eCommerce businesses have two options for order fulfillment: take care of the task themselves or outsource it to a third party. Both have advantages and disadvantages, making it a tricky choice for eCommerce business owners.
As you mull over this important decision, you must consider areas like future growth. In this article, we’ll map out the advantages and disadvantages of having in-house support for your eCommerce business.
By the time you finish reading, you should feel confident in choosing what’s best for your online store.
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What Is In-House eCommerce Support?
In-house eCommerce support keeps order fulfillment internal. Traditionally, a business has vendors and partners that handle different responsibilities associated with fulfillment. For example, one partner might manage inventory, another picks items, and another packs them. You may work with a fleet service for transporting items.
When you opt for in-house fulfillment, your eCommerce business takes care of these tasks. This has its advantages, as we’ll explore, but also its downsides to consider.
The Benefits of eCommerce In-House Support
Let’s get underway by exploring the good side of eCommerce in-house support.
The biggest reason to consider an in-house fulfillment team is to save money.
Outsourced service providers can be expensive, and the more of them you have, the greater the costs. Shorter-term deals or reduced service will save you some money, but you can pocket the most cash by eliminating third-party deals altogether.
The money you would have spent on fulfillment vendors can go toward expediting your shipping and delivery processes, hiring more staff (like a bigger customer service team or fulfillment workers), or improving your business in other ways, such as testing products and services.
You should always interview and research third-party vendors to ensure they’re trustworthy before striking a deal. However, even the most reputable vendors sometimes have issues that affect reliability.
For example, perhaps they have a truck breakdown, or one of their partners had supply-chain issues, so now your vendor can’t supply you with the same level of service.
The source of the issue isn’t as important. What matters more is that the vendor’s problems now become your problems, which in turn are your customers’ problems. This hinders the customer experience and can erode goodwill.
When you move to in-house fulfillment for your eCommerce business, you ensure these roadblocks don’t happen as often. You’re relying on fewer parties, which should reduce instances of hiccups for your online business.
Better experience for customers
eCommerce customers also benefit when you take over fulfillment duties. You can create a more seamless ordering and delivery experience, potentially expediting the time it takes for customers to receive their orders.
You can also introduce an in-house customer support team. Since your eCommerce company handles all the orders yourselves, your customer support reps can begin dealing with support tickets immediately, as they don’t have to call or email a vendor and wait to hear back.
Further, you might be able to offer lower shipping costs for all orders due to the money you’re saving by providing in-house support.
Tax time can be a headache for your eCommerce business when you have a lot of vendors. Once you cut down on all the third parties and take care of most tasks in-house, you’ll find managing your finances is far easier and less stressful.
You should still hire the services of a tax advisor or continue working with the advisor you chose before switching to in-house fulfillment, but your taxes will be far more straightforward.
Not only that, but if your company ever faces an audit, having your financial ducks in a row will keep the process moving smoothly, reducing your stress.
Reduced product issues
Manufacturing your own products according to stringent standards should reduce issues that mar the production line and render those products unsalable.
Your ability to see the issues with the products when they come off the manufacturing line and are sent to customers reduces the rate of complaints. You can also amend an issue sooner, reducing wasted stock.
Quicker repairs for equipment
Is your equipment up to par? Since you operate the entire supply chain within your business, you can quickly ascertain the condition of the equipment.
Breakdowns are expensive and can hinder your workflow, leaving you behind schedule, so minimizing them is advantageous.
The Challenges With In-House Fulfillment
While eCommerce in-house support might sound like a shoo-in for your growing business, please consider these potential pitfalls before parting ways with your vendors.
Lack of knowledge and experience
You can assume it’s easy enough to move an item through an entire production line because you’ve hired vendors to take care of each moving part. However, you try taking over their jobs yourself and realize you lack the experience to make it happen.
Knowledge is power, so understanding the ins and outs of eCommerce in-house fulfillment before choosing this option is integral if you wish to succeed.
You might not spend on vendors anymore, but the money will siphon out of your business bank account in other ways. Hiring a larger staff of customer support reps and production and shipping crew means paying more employees.
You must also usually expand warehouse space, perhaps renting or purchasing an additional warehouse. You’ll need production equipment and shipping trucks. You must also rely on eCommerce software, which isn’t the costliest on the list but an additional expense.
You must pay for shipping materials, postage, mail bins, printers, ink, paper, labels, bubble wrap, packing tape, packing peanuts, and cushioning like air pillows. These costs might seem low initially, but as you ramp up order volume, you’ll quickly realize that’s not the case.
Of course, you will also begin generating more income to offset these costs, but in some regards, in-house support can be more expensive than outsourcing fulfillment.
You can run out of space
Containing all your orders in one warehouse might be attainable now, but for how long will that be the case?
Expanding operations means a larger volume of products, more product lines, and more equipment to produce them, so you will have to plan to expand your warehouse to accommodate demand.
Hiring enough staff
Handling your item production and shipping as a small eCommerce business creates the erroneous belief that you can get it done with a handful of people. However, pushing forward with insufficient staff can increase turnover, reducing the number of bodies available to do the work.
With the high eCommerce turnover rate already working against you, keeping enough staff might be a continual issue for your business.
Meeting customer demand
A lack of fulfillment knowledge and sufficient staff can slow your production line, dragging down the shipping and delivery times in the process.
Customers will allow late orders a time or two, especially if you’ve built up enough trust and goodwill, but you can lose all you worked so hard to achieve if you garner a reputation for lateness or shoddy products.
So, Is In-House Support Right for You?
Now that you’ve reviewed the upsides and downsides of eCommerce in-house fulfillment, it’s time to determine whether it’s the right move for your business.
If you want to do everything yourself – Yes
Those business owners insistent on tackling all parts of the supply chain and order fulfillment themselves always have that option.
We want to reiterate our recommendation from the last section that you should enroll in some courses on in-house fulfillment to learn about your tremendous undertaking before you begin.
If you think you’ll save money – No
Do you save some money through in-house order fulfillment? Yes, we’ve established you do. However, you will not save as much as you might think, between the costs of shipping materials, additional warehouse and vehicles, and hiring more staff.
This isn’t a reason to disqualify in-house support, but you should measure the costs of doing it yourself versus continuing to work with a vendor to decide which is the most cost-effective.
If you have the staff for it – Yes
Have you recently expanded your eCommerce staff, or were you planning to? You’re in a better position for in-house fulfillment. You’ll have the staff size to accommodate the tasks required.
However, ensure you don’t overwhelm your employees with responsibilities, which can encourage turnover.
If you don’t have a large warehouse – No
Some businesses can easily buy a warehouse or several, while others only have access to their current space. Hold off on fulfilling orders in-house if you’re in the latter camp.
A large order volume will overwhelm your available space, leaving you with a disorganized warehouse that creates bottlenecks left and right.
If you do custom orders – Yes
eCommerce companies specializing in custom orders should strongly consider doing order fulfillment themselves. You can ensure you manufacture your custom products to your specifications, increasing customer satisfaction.
If anyone can produce your orders – No
However, you don’t necessarily have to jump to in-house order fulfillment if your business doesn’t produce custom orders.
If any vendor can use the equipment they have to manufacture your goods, there’d have to be other strong benefits to in-house fulfillment for it to be a smart business choice.
If you don’t have a large order volume – Yes
Small businesses and startups are among the best candidates for in-house fulfillment. You can learn about the fulfillment phases by doing, and you don’t have a large enough order volume that you risk running out of space or overwhelming your staff.
Tips for Managing eCommerce In-House Support
Have you decided to fulfill orders in-house for better customer service? These pointers will help you succeed.
Keep the packaging cost-effective
What’s the most important element of packaging? Is it how it looks or how it functions? In the beginning, prioritize function over form.
As your eCommerce company expands its audience and product roster, you can begin experimenting with other types of packaging and focusing more on how appealing and branded your orders are.
Organize your inventory
Inventory scanners, apps, and systems make it easy to track what’s available at the push of a button. You can reorder supplies before your inventory runs out so you don’t halt the production line.
Besides tracking stock, ensure you have an inventory organizing system your entire warehouse uses. The most common organizational tactic is to sort items by their SKU, but you can use another system if it works better for your business.
What matters most is uniformity across the warehouse so no one interrupts the other’s job with a messy inventory and missing products.
Make shipping rules
What kind of shipping rates will you offer? You can answer this question by considering your current product roster and what you can afford to spend on shipping. The customer will make up the difference.
However, shipping policies are typically fluid, evolving as your eCommerce business begins bringing in more capital and can afford to reduce shipping costs.
Invest in fulfillment software
We saved the most important tip for last: use an order fulfillment software if you aren’t already. You can rely on an order fulfillment tool for generating item tracking information, forwarding tracking to customers, monitoring and adjusting shipping rates, producing packing lists, tracking inventory, and more.
Here are some best practices for selecting fulfillment software:
- Determine your goals. What features are must-haves versus nice-to-haves?
- Calculate your budget.
- Research your options, comparing pricing and features. Begin narrowing your list.
- Read reviews and narrow down your options further.
- Sign up for free trials.
- Determine whether you’ll select that software or sample another.
Fulfillment software should feature automation to reduce extraneous processes and increase your order fulfillment accuracy and customer satisfaction.
eCommerce fulfillment can be outsourced or performed in-house. While outsourcing fulfillment requires relinquishing control, hiring quality partners can reduce bottlenecks and reduce personal workload.
Those who take on the tremendous responsibility of in-house fulfillment must ensure they have the warehouse space, staff, equipment, and knowledge.