How Outsourcing Warehousing and Distribution Services Can Enable Growth

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Finding the right warehousing and distribution solution for your ecommerce business is essential to promoting its long-term growth. However, many business owners quickly hit a wall when it comes to logistics: either they are fulfilling orders themselves but can’t keep up with order volume, or they are juggling multiple storage and shipping services, adding unnecessary complexity to the fulfillment process.

In both cases, ecommerce businesses oftentimes need more support with order fulfillment — and that’s where a third-party logistics (3PL) company comes in. 

Outsourcing fulfillment to a tech-enabled 3PL might seem intimidating at first, but fast-growing direct-to-consumer (DTC) brands rely on their 3PL partner to set them up for future growth. 

How are you warehousing and distributing your inventory?

Ecommerce businesses can take a variety of approaches to warehousing and distribution, and it all depends on your ecommerce supply chain and the challenges you’re facing. To scale efficiently, it’s important to think through how your current logistics operations will hold up as you start to see higher volumes of monthly orders. Here are the three common ways ecommerce businesses approach fulfillment and inventory management

In-house

Startups typically begin by handling warehousing and distribution themselves, pick, pack, and ship orders without the help of a fulfillment provider. But while self-fulfillment is cost-effective in the short term, it can be a challenge to keep up with as you grow (plus, there are hidden costs to self-fulfillment). As you grow, self-fulfilling orders in-house will only slow you down, taking up too much of your time and energy. 

With multiple logistics partners

To grow your business, you need the right partners on your side to manage your supply chain. But if you have one partner for warehousing and a different partner for distribution, you could be paying twice as much for slower service. Lack of synchrony between warehouse and distribution services can result in miscommunication and delays that waste your time and can also increase logistics costs. It also doubles the time needed to learn and track information on different technology platforms. 

With a 3PL partner (third-party logistics service)

3PLs have become the gold-standard in warehousing and distribution due to fast turnaround times and lower fulfillment costs. To compete with established brands and marketplaces like Amazon, 3PLs like ShipBob offer the infrastructure optimize your supply chain. Instead of storing inventory in a rented warehouse in a single location, you can take advantage of a 3PL’s distributed fulfillment network with multiple locations.

On top of that, you can sync your store to a 3PL’s technology so you can automate fulfillment and track inventory and orders in real-time across fulfillment centers from one single dashboard.  

What do warehousing and distribution encompass?

Before settling on a warehousing and distribution approach, business owners need to consider all the hidden responsibilities involved in warehousing and distribution that takes time away from product development, customer relationships, and marketing. Here are just some of the many key tasks involved in the warehousing and fulfillment process

Receiving, storing and warehousing

The first step is receiving inventory from the manufacturer or supplier and storing inventory properly for easy picking. Inventory then needs to be physically stored in an organized place until orders come in. From here, you’ll have to consistently control inventory to avoid deadstock and stockouts, and find ways to optimize inventory storage and keep carrying costs down. With a 3PL, you don’t have to worry about time-consuming warehouse management tasks. 

Picking

When an order comes in, you need technology (like a warehouse management system) to help process orders so you can quickly pick items. Most 3PLs have a technology platform that integrates with your ecommerce website and pushes orders directly to a fulfillment warehouse. Then a team of workers is given a picking list and goes through your inventory and assembles that order.

Packing

The finished order must then be packed in a container for shipping. Partnering with a 3PL helps to avoid common packing mistakes and also gives you the option to use their standard packaging options or use custom branded packaging

Distributing and shipping

Finally, a packaged order needs to be labeled, shipped, and tracked to its final destination. Instead of shipping orders yourself, a 3PL like ShipBob partners with major shipping carriers to offer negotiated rates for their merchants. That way, your orders are shipped through the most cost-effective shipping route available without any effort on your end. Once orders are shipped, you can view order status in real-time from one single dashboard. 

Benefits of outsourcing your warehousing and distribution

Outsourcing your warehousing and distribution needs is an investment that can yield a variety of returns for your business, all of which ultimately bolster your bottom line and increase your business’ profitability with time. Here are a few of the top benefits you can expect when you partner with a 3PL. 

Cost savings

When you outsource warehousing and distribution to a 3PL, you no longer bear the hidden costs of inbound and outbound logistics processes that eat away at your profits, such as warehousing rent, inventory management, labor, and shipping. Instead, you can allocate your budget toward achieving more strategic growth and development objectives. 

Time savings

Managing warehouse operations and order filling steals hours of time better spent elsewhere, increasing your opportunity cost. Without having to worry about the details of receiving, storing, warehouse picking strategies, packing, and shipping, you are free to spend your time on more important endeavors, such as marketing, product development, and ensuring customer satisfaction.  

More expertise in logistics

Businesses often fear that outsourcing fulfillment will impact quality control or increase shipping rates, but 3PLs are the fulfillment experts. The right tech-enabled 3PL offer not only a robust fulfillment solution but also the support and resources needed to help you scale quickly.

Faster processing and shipping

A 3PL’s expertise translates into optimized order processing and quicker ecommerce shipping. Modernized 3PLs will typically have an intuitive software system that integrates with your website to streamline and automate order processing, and some even distribute your inventory between various distribution centers to reduce shipping costs and enable 2-day shipping

ShipBob as a warehousing and distribution partner

To maximize the benefits of outsourcing your warehousing and order management, you’ll need to choose the right partner: The one that offers a combination of technology, support, and a growing fulfillment distribution network to enable your unique business to scale. ShipBob is a 3PL that partners with thousands of businesses. We go above and beyond for our merchants by offering these key services to foster our partners’ growth.

Distributed inventory

When ShipBob partners with your business, we analyze where orders are coming from and strategically split inventory among our fulfillment centers located across the globe. When an order is placed, the distribution center closest to that order’s location automatically fulfills that order. That way, you can strategically reduce the number of shipping zones a package must travel through, reducing shipping costs and last-mile delivery time

2-day shipping

Customers have come to expect ecommerce businesses to offer free shipping and same-day delivery, which is why ShipBob provides 2-day shipping via ground options. Guaranteeing your customers 2-day shipping can help prevent cart abandonment and improve brand loyalty. 

What happened when Rainbow OPTX outsourced their logistics to ShipBob

When founder and CEO of Rainbow OPTX Noel Churchill left his day job to pursue his color therapy glasses business full-time, he initially chose to self-fulfill orders. But when Rainbow OPTX hit their breakout year in 2017, orders came pouring in and Noel could barely keep up. His garage was overflowing, and even after hiring friends to help, he was still spending a staggering 20 hours a day fulfilling and shipping orders. 

“ShipBob is also not complacent — their software is always improving and the fulfillment services are always advancing, like expanding 2-day shipping coverage. The company has ambition for growth and they keep developing in very real ways.”

Noel Churchill, Owner and CEO of Rainbow OPTX

After researching several 3PL options, Noel partnered with ShipBob to address his warehousing and distribution needs, and once all of his inventory had been transported to ShipBob’s distribution centers, Rainbow OPTX was able to grow 115%, saw a 24% increase in average order value due to faster shipping, and are currently working with 2.5 times more order volume since partnering with ShipBob.

Ready to get started with a 3PL?

Outsourcing ecommerce fulfillment frees your business from constraints and costs that stunt its growth. ShipBob is a 3PL that offers a variety of warehousing and distribution services to help your business thrive.

To learn more about how ShipBob works, fill out the form below.

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FAQs on warehouse and distribution services

Outsourcing to a 3PL doesn’t have to be complicated. Here are some answers to common questions on warehousing and distribution.

 

How much does warehousing and distribution cost?

Warehousing and distribution costs vary depending on your approach: be it self-fulfillment, contracting with multiple logistics companies, or partnering with a 3PL. There are many hidden logistics costs to consider when self-fulfilling or hiring multiple companies, including warehousing, shipping insurance, packing supplies, equipment, labor, fulfillment costs, and more. When partnering with a 3PL like ShipBob, you get a price structure that’s straight forward so there are no surprises.

 

What is distributed inventory?

Distributing inventory involves dividing a company’s inventory among several distribution centers dispersed across a wide geographic area, rather than storing all of the inventory in a single location. With inventory distribution, each order is automatically fulfilled by the fulfillment center closest to it the order’s destination, which reduces shipping costs and speeds up transit times. 

 

Should I outsource my warehousing and distribution?

If your ecommerce business has outgrown self-fulfillment, outsourcing your warehousing and distribution processes to a 3PL can take warehouse management, inventory tracking, and order fulfillment off your plate and into the hands of the experts. A 3PL like ShipBob will automate and document warehousing and fulfillment processes in real-time, leaving you free to focus on strategically growing your business.