then you will need to decide on which shopping cart software to use. There are enough options that discussing them is a whole blog post in itself. You can read about the different options in this previous post. Needless to say, choosing the best Web store for your business should be considered very carefully, as it's important to integrate with other systems that your business might use, such as :

  • Fulfillment, Shipping and Inventory Software
  • Financial and Accounting Software
  • Barcode Software

Fulfillment, Shipping, and Inventory Software

In-House Fulfillment - Everything You Need to KnowAs we stated early on, there are a lot of powerful tools out there to make handling a shipping operation easier. It is important to understand that trying to do all of this by hand will cause a huge potential for error and take more time out of your day than is necessary.

The Minimum Required Software - Shipping Software

At the very least, your web store application should have shipping software or in the very least allow you to integrate with shipping software. Services such as Endicia, Stamps.com, Shippo, and others are available depending on your choice of carrier. These services will make it easy to print labels and get the shipment into the carrier's systems.

It's important to point out that if you only use shipping software, it's highly likely that you'll be managing many functions manually. For just starting out and with an extremely tight budget, this may be necessary to get your business off the ground.

The Next Level Up - Combining Solutions Via Shopping Cart Software and Integrations

Some Web store solutions offer a wide range of integrations that will help cover every area of your business. To give you a few options as examples, we've listed some of the more popular Web stores and the supporting plugins that they offer. If you are using a service such as those listed below,  you will be able to find a number of software add-ons that will aid you with shipping, inventory, and fulfillment.

  • For WordPress websites, WooCommerce offers fulfillment integration and is an extremely popular choice for a shopping cart. WooCommerce offers a number of integrations, such as shipping extensions, inventory and fulfillment extensions, and accounting extensions
  • For Shopify websites, all of the bells and whistles are at your fingertips and easily accessible. The Shopify platform offers the integrated functionality to be able to fulfill orders, manage shipping, manage inventory, and even integrate with Quickbooks out of the box.
  • There are countless additional shopping cart platforms to use and a wealth of integrations that can be used in conjunction for operating all aspects of your in-house fulfillment service

It's important to note that even though most popular shopping carts offer every solution you need to run fulfillment and shipping in-house, there still might be some manual operations or additional customizations needed to tailor to your specific needs. Mapping out your needs and thoroughly researching all options in imperative. The last thing you want to do is switch platforms midstream, as it will increase your costs and waste valuable time that could be spent growing your company.

A Final Option - Using an Additional Fulfillment, Shipping and Inventory Platform to Tie All Systems Together

Alternatively, there are software options that are independent of any platform but rather integrate with most of the popular options. These include products like ShippingEasy, Shipstation, Ordboro, Sellbrite, Shipworks, and SkuVault.

These software products go far beyond what mere label printing and shipping software can do. They will help you to manage your inventory so that you always have the appropriate amount of stock on hand and sync that inventory to your Web store so your customers know what is and isn't in stock as well. They can integrate all of your sales channels so you have a unified platform from which to pull your sales data. They can even make handling returns easier, and can sync valuable information with financial and accounting systems such as Quickbooks using plugins such as Webgility and Connex.

If you use these systems, they will be used in addition to your Web store. Many will perform most of the following functions (Be sure to look into each option to see a full feature set. As an example Shipworks provides advanced order management, automation rules and shipping label creation, but it does not sync inventory between channels or manage inventory.):

  • Offer real-time rate calculations
  • Sync inventory to available quantities on your web store
  • Oftentimes offer discounted shipping rate access
  • Provide worry-free returns handling
  • Integrate and pull orders from multiple platforms (this is especially helpful if you through channels other than your Web store, such as through Amazon, Walmart, eBay, etc.)
  • And many more...

Integration With Accounting Systems

Most businesses use accounting software, such as QuickBooks. This means that they need to get the sales data into the accounting software. Thankfully, many large platforms have the ability to integrate with QuickBooks as a core feature. If the platform that you are using does not, then you may still be able to make the integration. Intuit maintains a list of integrations that can be made with the QuickBooks software. Some of these are intermediary solutions that will connect QuickBooks with software that does not have its own integration. Integrating your sales into QuickBooks will reduce the amount of manual entry that you must do and eliminate human error from the equation.

QuickBooks also has built-in inventory functionality for those that choose not to utilize a Web store-based inventory plugin or a full-blown fulfillment, shipping and inventory management solution. It is not the most advanced inventory system available, but many businesses find that it suits their needs well. If it does not, and you do not want to use an entirely separate program for your inventory, then you can look at this QuickBooks standalone app: SOS Inventory.

The Glue That Holds it All Together - Barcode Scanning Technologies

The entire fulfillment process (receiving, inventory management, fulfillment, shipping and returns) can completely fall apart if all of these processes and procedures rely upon humans alone. In order to minimize errors to an acceptable level, barcode scanning technologies must be implemented. Barcode technology is vital because it allows you to automatically receive inventory, manage inventory, and pick and ship products with computer scanning rather than a set of eyeballs from a human (which are very prone to error!).

Barcode scanning technologies automate the following processes:

  • Pick, Pack, and Ship Verification
  • Receiving Inventory
  • Stocking and Replacing Inventory
  • Recounts and Cycle Counts

There are three main barcode software options to choose from:

  1. A barcode software that resides within all-inclusive inventory management application (app), such as the previously mentioned SkuVault
  2. A barcode software that resides within an application that you already use, such as the barcode app within QuickBook's SOS Inventory application
  3. An app that focuses solely on barcode software that can be integrated with any other software that you use, such as GroovePacker.

As with choosing your Web store, and inventory management and fulfillment/shipping software, it's important to take a look at your overall needs to determine which barcode scanning software solution is the best for your business. On the one hand, using an all-inclusive inventory management application may provide a single solution, it may come at the expense of flexibility and ease of modifying processes to meet your specific process and procedures within your warehouse. At the other end of the spectrum, using a single app specifically geared towards each need of your business provides great flexibility, but does require you to manage and maintain multiple apps.

What to consider for In-House Fulfillment Software?

If not outsourcing is the right choice, you need to look beyond and see what tools you can use to make fulfillment work better in-house. You’ll need something that will fully integrate with your existing systems to avoid transition problems. In our quest to help businesses find what is the right fit for them we’ve started reviewing some of these Software platforms.

Conclusion

If you'd like more information on becoming your own fulfillment company or finding a company to handle fulfillment for your growing business, reach out to us today.

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