The future looks bright for subscription box services. Currently, 25% of consumers take advantage of subscription box services, and another 32% plan to sign up for them in the next six months, according to a survey by tech firm First Insight.
While the prospect of increased sales volume is welcome, a barrage of incoming orders can overwhelm up-and-coming subscription box companies. Packing and shipping customer orders in house may work fine when the business is just getting off the ground, but that arrangement is less than ideal when order volume picks up.
Order fulfillment also can be a burden for established retailers and ecommerce companies that opt to add a subscription channel. Their internal fulfillment and distribution operations often are ill-equipped to meet the unique needs of subscription box customers.
When Should You Consider Using a 3PL?
How do you know when you need outside fulfillment help? Here are 6 signs that it’s time to engage a third-party logistics partner.
Many subscription businesses reach a point where in-house fulfillment processes are simply no match for their sales volume. Additional space and staffing and automated fulfillment solutions are necessary to keep the wheels on the bus and accommodate future growth. While everyone has a different threshold, 5,000 orders a month is a common tipping point for outsourcing.
Fluctuating order volume
Whether you’re filling thousands, hundreds of thousands or even millions of monthly orders, it can be difficult to balance the intense peaks and valleys of the subscription business cycle. As they rush to hit a shared drop date, subscription box companies typically have a brief period of intense activity. Paying for space and staffing to accommodate the period of highest order volume when that’s only one week out of the month can significantly impede profitability. With a scalable, shared-space environment, a 3PL gives you the ability to meet your peak requirements without a permanent overhead investment.
Narrow delivery window
Subscription box companies with an active social media following strive to generate a social buzz around unboxing, so it’s critical to ensure that subscribers across the country receive their orders at approximately the same time each month. A knowledgeable 3PL can process orders strategically based on customer location to meet the tight delivery window required for synchronized deliveries.
When you’re faced with high order volumes, it’s easy to drop the ball on customer service – inventory issues, inaccurate orders, delivery delays, etc. Subscription shoppers have high expectations and are quick to share dissatisfaction via social media where word spreads quickly. An experienced fulfillment provider will pay careful attention to solution design and engineer processes to ensure a positive customer experience. Quality management programs can increase efficiency, improve accuracy and ensure continuous improvement.
Rising fulfillment costs
Subscription services typically have slim profit margins, so it’s critical to monitor the cost of fulfillment closely. Transportation tends to be the highest operational expense, and parcel costs have risen significantly this year, thanks to rate increases and surcharges from major carriers.
To help control costs, a 3PL can design a strategic distribution network to reach your customers via cost-effective two-day ground service. They’re also likely to offer economies of scale, an established carrier network and relationships with the major carriers, so you can choose the best mode or service level for each shipment at the best price.
As business grows, visibility and inventory management are critical. Robust technology solutions are essential for effective subscription fulfillment, but they can be expensive to implement and require frequent updates. Outsourcing to a provider with state-of-the-art systems in place (i.e., OMS, WMS, TMS) and on-staff expertise allows you to benefit from the latest technology without unnecessary overhead.
If one or more of these challenges is impacting your business, an experienced 3PL can help. Now’s the time to master subscription box fulfillment and distribution so you are well positioned to grow along with the industry.
Nicole Lee is director of fulfillment for Saddle Creek Logistics Services