Fulfilling Orders

Should you outsource your fulfillment and distribution process or keep it in-house?
3 min read
Opinions expressed by Entrepreneur contributors are their own.

Once your Web site is up and running-and you're getting tons of orders-you need a way to fulfill and ship those orders. Entrepreneurs can either outsource the fulfillment and distribution process or set it up in-house.

Full-service fulfillment companies offer up an end-to-end solution: They take your products from warehouse shelves, pack them, hand them to shippers and then send an automated e-mail response to your customers to let them know their packages are in transit. They can also handle your credit-card processing, supply current inventory levels to your Web site, reorder products, offer call-center services, send notices of shipping, and handle returns. There are literally thousands of these companies to choose from, but experts say the best way to find one that suits your needs is by word-of-mouth. Ask computer-savvy friends or talk to the employees who manage your Web site and ask them for referrals.

If you are using your hosting company for shopping cart and credit-card functions or doing this in-house, you can just use some of the fulfillment companies' options-such as pick-and-pack, returns processing and customer service support. If you're shipping a small number of orders, you may want to fill your orders yourself.

To do this, you'll want to use the major package delivery companies-Federal Express, UPS or the USPS, since they're considered the most reliable. All these carriers offer down-loadable software on their Web sites that allow you to track customer orders and also begin shipping immediately. However, the downside is that you'll either have to go to your local post office to ship the packages or schedule pickups with whichever delivery company that you eventually choose.

So, should you outsource? Art Avery, principal consultant of Avery & Associates, an e-commerce distribution and logistics consulting firm in Coopers-burg, Pennsylvania, advises that out-sourcing to a fulfillment company only makes good financial sense if the entrepreneur has more money than time. "When you need every penny, you should do it yourself," he explains. "When you can earn more doing other things with your time, look outside." In addition, he says you should outsource only when your present method has to be expanded and the incremental cost of expansion would be expensive.

Before you choose a fulfillment company, however, make sure that it wants the business of a small company (many do not) and is reliable. "If your fulfillment company screws up in your peak season, you can lose your entire business," Avery says. And, no matter what type of fulfillment operation you set up, it shouldn't cost more than 10 percent of sales, Avery says, plus the actual shipping costs.

Melissa Campanelli is a technology writer in Brooklyn, New York, who has covered technology for Mobile Computing & Communications and Sales & Marketing Management magazines.

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