Each fulfilment model has its strengths and weaknesses and is suitable for particular requirements and hence, is tailor-made to a great extent.
Fremont, CA: There is no one way to carry out eCommerce fulfilment. It includes several models that vary based on the number of orders you have, your inventory, and your requirement for processing orders.
According to these parameters, there are various types of eCommerce fulfilment methods that you can consider for your business. Of course, each fulfilment model has its strengths and weaknesses and is suitable for particular requirements and hence, is tailor-made to a great extent.
The self-fulfilment model is the first and the only type of eCommerce fulfilment model. In this type of eCommerce fulfilment, you handle all fulfilment operations on your own, including storage, inventory and order management, packaging, shipping, & returns.
This implies you can have a small storage centre to carry out all the processing operations. Although this model fits small businesses just starting, it is not sustainable. Eventually, when your orders grow, you will have to invest in extra storage space and resources to manage your operations. If you don't do this, there are possibilities that you might face days; improper orders are shipped, etc.
We do not suggest the self-fulfillment model as it has more minus than positives. It is suitable for businesses that have just started & are looking for sustainable alternatives for fulfillment. The early you switch from this model, your business will see improvements.
3PL fulfillment refers to third-party fulfillment. This incorporates outsourcing your fulfillment operations to a third party that offers you access to warehouses, inventory management systems, shipping, and return management.
Once you determine to hop on to 3PL fulfillment, the third-party logistics company will take care of all operations. 3PL companies work with numerous merchants; they have a training resource for all functions and fulfillment centers to facilitate faster processing of orders.
Depending on your business type, you can approach 3PL businesses by partnering with your eCommerce store. Every 3PL gives unique solutions like B2B order processing, B2C order processing, temperature-controlled storage, etc.
Once you contact these fulfillment companies, they can also customize as per your requirements. For instance, if you do not want to ship with them, you can reach them for storage and processing and arrange for shipping yourself.
Third-party fulfillment is the most dependable option as it gives you the benefit of shipping more orders and a chance to scale your business depending on demand. It is flexible, and no investment is necessary for growth. You get trained resources to perform all the processes, and you can process orders much faster by storing them with a 3PL provider nearer to your customers.
In the dropshipping pattern, your wholesaler or manufacturer straight ships the product to the customer. This means the merchant never takes inventory physically. Thus, when a customer books an order on your website, the order is manually or automatically transported and dispatched to the supplier, from where it is processed and delivered.
The Dropshipping model is appropriate if you just began a business and are still figuring out your way around storage and processing. In the long run, it can prove difficult as it does not allow you to control inventory and reduces any scope for branding.
Ultimately, if you want to scale your business, it can be challenging as you might have to tie up multiple drop shippers and coordinate with many for a consistent experience.
eCommerce Fulfillment Costs Depending on The Model
The next concern regarding eCommerce fulfillment is fulfillment costs. How much will the whole eCommerce fulfillment process cost you based on our presented models?
Let's dive deeper to see what facets of this fulfillment each model covers and how this will influence your fulfillment costs.
Under self-fulfillment, you require to take care of all fulfillment operations yourself. That means you must put a manual inventory and order management system in place, but additional storage space, train resources for choosing and packaging and tie up with courier companies to ship your products. All these operations are labor-intensive and require a significant investment. Thus, you might have to invest much more in self-fulfillment as you scale up your business.
In 3PL fulfillment, you must only tie up with a 3PL provider to take care of all fulfillment operations. As you only pay a processing fee per your inventory and the storage you occupied, the full costs are much less as you skip the overheads and the labor costs.
This model could be highly beneficial for your business if you were looking to scale up eventually.
The hack is to choose a 3PL partner closer to your customer's delivery location. Thus, you can reduce your delivery time and delivery costs. Usually, 3PL providers watch out for shipping while you only pay for the shipping costs.
Finally, when we talk about drop shipping, it does not include any overheads or full payment costs, as your supplier accounts for the entire shipping process along with storage and processing. This can lead to you having the same costs to scale up. Yet, as you grow your business, it can be hard as you will need to tie up with multiple drop shippers.
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