Warehousing & Fulfillment: Choosing Between In-House Fulfillment And 3PL Fulfillment Center
First published by blu, on 21 January 2022Warehousing and fulfillment
After reaching a certain level of growth, businesses looking to sustain their expansion will need to consider their warehousing and fulfillment solutions. To continue scaling the business effectively and contend with greater rate of order fulfillment, the management should look towards outsourcing their warehousing logistics and fulfillment needs. Partnering with a 3PL eCommerce fulfillment center will allow your business to take advantage of the autonomous warehousing technology and digital systems to react efficiently to large or volatile changes in volume orders and save costs.
What Is In-House Fulfillment?
In-house fulfillment is when businesses decide to manage the order fulfillment process themselves. Everything post-receiving orders – including inventory management, picking and packing – will be fully managed in-house rather than outsourced to a third party.
While this operations model may be suitable for small businesses starting out, it is not an optimal method for established brands looking to expand their business and cater to an increased number of monthly orders. For larger retail businesses with a high volume of goods to be managed and delivered, in-house fulfillment processes and systems can be easily overwhelmed by the challenges of growing the business.
Issues with In-House Fulfillment
As businesses scale and the volume of orders increases, there will be a need to invest in additional resources to increase the accuracy and efficiency of order fulfillment. More specifically, eCommerce businesses will need to reduce the probability of running into these challenges:
1. Inaccurate Filled Orders
Typically, in-house fulfillment management lacks automation and the newest in warehousing technology. This will increase the chances of inaccurate order fulfillment due to human errors during the manual process of picking and packing the product for delivery. Be it a wrongly packed product or orders of an incorrect quantity, businesses are bound to incur losses.
Given the large volume of orders per month received by established brands, manual errors will accumulate into larger costs. Alone, these random errors may seem small and insignificant. However, if you run a business that receives hundreds of purchases per month and are looking to take in more orders in the future, these human errors will snowball and derail the efficiency of large order fulfillment. The business will bear additional costs in terms of money and time when rectifying the inaccurate order fulfillment and managing returns.
Order accuracy is an important metric to note as it also impacts customer satisfaction. Customers have higher expectations for larger retail business to guarantee accurate and correct fulfillment.
Large volumes of orders, if not properly managed, could increase the frequency of inaccurate orders, causing substantial numbers of customers to be dissatisfied with the service. Singaporeans have been observed to be quick to express their frustrations online when receiving less-than-satisfactory eCommerce services. They are 34.7% more likely than other Southeast Asian countries to leave a negative review online. This will translate to a decrease in customer loyalty and retention, and the eventual loss in profit. Substantial negative reviews will also deter any potential customers from considering purchasing your products.
2. Improper Inventory Management
Opting for in-house fulfillment means committing substantial effort and resources to balance having too much or too little stock. In-house fulfillment will expose the inflexibility and lack of expertise to manage inventory in the warehouse, which limits the potential of growth for eCommerce businesses with increasing volumes of orders per month.
An improper inventory management raises the chances of stockouts. Not having enough inventory to meet the products ordered will lead to lost sales and also reduce customer satisfaction. An out-of-sale caption will not attract more orders. Customers may jump ship and turn to other brands with better inventory management and higher reliability to actually provide the product.
In-house fulfillment infrastructure with improper inventory management can also result in overstocking. Growing eCommerce businesses that are susceptible to seasonal trends run the risk of over-anticipating demand. Thus, increasing the number of units to be stored in your warehouse could easily transform into a hoarding situation if there is no proper system for inventory management. Scaling a business with improper inventory management will lead to amassing hidden operating costs – investment is tied up in unsold stock, and expenses are needed for warehouse maintenance and labour required to manage the inventory.
These costs, be it financial or the brand's reputation, will add up when trying to keep up with brands that have already partnered with well-established warehousing and eCommerce logistics companies.
3. Inefficient Delivery
When a flood of orders come in – during promotional sales like Black Friday, Singles Day, Christmas period – in-house fulfillment teams often find themselves stretched to manage business operations.
In-house fulfillment, which relies on manual manpower, often does not have an integrated digital system that can track the goods effectively. Over-reliance on analogue methods and physical manpower creates opportunities for miscommunication between logistics personnel and human errors are bound to happen amidst the chaos and urgency of peak sale seasons. Without a digital platform to provide real-time visibility of Stock Keeping Units (SKUs), finding a particular SKU would take longer. When dealing with large volumes of orders daily, information transmission within the logistics team can be lost, miscommunicated or forgotten. The lack of automation in inventory management and order fulfillment will slow down the rate at which orders are picked and packed.
Slow fulfillment pushes back delivery and will negatively impact the efficiency of your business’s supply chain and lower customer satisfaction. This will lead to a fall in brand loyalty, pushing the need for increased customer management to explain the lack of efficiency. There will be a never-ending cycle of playing catch up and remedying the problems. Around 90% of negative feedback in Southeast Asia are related to delivery times not meeting expectations of the customers. Businesses looking to scale need to take advantage of their increasing orders, especially during promotional periods to show their commitment to their customers and thus improve their brand image. Slow order fulfillment and delivery are not options that should be accommodated.
4. Inflexibility of Storage Space
For retail businesses with increasing monthly orders, especially omnichannel retailers, you need to consider if there is enough inventory to meet the demands of your customers. The storage space also needs to be flexible enough to accommodate both on-peak and off-peak seasons for sustainable and scalable growth. When scaling the business, investing in a proper warehousing space will be a financial burden that you might not be keen to take up.
Adding to that, a large portion of business costs needs to go into hiring and training manpower to manage your warehouse. The financial responsibilities of hiring new workers and paying for overtime can prove to be a costly decision for a business with a high expected volume of orders.
How 3PL Fulfillment Can Help to Mitigate These Issues
3PL partners such as blu, provide warehousing and fulfillment solutions for businesses looking to forgo the problems associated with in-house fulfillment and scale. Taking into account the sheer volume of orders and potential accumulated costs, engaging a warehousing and fulfillment partner will circumvent the limitations of in-house fulfillment and offset some of the costs associated with in-house fulfillment.
1. Better Warehousing Management
As an experienced and specialised warehousing fulfillment center in Singapore, blu utilises robotics and AI to increase warehousing productivity and efficiency. With AI-based warehouse management systems, goods are stored securely with piece-level precision, allowing businesses to track inventory movement and facilitate supply chain planning. With access to real-time inventory visibility, you will be able to make well-informed business decisions to minimise errors relating to inventory management and agility to respond to changing consumer demands. With the data available online, inventory will be better managed, mitigating issues related to overstocking or understocking. This, in turn, will save financial costs and prevent fewer opportunities for your products to be out-of-stock.
With better warehousing management and real-time inventory visibility, the business can shift its focus to other aspects outside of warehousing and fulfillment. Outsourcing warehousing and fulfillment to blu will allow the business to invest more time and funds into sales and marketing strategies. Money that would have been needed to buy your own warehouse can be diverted to other areas of your business while blu helps to optimise your supply chain.
2. Efficient Pick and Pack Services
eCommerce order fulfillment at blu includes receiving stocks at blu’s warehouse, storing inventory, and order processing (pick and packing). Having a digitised inventory of your stock will allow faster eCommerce order fulfillment by reducing human errors when looking for the product.
blu’s integrative storing and retrieval system powered by automation solutions will pick the required product when an order is made. There is no need to pull out the sale SKUs manually. The integrated digital system allows easy tracking of each item – exact information on the location and quantity. Manual warehousing labour will make mistakes, but blu’s algorithm can’t. This will improve the supply chain and help shorten the time to prepare the product for delivery.
Improving fulfillment time is highly advantageous when looking to take in more orders. Be it ten or ten thousand SKUs, blu’s automated warehousing solution is able to help scale your business quickly and reduce human errors. This will translate to more profits and less costs, allowing for positive business growth.
Achieve Your Potential Growth with Warehousing Fulfillment Center
Outsourcing to a 3PL eCommerce fulfillment center, such as blu, that uses automation means fulfillment operations will not be affected by manpower changes. This future-proofs the business for uncertain times. Having an automated warehousing and fulfillment solution offers flexibility and resilience to meet the challenges of scaling a business.
As mentioned previously, the accumulation of the hidden costs of in-house fulfillment (expenses for facility management, utility expenses, hiring new workers) is a significant factor to consider when looking for eCommerce solutions and plotting future growth for your business. Choosing blu as your warehousing and fulfillment center in Singapore and the region, will be an appreciating decision for the growth of your business.
Grow your business by leveraging our automated warehousing & fulfillment capabilities. Talk to us today!