Learning to Let Go When Outsourcing

Jun 11, 2013 10:33 AM  By

warehouse-manager-300More and more companies are looking into using Third Party Fulfillment (3PF) as an option to avoid increases in staff, warehouse size, and technology investments. But for some considering outsourcing, the basic hang-up is giving up control of contact center and fulfillment operations.

Here are three issues and how we have dealt with them for our clients:

“I can provide more cost effective fulfillment internally.”  Until you do a detailed comparison of internal fulfillment vs. 3PF, you can’t estimate whether there are additional costs or savings. We have seen many businesses that have been able to lower their backend fulfillment and contact center costs through outsourcing, but it varies by company. They were able to reduce the costs they had to absorb during the off-peak periods—which could be as much as half the year. The freight savings can be significant for small- to moderate-size companies with the utilization of a 3PF’s lower shipping rates or multiple centers. We also have large clients outsourcing to deal with peak season labor and expanding their distribution center networks. Many businesses can benefit from the efficiencies of larger 3PF operations. We have had several very large clients look at outsourcing rather than expanding fulfillment as their companies grew.

“I will lose control of my order entry and customer service.”  Set up contractual standards for customer service as illustrated above. In some cases, 3PF contact centers will be willing to use your order management system and will want to be online with security control for all transactions. You will be able to fully service the customer seamlessly by giving the 3PF access to customer records, orders and returns, shipping information, and inventory availability. Make sure you have access to customer accounts, and will be able to listen in on customer calls whenever you want.

“My customers will notice the difference.”  Unfortunately, we have all experienced some less-than-perfect customer service by both 3PF and internal fulfillment operations. We think the important criterion is providing the seamless customer service standards your customers expect—whether you choose to do that by a 3PF or via internal operations is up to you.

For more on 3PLs, download Multichannel Merchant’s 3PL and Fulfillment Service Guide.

Curt Barry (cbarry@fcbco.com) is president of F. Curtis Barry & Co., a multichannel operations and fulfillment consulting firm.