Decision time: Outsource Fulfillment or Keep in house

[Paul David]

It's time again for another crucial business decision. My warehouse Packer has handed in his notice and it means i need to find either a replacement or scrap in house fulfilment altogether and move to 3rd party.

There's positives and negatives to each side. The two things that are casting doubts from saying yes at the moment are firstly the cost. It's going to cost me roughly $1800 a month more. And secondly if i'm ever off work (i do customer service messages at the moment) the warehouse packer can do the messages on my behalf. (the person i have i mind to replace my current warehouse packer has worked for me previously for 7 years so would need no training).
If use a 3rd party fulfilment I would need to still ensure the messages are answered even if i went on holiday for instance.

We sell Power Adapters and a lot of the messages we get are technical questions so not just anyone can reply to them.

I did start training somebody up in the Philippines to do the messages but i'm currently trying to migrate away from selling power adapters long term anyway. It didn't seem a good use of time to train somebody up for a job that isn't going to be long term. They were fine chasing up missing orders or sending invoices but it would take some time to train them to answer the technical ones.

The cost price of fulfilment is an issue also. I'm barely making ends meet at the moment but i suppose i could look into trying to cut costs elsewhere to cover the extra monthly layout if i went down the 3rd party route. I could try and squeeze my supplier for cheaper costs or put my sales prices up although i'm in a competitive market as it is.

3rd Party Fulfillment would also free up a lot of my time to spend on growing the business so its a bit of catch 22 at the moment.

It's also simply not an option for me to do both the packing and customer service messages. I would not have much free time to grow the business and if i was ever off sick or for another reason the business would grind to a halt and 100 customers would not be getting there orders that day which would be a disaster and spell the end.

Any thoughts from anyone? I would really appreciate some input!

 

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[MHP368]

It's time again for another crucial business decision. My warehouse Packer has handed in his notice and it means i need to find either a replacement or scrap in house fulfilment altogether and move to 3rd party.

There's positives and negatives to each side. The two things that are casting doubts from saying yes at the moment are firstly the cost. It's going to cost me roughly $1800 a month more. And secondly if i'm ever off work (i do customer service messages at the moment) the warehouse packer can do the messages on my behalf. (the person i have i mind to replace my current warehouse packer has worked for me previously for 7 years so would need no training).
If use a 3rd party fulfilment I would need to still ensure the messages are answered even if i went on holiday for instance.

We sell Power Adapters and a lot of the messages we get are technical questions so not just anyone can reply to them.

I did start training somebody up in the Philippines to do the messages but i'm currently trying to migrate away from selling power adapters long term anyway. It didn't seem a good use of time to train somebody up for a job that isn't going to be long term. They were fine chasing up missing orders or sending invoices but it would take some time to train them to answer the technical ones.

The cost price of fulfilment is an issue also. I'm barely making ends meet at the moment but i suppose i could look into trying to cut costs elsewhere to cover the extra monthly layout if i went down the 3rd party route. I could try and squeeze my supplier for cheaper costs or put my sales prices up although i'm in a competitive market as it is.

3rd Party Fulfillment would also free up a lot of my time to spend on growing the business so its a bit of catch 22 at the moment.

It's also simply not an option for me to do both the packing and customer service messages. I would not have much free time to grow the business and if i was ever off sick or for another reason the business would grind to a halt and 100 customers would not be getting there orders that day which would be a disaster and spell the end.

Any thoughts from anyone? I would really appreciate some input!

Back of the napkin whats the cost look like for 3rd party? You say you're just treading water as is but would it require a 3% price increase? 10%?

That seems like the logical choice (third party , wether by increased price or cheaper sourcing) as it solves more than the immediate problem at hand (allows you to focus on other areas)

Have you tested how sales react to different prices? (Is the current price actually optimized or did you just land on it because its in the range of competition?)

 

[Paul David]

Back of the napkin whats the cost look like for 3rd party? You say you're just treading water as is but would it require a 3% price increase? 10%?

That seems like the logical choice (third party , wether by increased price or cheaper sourcing) as it solves more than the immediate problem at hand (allows you to focus on other areas)

Have you tested how sales react to different prices? (Is the current price actually optimized or did you just land on it because its in the range of competition?)

Thanks for your reply. We ship on average 4000 orders a month, the fulfilment company want £0.70p per item to pack. So to cover those costs i would need to increase sales prices by that for starters. That's if i couldn't get the product cost down. Our products sell for between 8.99-12.99 usually.

Prices are pretty competitive in the niche, it's a non desirable commodity type product so putting the prices up too much would hurt sales.

In an ideal world i'd pick 3rd Party all day long, at the moment to keep the costs down i'm not even insured for the stock in my warehouse that i've got!
Plus the UK minimum wage has just increased by around £0.30p an hour so the new warehouse employee would need paying more!

I suppose the crux of it is the additional cost each month which is my major concern. 3rd Party fulfilment is the last step to making my business 100% location independent free!