Advantages and drawbacks of fulfilment outsourcing for online stores

Advantages and drawbacks of fulfilment outsourcing for online stores

The e-commerce market in Russia continues to grow and the number of its participants is increasing. Among the leaders are online stores of gadgets, electronics and home appliances, as well as clothing and accessories. The top and universal platforms such as: OZON, DNS-Shop, Wildberries.

But e-commerce is different from shopping in a regular store, where the seller hands over the goods delivered by the supplier to the customer. In the field of online sales this chain is complemented by a lot of related processes that are not seen by the average user, although they are forced to use and market leaders, and small online startups shops. The most important component in this chain is logistics. It includes many processes:

  • obtaining goods from a supplier;
  • storage;
  • bundling;
  • packaging;
  • delivery to the customer;
  • handling of returns, if necessary;
  • processing of cash on delivery.

Performance of all these operations on a turn-key basis has received the name “fullfilment”. Such tasks the Internet shop can carry out own forces, and can transfer on outsourcing.

YaCu is exactly the kind of company that takes on all the tasks in the field of logistics and provides a full range of functions. Our practical experience includes solving complex logistics tasks.We will tell you about the features of this process.

Fulfilment by yourself or outsourcing?

Each retailer can answer this question for itself by estimating the resources spent and acquired, and there are many:

  • time. This is a key source for any entrepreneur, because time is money. When a businessman removes all the hassle of organizing logistics and passes it on to specialists competent in this area, he does not need to spend time on routine tasks. There is no need to spend it and money for operational needs. It is much more effective to direct them to business development: marketing, sales, promotion, because it will bring profit.
  • money. The average cost of renting a small warehouse (100 m2) in your region is 1000 $ per month. The salary of a couple of movers – another 1 thousand dollars per month and a courier – from 1 thousand. And you also need a packer, 800$ per month, equipment, its maintenance, and sometimes repairs, training of staff, pay taxes, and already it seems that such a sum for one warehouse alone will not pull any business.

But even if your company is already firmly established in the market and can afford such costs, no one cancels the question “Why? Why spend so much money on the warehouse, if they can be used more effectively and directed to the development of business.

  • storage. A well-thought-out and well-established warehouse infrastructure costs hundreds of thousands. This is a very tangible investment, especially at the start. It is possible to keep records in the old way: in a notebook or excel, but very soon it will lead to problems and errors because of the human factor.

This method will not suit a large store, and it will look very strange in the eyes of counteragents, XXI century after all. It is easier and cheaper to work with a fullfilment operator, who has a ready and working WMS-system.

  • seasonal changes. Trade is very sensitive to seasonality. All its areas feel peaks on holidays and drops at other times. Fulfilment operator will protect your business from risks associated with sales spikes. We will allocate more human resources and space to your shop for this period than usual. During a downturn it will save you money on staying idle extra space.
  • constant cost factor. If a retailer organizes the fullfilment himself, it is unlikely that he will be able to rent a warehouse when he needs it, pay the salary of the loaders and packers only when he needs it. This is likely to be a fixed cost. With a fulfilment operator, it’s different: no orders, no expenses.
  • extra profit and speed in processing orders. You will be able to process more orders in the same unit of time, which means your profit will increase.
  • cash on delivery. This process also needs to be implemented independently, or simply transfer the task fulfilment operator.
  • risk reduction. All processes transferred to the operator: storage, cash on delivery, etc. are the responsibility of the outsourcer, according to the contract. The client can install the KPI Executor and demand their compliance.

Why do online stores prefer to organize fullfilment themselves?

We believe that the benefits of outsourcing fullfilment are obvious. Why then do not all retailers choose this scheme? The fact is that there are certain stereotypes, according to which this approach can lead to certain negative consequences for the online store:

  • the store owner has no access to the warehouse. This is not true, he is not only free to come independently, but also to send an employee who will be in the warehouse;
  • mistakes in the configuration of the goods. This is a myth, because the warehouse is fully automated with the help of WMS-system. There is no human factor, so errors are excluded – the system will not allow to pass the inappropriate goods;
  • there’s no control over the fulfilm operator. Another misunderstanding. Such cooperation provides 100% control in real time in the personal office of the YaCu or through the application. The system reflects the real time movement or status of the product, your customer will know exactly when his order will be delivered.
  • document flow problems. A common mistake. Each process that occurs with a product is recorded in the appropriate document. You can also view and download them in your personal cabinet.
  • problems with delivery. We have implemented an algorithm for building optimal routes in our software product. That is why we have no more than 5% delays. That is why the courier is moving on a pre-created and the most optimal route and does not spend time on planning. Even large players do not have such a solution.

But many online stores continue to organize logistics processes on their own, remaining confident that in this way they will be able to control all processes on their own, they will not have to bear the costs of the contractor. In fact, everything is the exact opposite:

  • the costs will be much higher, as they will need funds for renting the warehouse, software and equipment for the warehouse, and staff salaries;
  • a lot of time is spent on organization and control, more important processes – sales, marketing, etc. – suffer from it and do not develop;
  • even the most experienced managers can not foresee all the details of logistics processes, because they are not professionals in this field. As a result, something is missing: peak loads have not been taken into account, the downtime of areas has not been leveled;
  • it is difficult to establish all processes quickly and simultaneously, and without errors;
  • the accountant gets an extra workload in cash transactions, and the manager has to cooperate with the postal and courier services;
  • if the retailer has no or not enough couriers, the money will not come in quickly.

Mistakes in all these processes can cost the online store hundreds of hundred of dollars and carry with them not only financial but also reputational risks. YaCu recommends to think well whether it is worth doing warehouse processes on your own or better to outsource them.