May 10, 2022

What to Do When You Outgrow Your E-commerce Fulfillment Operation

What to Do When You Outgrow Your E-commerce Fulfillment Operation

Massive e-commerce sales fueled by the COVID-19 pandemic have left many online and omnichannel retailers dealing with unexpected business growth. Though the e-commerce boom has slowed compared to the explosion seen in 2020, online retail continues to experience steady growth year-over-year. This level of continuous growth came as a shock to the industry, resulting in many e-commerce sellers outgrowing their existing fulfillment capabilities much sooner than they planned.

3 Signs You’ve Outgrown Your Current Fulfillment Capabilities

As your business grows, its needs can change dramatically. Whether you use a third-party logistics (3PL) provider or your fulfillment operation is currently in-house, the following signs will indicate that you need to take steps to expand your fulfillment practices.

1. You can’t scale to meet peak demands successfully

Given the pace of e-commerce growth, scalability is an essential capability for any modern e-commerce fulfillment operation. Online sellers need to accommodate steadily growing demand, but they must also be prepared to handle sudden volume spikes during holidays and other peak sales periods. If your fulfillment center can’t keep up when order volumes rise, it’s a sure sign that you need to invest in more robust fulfillment capabilities, technologies, or partnerships.

2. You’re noticing excessive return volumes

When your fulfillment center can’t keep up with orders, your customers will take notice. As you exceed your current capacity, you’ll likely experience a rise in damaged products and wrongly picked items. Your returns volumes will reflect these mistakes as customers seek to get undamaged goods, correct items, or refunds.

3. You have a poor on-time shipping rating

If you can’t get orders to your customers on time, this may be another sign that your fulfillment operation has reached its limits. On-time delivery is an essential part of the customer experience, and failing to address poor performance in this area will result in the loss of repeat business.

4. You’re out of warehouse space

One guaranteed sign you’ve outgrown your existing fulfillment operation is when you have outgrown the building itself. If you have more inventory than you have space to store it, it becomes difficult to optimize inventory placement. You may also create safety risks and inefficiencies for your warehouse employees if you need to store pallets in unexpected places.

Expanding Fulfillment Operations With a 3PL

If you’re experiencing problems like those listed above—on your own or with your current provider—your business could benefit from a partnership with a new fulfillment 3PL. As the logistics partner takes over the responsibility for fulfillment, you can focus on core competencies and revenue-generating activities such as sales and marketing, procurement, new product development, and more. In addition, a quality 3PL partnership offers benefits such as:

  • A broad fulfillment network. Though you may have limited resources on your own, using a 3PL with an established real estate footprint will ensure that you can spread your inventory across multiple facilities and place it close to your key customer markets.
  • Critical warehouse technologies. With a good 3PL, you gain access to the benefits of advanced warehouse management systems, picking technologies, and automated or semi-automated solutions without the upfront investment.
  • Fulfillment expertise. Your logistics partner can leverage its expertise to streamline fulfillment costs and optimize processes and practices, helping you to elevate your on-time delivery ratings and reduce errors.
  • Lower shipping costs. Though you may be able to negotiate some volume discounts with parcel carriers on your own, a 3PL leverages the combined shipping volume of its entire customer base to get even lower rates.

These are only some of the advantages a strong 3PL partnership can provide. Overall, a good logistics provider goes beyond providing services and acts as an extension of your e-commerce brand. The right logistics partner ensures that your customers have a positive experience and keep coming back for more.

About Phoenix Logistics

Strategic Real Estate. Applied Technology. Tailored Service. Creativity. Flexibility. These fundamentals reflect everything we do at Phoenix Logistics. We provide specialized support in locating and attaining the correct logistics solutions for every client we serve. Most logistic competitors work to win 3PL contracts, and then attempt to secure the real estate to support it. As an affiliate of giant industrial real estate firm Phoenix Investors, we can quickly secure real estate solutions across its portfolio or leverage its market and financial strength to quickly source and acquire real estate to meet our client’s need.

Kurt Jensen is the Senior Vice President, Acquisitions & Leasing of Phoenix Investors, a national real estate firm specializing in industrial real estate based in Milwaukee, Wisconsin. He is a seasoned executive with over 25 years of entrepreneurial, management, and deal-making experience.

Frank P. Crivello is a Milwaukee-based developer and Chairman & Founder of Phoenix Investors.

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