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Article | When to outsource your e-commerce logistics?

When to outsource your e-commerce logistics?

E-commerce sure is growing, every day more and more retailers are making the move to sell online. The ongoing digitalization of retail and recent year’s restrictions on social distancing has leapfrogged the industry. The number of consumers turning to online shopping is steadily increasing and by 2022, e-retail revenues are expected to grow to $6.54 trillion USD. If your e-commerce business is part of this growth – congratulations! But knowing when to outsource your logistics and how to get a cost-efficient solution that allows for future growth, can be difficult. We are here to help.

Taking the leap to find a third-party logistics (3PL) partner can feel scary, especially if you are running a direct-to-consumer (DTC) brand. From having a complete overview of operations, cost, and orders, to trusting an external supplier with your entire logistics flow. 

This can include everything from how your product is packaged, to routines for returns and customer contact. We know it can be hard, but at some point, it is time to let go and let the professionals take over. In order for you to fully focus on growing your brand and business.

E-commerce is an excellent way to get economies of scale. With the right product and sales channel, you can get your product marketed at a comparatively low price compared to physical sales. As order volumes increase you can keep increasing your income, while cost per order decreases. But when do you hit the break-even point?

Where many e-shops go wrong is that they think an in-house warehousing solution is more cost-efficient than a 3PL solution. While there is obviously a cost involved for third-party logistics. Many e-shops are not comparing this to the total costs they are spending on managing warehousing, technology, shipping, and returns.

Any 3PL solution should always be compared to the total amount of resources and costs involved. We have helped many e-commerce companies lower their costs and get a flexible fulfillment solution to help them scale.

Here are 6 important benefits to consider when assessing if your business can profit from an outsourced solution:

1. Lower your total cost

At first, the initial cost for handling each order through a 3PL partner will be more than doing it yourself, sure. But what many business owners don’t consider is the alternative cost of their own time and that of their colleagues and staff. Time that could have been spent on other value-adding, core business tasks. 

There is a strong benefit in letting experts do what they do best. A 3PL logistics partner will work very efficiently. Moreover, there is a very positive factor involved, which is simply expressed as: “you pay for what you get”. In the 3PL pricing model, you only pay for the efficient time of labor in picking and packing each order. In comparison to in-house logistics set-up where employees and warehouse space are fixed costs.

E-commerce can be very seasonal. An outsourced solution is extremely flexible in terms of workforce and utilized space. Warehouse resources can be called in when there is a surge in orders, and won’t cost you anything to stand by. In the same way, when there is a decrease in demand, you only pay for the actual order handling and what you stock at the time.

2. Increase your control 

Living up to customers’ high expectations on process, delivery, and support in e-commerce is becoming increasingly important in order to stay relevant to customers. The thought of losing control over customer contact, product handling, and shipping activities can feel daunting. This is a classic outsourcing dilemma for any caring business owner and it is also one of the big reasons why we developed the Prime Penguin cloud-based platform. To provide a total digital overview of your outsourced e-commerce logistics where you stay in complete control. 

With a technologically robust solution and a trusted partner, your business is in very good hands. By outsourcing your logistics and having a digital solution for order management your control will increase. A customized optimal, order routing flow can easily be set up based on rules in the platform. All data is monitored, double-checked, and can be updated at any time through the platform.

In many ways, you reduce your business risk considerably. Through the Prime Penguin platform, you will gain an aggregated view of all orders and upcoming shipments. Including automated messaging and double-checking all data to be consistent. By flagging any potential errors from the order data streaming from your sales channels (e-commerce platform or marketplace) to the logician’s warehouse management system (WMS) and vice versa. 

3. Get Technological support

Moving your business online has never been easier. However, with digitalization also comes complexity and the need for technological know-how. Many e-stores are well adapted to bringing exciting brands and innovative products to the market but do not always have the resources or capacity to set this up in an online environment. This is where a 3PL partner and logistics tech (logtech) resources come in handy. In an instant, all of your sales channels can be connected to any warehousing of your choosing. Without having to stress about the technological complexity of integrating your systems to create efficient flows. Often, your e-shop requires a customized solution, depending on the e-commerce platform and pre-existing tech stack. Through outsourcing, you will gain a partner to take care of your development needs without any high consultant fees. 

4. Scale your business

It is never too late until it is too late. By outsourcing your logistics in time, you can have a solution in place that is ready for your increasing volumes before you have outgrown your capacity.  With a flexible, cost-efficient warehousing solution, and real-time inventory updates you will never miss a sale. In the Prime Penguin platform, you will have notifications on when you are running low on quantity for any SKU and when it’s time to restock. 

E-commerce is a global opportunity.  As your business expands to new markets it is crucial that you can find efficient partners to route your orders. By creating hubs all over the world in a cost-efficient solution you can save both time and money, and significantly lower your carbon emission  Finding new warehouses and connecting these to one single platform is a great advantage and a well worth investment for scalability. 

5. Providing a better customer experience

We know that customers’ expectations on delivery, support, and returns are constantly raised. Doing all of it in-house is getting difficult, especially as order volumes grow. With a 3PL solution returns and quality management is in safe hands. By leveraging the 24h customer service and smart warehousing hubs for returns many e-shops can handle and resell their returns at a lower cost than before. Many 3PL partners offer professional and hands-on customer service at comparably low cost. 

6. Develop your product and team 

At the end of the day, your time and creativity are what really matter. By outsourcing the administrative parts of your business to professionals you will have more time and resources left to build your company. As your business is scaling it is vital that you are in tune with your customers’ needs and the problems you are solving for them. We value your effort and time and you should do as well. Finding a scalable solution that allows your company to do what you do best at is key. 

All in all, many businesses can benefit from examining how much time and resources are spent on administration versus development. It is then important to take all costs into account when comparing in-house operations to an outsourced solution. Prime Penguin has helped many e-commerce businesses of all sizes gain control over their logistics operations, saving both time and money by building an effortless logistic operation.

Hope you’ve found this article helpful. Contact us today to get a cost-free price quote from our network of trusted 3PL partners.

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