Let’s face it. As an online business owner, the last thing you want to spend your time and energy on is managing your ecommerce supply chain.
But how well your supply chain runs impacts how successful your business will be and how quickly it will grow. It’s no doubt that managing and optimizing the supply chain is crucial for online business success.
This can cause a conundrum: as you build your ecommerce business, where should you spend a bulk of your time? Supply chain management is a time-consuming process, but it’s important. However, without the right technology, labor, and expertise — the hours spent on logistics operations can quickly add up.
Fortunately, outsourcing supply chain management is an option that many fast-growing ecommerce businesses choose to go rather than investing in the infrastructure themselves. There are several benefits to outsourcing supply chain management, including time and cost-savings — not to mention fewer headaches.
In this article, you will learn the benefits of outsourcing supply chain management (as well as a few risks to consider), so you can spend less time and money on overseeing logistics.
What is outsourced supply chain management?
Outsourced supply chain management refers to hiring a third-party logistics (3PL) company to manage, improve and optimize the supply chain. This allows ecommerce businesses to delegate storage and time-consuming ecommerce fulfillment tasks while saving money and improving their supply chain velocity.
Which supply chain processes can you outsource?
Outsourcing the supply chain can be done at every stage of the process. While some logistics companies only take care of a few stages or tasks, a tech-enabled 3PL can help streamline the entire supply chain by managing logistics operations on your behalf.
Here is a list of which supply chain processes can be outsourced to a 3PL:
- Warehouse receiving
- Inventory storage
- Order management
- Inventory management
- Order fulfillment
- Automated shipping
- Returns management
Benefits and risks of outsourcing supply chain management in ecommerce
The benefits of outsourcing supply chain management are endless, but that’s not to say there isn’t any risk associated with it. The key is to find the right 3PL partner that can provide with what you’re looking for to meet your unique needs.
Fortunately, the good should outweigh the bad, and if you take the time to choose the right 3PL, you will reap the benefits.
Below is a comprehensive overview of the benefits and risks of outsourcing supply chain management.
Benefits of outsourcing supply chain management
1. Reduce overall costs
Supply chain management requires a wide range of processes and labor to run a smooth and lean supply chain. When not done right, logistics costs can add up quickly.
By outsourcing the supply chain, you can worry less about managing logistics systems yourself while benefiting from lowered fulfillment logistics costs, including warehousing, fulfillment, and shipping fees.
Running the entire supply chain can be costly for your business if it’s not being done strategically. For instance, renting a warehouse is becoming more costly than in the past with logistics warehouse tenants expecting to see a 10% rate hike starting in 2021.
Logistics issues such as inefficient inventory storage, a poor geographic footprint, and unoptimized labor and operations can also add up over time.
Outsourcing the supply chain to a tech-enabled 3PL can solve many of these logistical challenges, such as offering affordable warehousing, optimizing the fulfillment process using automated technology, and offering affordable shipping by negotiating discounted rates with major carriers.
“We need to deliver quickly and inexpensively. Since switching to ShipBob from our previous 3PL, our fulfillment cost on comparable orders went down by 25%.”
Michael Peters, VP of E-Commerce Operations at TB12
2. Adds time to focus on scaling your business
When you outsource your supply chain, what you are left with is more time to focus on other important business processes such as marketing, product development, and building better customer relationships and support.
As your business grows, a 3PL can offer insights into how to expand your fulfillment strategy and optimize inventory, whether it’s storing inventory in more fulfillment centers, setting up subscription orders, or expanding into new markets and sales channels.
“ShipBob pulls me out of having to deal with the physical labor side of the business, which allows me more time to focus on making and marketing music. It’s an automated flow that lets me spend less time on things that aren’t making money.”
Lee Nania, Founder of SubSubmarine
3. Speeds up shipping times
Outsourcing the supply chain also offers ecommerce businesses the ability to provide affordable and fast shipping to expand their customer reach and meet customer expectations.
This can be done by partnering with a 3PL with a robust and growing fulfillment network, which offers the ability to split inventory across several fulfillment center locations.
Storing inventory in more than one strategic locations can drastically cut down on shipping distance and costs, which also makes it possible to offer better shipping incentives for customers, such as 2-day shipping via ground and free shipping.
“We started in ShipBob’s east coast fulfillment center, which was local for us. We have since moved to a more central fulfillment center location in Chicago to improve transit times and shipping costs.”
Manuel de la Cruz, CEO at Boie
4. Increases flexibility
When you work with a 3PL to outsource your supply chain, you will have access to a well-connected logistics network, technology, and expertise, which make it easier for you to make important business decisions moving forward.
ShipBob makes it easy to grow and expand into new locations in the US and other countries. Other ways we provide flexibility include no monthly order minimum requirements to open up outsourced fulfillment to startups, the option to use standard or branded custom packaging, and the ability to monitor and make changes to inventory or orders all from one dashboard.
“ShipBob offers the option to customize packaging and tell a story through our products when shipping to our customers, giving us more control over our business and brand.”
Matt Dryfhout, Founder & CEO of BAKblade
5. Increases accuracy in order processing
While smaller ecommerce businesses often have to manually process orders, 3PLs have software that integrates and syncs with your online store and other sales channels to simplify the order processing phase.
With ShipBob, orders are automatically sent to a fulfillment center to be picked, packed, and shipped as soon as possible. Our customers can view order status and track inventory levels in real time all in one place.
“An hour after an influencer ordered from me, he had already received an email saying his order had shipped. If I was fulfilling orders myself, it would have taken me much longer. This was the perfect example of ShipBob working how it should, automatically sending tracking info and giving my customers everything they needed.”
Tracey Wallace, Founder of Doris Sleep
6. Boosts customer satisfaction
Although customers don’t have direct visibility into how an order is processed, fulfilled, and shipped, when your supply chain is efficient and effective, your customers can benefit.
By outsourcing your supply chain, you’re able to leave logistics up to the experts, who can help you save on costs and provide a better experience for your customers with improved order accuracy and faster delivery.
“Over Black Friday and Cyber Monday, we release many new products sell two months of unit volume in that weekend alone. I am confident that ShipBob makes this a success for us, helping us live up to our customers’ expectations and deliver on time.”
Carl Protsch, Co-Founder of FLEO
Risks of outsourcing supply chain management
1. Choosing the wrong 3PL company
Outsourcing supply chain management is a big step. The key is to take the time and choose the right 3PL partner for your business. It’s important to find a 3PL that offers a consistent and reliable service across their entire distribution network.
When sourcing a 3PL, make sure to ask about their tech stack, their pricing model, where their fulfillment center locations are (and if they will continue to expand), and how hands on their support team is. For more tips on how to choose the right 3PL company, check out this free guide.
“I felt like I couldn’t grow until I moved to ShipBob. Our old 3PL was slowing us down. Now I am encouraged to sell more with them. My CPA even said to me, ‘Thank God you switched to ShipBob.’”
Courtney Lee, founder of Prymal
2. Unplanned costs
When ecommerce businesses first start out, there’s a common belief that outsourcing logistics and fulfillment will increase costs. The truth is, there are hidden costs to self-fulfillment and leasing warehouse space.
Outsourcing supply chain management should not only save you time, but it should also provide cost-savings. Since you won’t have to put money towards rent, labor, and equipment, outsourcing saves you money in the long run. When looking into a 3PL, make sure to ask about their pricing model and if there’s any other charges or fees.
“While many 3PLs utilize a complex pricing model that makes forecasting expenses nearly impossible, ShipBob has a clear pricing model so we know exactly what we’re going to be billed.”
Gerard Ecker, Founder & CEO of Ocean & Co.
3. Long onboarding processes
Every 3PL will have a different onboarding process, but you should expect the process to be smooth and easy to get started. It’s important to ask the 3PL questions like what information they will need from you upfront, if there’s a direct integration with your online store, and how easy it is to set up and configure your account.
If there are signs that the process will be too tedious, you might be better off finding a 3PL that offers a simpler onboarding process, so you can ship your inventory as soon as possible and have them start fulfilling and shipping orders quickly.
“Nine days after we got started with ShipBob’s implementation team, we were shipping orders.”
Tim Fink, Co-Founder of EnduroSport
Supply chain management outsourcing with ShipBob
Tackling the entire supply chain alone can be a challenge. It can take up time and energy that is better spent somewhere else.
Many direct-to-consumer (DTC) brands choose to partner with a logistics company that offers a global fulfillment network, best-in-class technology, and supply chain expertise. ShipBob can help you better manage your supply chain by taking time-consuming logistics tasks off your plate.
When you outsource fulfillment to ShipBob, you get your time back and you save money in the long run:
- Store inventory in one or more strategic fulfillment center locations (with international fulfillment capabilities).
- Gain full visibility into inventory and order management.
- Get real-time insights into shipping costs, fulfillment performance, demand forecasting.
- And much more.
Outsourcing supply chain management can require taking a leap of faith, but it is worth it in the long run. There are several benefits to outsourcing, but to minimize risk, be sure to take your time in choosing the right 3PL that fits your needs.
ShipBob offers a growing global fulfillment network, best-in-class technology, responsive customer support, and expertise to help you feel at ease and provide you with more control and visibility into the entire fulfillment process.
With ShipBob, you’re given warehousing, built-in inventory management tools, access to advanced data and analytics, fast fulfillment, and affordable shipping.
To learn more about ShipBob and to request custom pricing, click the button below.
Outsourced supply chain FAQs
Here are some answers to common questions related to outsourcing supply chain management:
What are the benefits of outsourcing?
There are several benefits of outsourcing to a 3PL provider, including cost savings, more flexibility, access to a robust logistics network, and ultimately more time and energy to focus on your business.
How does globalization affect outsourcing?
Globalization has opened up international shipping capabilities and ecommerce in genreal. In terms of outsourcing the supply chain, outsourcing can help businesses expand their ecommerce sales worldwide. By outsourcing supply chain management to a global fulfillment provider, you can easily compete with international brands by fulfilling and shipping orders closer to your customers across the globe and expanding international sales.
What is outsourcing the supply chain?
Outsourced supply chain refers to hiring a third-party logistics company to manage, improve, and optimize ecommerce the supply chain, starting at receiving and warehousing, to inventory and order management, to fulfillment and shipping, and even ecommerce returns.
What are the risks of outsourcing?
The biggest risk is outsourcing is partnering with the wrong 3PL. When outsourcing your supply chain, be aware of hidden logistics costs, lack of technology, and poor customer support. If you take the time to find the right 3PL to partner with, the benefits outweigh the risks.