A guide to outsourced eCommerce warehousing

For any new or established online retailer, warehousing and logistics is a mission-critical part of the supply chain. Getting order processing right can mean reduced overheads, a better end-to-end customer experience, and even higher conversion rates. While many merchants store and despatch their products in-house, decision-makers are increasingly looking to outsource it with a third-party logistics specialist. In this guide we will explain what eCommerce warehousing involves, how to do it efficiently in-house, and what to look out for when outsourcing 3PL services.

Ecommerce warehousing is the goods intake, storage, picking, packing, and distribution of finished consumer goods to online shoppers. Doing this yourself can be highly capital-intensive, as it involves buying or renting warehouse premises, along with investing in:

· Pallet racking

· Barcode scanning technology

· A warehouse management system

· Forklift trucks

· Picking staff

· Packing staff

· Training

· Insurance

· Human resources support

· Packaging machinery such as pallet wrap

· Conveyor belts for parcels, packets and mail

· Security

Running your own eCommerce warehouse might be capital-intensive, but it does grant greater control. The downside of this is that business leaders can become entrenched in day-to-day order fulfilment issues, which means less focus on their core competencies such as strategy, competitor analysis, procurement, sales, marketing, and new product development.

82% of startups fail due to cashflow problems, and because it’s so capital-intensive, developing one’s own warehousing infrastructure will exacerbate this risk, which is why outsourcing eCommerce fulfilment is a viable option for many. Businesses shipping less than 10 orders per day are better positioned to store their own goods, and work with a courier directly, or a shipping aggregator, that specialised in ad-hoc, low order volume merchants.

Third-party fulfilment starts to become accessible for SMEs shipping 10 to 30 daily orders, mid-market retailers delivering hundreds, and established brands sending thousands. 3PLs are diverse in terms of their:

· Integrations (e.g. Shopify, Amazon, eBay, Magento, or WooCommerce)

· Key industry verticals (e.g. fashion, sports nutrition, or subscription boxes)

· Additional services (e.g. customs clearance, bespoke packaging, outsourced customer service, and returns solutions)

· Pricing (e.g. integration and onboarding fees, goods in, storage, picking and packing charges, shipping costs, along with minimum contract commitments.)

· Willingness to work to agreed KPIs and OKRs (for metrics such as picking accuracy, order processing speed, customer satisfaction and Net Promoter Scores.)

How warehouse outsourcing works

· Once you’ve found your ideal 3PL, the first step is to a agree on a contract that’s based on KPI and OKR metrics. This way you can monitor progress in real-time, and in periodical account management meetings.

· The next stage is to integrate your order management system with the 3PL’s warehouse management technology, so that order data can be processed.

· Following this you will need to instruct your suppliers to ship your stock to a new warehouse location, or via haulage from your own premises.

· Then orders can begin flowing in from your sales channels. As orders arrive from your eCommerce platform and marketplaces, picking and packing notes are generated. Then the pick and pack team can collect your orders, ready for packaging and application of the shipping label.

· Shipments are then grouped by carrier (e.g. Royal Mail, DPD, and DHL), ready for collection by the 3PL’s courier partners. As orders pass through the delivery networks, your customers will typically have a range of in-flight delivery options allowing them to tailor delivery windows, and the ability to mark a safe delivery location.

· Depending on its level of involvement, the 3PL will be able to support returns processing, and stock replenishment for subscription orders.

Retail logistics case study: Skinspace

Skinspace is an online retailer of new, upcoming niche skincare brands. The Shopify store was formed just through the online explosion of cosmetics. Charlie, the founder, explains:

“I think my customers are very understanding and they have very normal expectations, but one thing they do expect is that you deliver on your promises. If you select next-day deliveryand it's same-day dispatch by 3pm, and they order at 245pm, they expect that the next day because that's what we said and that's what they've paid for. And that's totally reasonable.”

“If you're running an online retailer, really, distribution has to be 100%. You can't be worrying about whether your orders are going out on time or whether your customers are receiving them. You just can't. You've got too much to focus on. You've got new products to try and add, ways to promote your products, and all this kind of stuff. You just can't be thinking about it. With the people we were with previously, I was having to check in at 4pm every day to check that the orders had gone out. If not, I was calling them, asking, "Why haven't these ones gone out?" That’s a nightmare. It's hard enough as it is, running in a competitive space. If you're not fulfilling what you've promised the customer — if I order by a certain time, it will be dispatched — if you're not doing that, you don’t stand a chance.” 

“Being with Zendbox has definitely saved money in terms of customer service. Customers not getting their orders dispatched on time was just taking up so much time dealing with it before. Now, all that time is liberated to grow the business. You've got time for social media Q&As, you've got time to speak with new brands, you've got time to design new email campaigns. When I moved to Zendbox for the first time, I never had to think about logistics. I never had to worry if orders were going out or whether they were being picked right or wrong. I never had that deluge of emails at 5pm saying, "Why hasn’t my order been dispatched?" Now, for the first time since moving to Zendbox, I can completely take eCommerce fulfilment out of my mind and know it's being handled properly. If you read our Trustpilot reviews, overwhelmingly they always mention the delivery: "super-fast dispatch," "great delivery."”

“In my space, I'm selling branded goods that aren't my own brand, so most of them can be bought elsewhere. One of the only areas I can differentiate is in the service, and that sort of dispatch and delivery time is key. It feels like at least 50% are saying, "Awesome service. Ordered it on X day at X time, and it was here before my holiday," or "It was a present, and it got there on time." Reliability means I can make a promise to my customers that I know will be kept. There’s no point in having some orders being dispatched up to 7pm and others the next day being 1pm What do I put on my website? Do I say same day by 3pm? That promise is only good if it’s being kept. So, the fact that you can say that, customers then trust that. If you're missing that, it just destroys your credibility and your brand. It sounds unimaginative, but it’s a processed thing. Things are packed neatly and safely. We have a lot of breakables, like glass boxes and stuff — very low damage. I can’t fault it, really. I have and continue to recommend Zendbox to lots of people.”

The future of warehousing

The surge in eCommerce has given rise to a wave of inventive warehousing and fulfilment solutions. The eCommerce fulfilment market is predicted to more than triple in size over the next decade, and as a result retail decision-makers are inundated with choice when it comes to 3PL. In the same vein, the explosion in online retail has given consumers endless choice, which has made them comfortable with the way giants such as Amazon operate. As a result, retailers will continue to be pressured to offer same, or at least next day delivery as the norm, and items to never be out of stock. The later into the evening retailers can offer next-day shipping, the more customers they will acquire and retain. Furthermore, the better a fulfilment warehouse can support a retailer with its inventory control, the fewer incidents of overstocking and understocking can occur. As a result, it can be concluded that aligning with a suitable 3PL can be a real growth catalyst for ambitious online stores.