Expanding Your Warehouse VS Outsourcing Fulfillment for Ecommerce Companies that are Scaling
Getting a handle on warehousing costs has become increasingly challenging for supply chain managers, chief operating officers, and e-commerce companies. This is especially true when your company is experiencing rapid expansion. The question may arise: is it best to start outsourcing fulfillment?
What will you do when the warehouse space is running out and yet orders keep streaming in? When this happens and you need to scale, your choice is clear: either (i) expand your warehouse or (ii) outsource your order fulfillment to a trusted third-party.
Your choice can make or break your e-commerce business. That’s why it is important to examine both the pros and cons of each option you have when it comes to ecommerce fulfillment.
Option A: Expand your Warehouse for Your eCommerce Business
If you decide to expand your warehouse to meet your increased order fulfillment needs, you must realize two things:
- A new warehouse should have more capacity than you actually need at the moment in anticipation of further expansion.
- The expansion of warehouse cannot be done in small bits
Pros of Expanding your Warehouse
Keep everything in-house
Expanding your warehouse means you keep the entire process in-house. Naturally, this gives you full control over everything, from inventory management to fulfillment. In other words, you will do all the storage, picking, packaging, and shipping of the products to consumers yourself.
When you run your own warehouse, you can easily pick a location that’s close to the headquarters of your company. This makes it much more efficient to identify and remedy quality issues.
Enjoy tax benefits
Perhaps this is the biggest draw of expanding your warehouse. As you may already be aware, warehouse space is treated as commercial property. That means you can claim several federal and state real estate tax benefits.
Cons of Expanding your Warehouse
Difficult to scale
Three advantages mentioned above are all good and dandy, but things can go south when your ecommerce business grows. It’s easier to fulfill 100 orders in-house, but what about 10,000 or 100,000?
Hefty upfront costs
Warehouse space isn’t exactly cheap. Remember, you need to build or buy a bigger warehouse than you presently require. That translates to lots of upfront expenses that can actually derail your business expansion.
To add insult to injury, there’s a good chance that the new space will sit idle sooner than later, particularly during low order seasons.
Space limitation can hinder your business
Available space is dependent on how much warehouse you buy or build. This can limit your business’s ability to fulfill orders, which means reduced revenue, poorer customer shipping experiences, and worse bottom line.
Option B: Outsource your eCommerce Fulfillment Needs for Your eCommerce Business
However you look at it, expanding your warehouse may not be the right course of action, especially in the near-term. Alternatively, you can decide to work with a trustworthy fulfillment partner.
In saying that, outsourcing your order fulfillment to a good 3PL company comes with plenty of perks and only a few drawbacks that you need to consider beforehand.
Pros of Outsourcing to Fulfillment Partner
Much lower costs
Using a fulfillment partner can save you the humongous, upfront cost of building or buying a new warehouse. Moreover, a 3PL partner can get you better shipping rates. After all, they combine the throughput of hundreds if not thousands of e-commerce businesses, passing on the volume discounts to you.
Focus on what truly matters
With fulfillment partner doing all the heavy-lifting, you will have more time on your hand to focus on what truly matters. Your business is expanding, after all. So you can concentrate on increasing revenue, sprucing up product quality, better marketing, and increasing sales.
No manual audits of your inventory
Manual inventory auditing is every e-commerce company’s nightmare. The fulfillment partner will do it. And thanks to the convenience of inventory management integration, you will always be updated on your current quantities.
When you outsource your order fulfillment, you can expand or contract your space as needed. More crucially, you will pay only for the space you’re using.
Less worrying about returns and customer service
An all-in-one fulfillment partner is truly a godsend. They will process returns and offer top-notch customer service on your behalf. What more could you ask for?
Cons of Outsourcing your Order Fulfillment
Depending on who you choose, the partner will have much control over how your products are stored, packed and shipped. Not every e-commerce business is comfortable with giving up full control of the order fulfillment process. It is possible to find a fulfillment partner that works with you in how you want your products fulfilled and in addition gives you full transparency into daily operations of your fulfillment.
Hard to detect mistakes
What if the vendor sends the wrong item? What if the products are damaged or misplaced? When you outsource, you’ll probably not know about mistakes until the customer complains. It is important to work with an honest, trust worthy fulfillment partner that will own up to any mistakes and fix them free of charge.
Which is right for me?
As you can see, outsourcing your order fulfillment delivers more benefits than expanding your warehouse. The trick, however, is to choose the right fulfillment partner. hundreds of ecommerce businesses have trusted QuickBox Fulfillment to become a valued partner in their ecommerce fulfillment strategy. Reach out to Quick Box today to learn more.