Many ecommerce businesses start off handling their own order fulfillment, which includes storage, picking, packing, and shipping of their orders. However, as businesses expand into new markets and product lines, they often realize that they can’t effectively manage ecommerce order fulfillment operations and consistently meet customer delivery expectations.
That’s why many ecommerce businesses decide to engage third-party logistics (3PL) provider services—like Amazon Multichannel Fulfillment (MCF), which is part of Amazon Supply Chain Services (ASCS), Amazon’s end-to-end logistics solution—to help them handle order fulfillment operations.
Nearly two-thirds of ecommerce businesses managing fulfillment in-house plan to outsource these operations to a 3PL in the future, according to a recently released Forrester Consulting report, commissioned by Amazon, From click to delivery: Unleashing the power of ecommerce fulfillment.
The study—which is based on a survey of 300 ecommerce executives in the US—delves into the order fulfillment challenges businesses face, the reasons why many opt to outsource to a 3PL, and the benefits of effective order fulfillment.
As your business scales, knowing when to engage a 3PL to manage order fulfillment can be a critical milestone to hit. In this blog, we highlight the four unmistakable signs that should make you consider outsourcing.
Sign #1: You’re not meeting customer expectations for order delivery speed
Perhaps the most clear and critical indicator that your business should start outsourcing is that you can’t consistently meet customers’ expectations for order fulfillment speed.
These expectations continue to increase: According to the Forrester report, surveyed ecommerce executives say that in 2019, customers expected click-to-delivery speeds of 5.7 days on average, while customers in 2024 expect order delivery in 2.5 days on average, and in 2029, customers will expect order delivery in 1.5 days on average.
If your business can’t keep pace with customers’ order delivery expectations, you are not alone. The Forrester study reveals that 63% of online retailers report that at least one in 10 of their orders is delivered late, and 64% are unable to deliver orders as fast as their customers expect during peak shopping periods.
Failing to live up to customers’ order delivery expectations can take a toll on your bottom line. According to the Forrester report, 79% of ecommerce leaders believe that order fulfillment experiences impact whether customers purchase from a retailer again, and 78% say that poor fulfillment performance causes a loss in ecommerce sales revenue.
If your business can’t reliably meet customer expectations for order delivery speed, you may want to outsource to a 3PL provider. The Forrester study shows that ecommerce businesses improved their delivery speeds by an average of 24% by outsourcing—from 3.7 days for in-house fulfillment to 2.8 days for outsourced fulfillment, on average.
Sign #2: You struggle to maintain consistent order fulfillment across multiple channels
Today’s shoppers are buying items across a growing number of sales channels—from social media stores to brand websites to ecommerce marketplaces, like Amazon, eBay, or Shein. According to the Forrester research, the number of ecommerce channels is rapidly increasing: In 2019, ecommerce businesses sold through 4.3 channels on average, through 5.4 channels in 2024, and are expected to sell through 6.5 channels by 2029.
To meet potential customers where they are, your business must have a presence across online channels where they shop, while delivering a consistent click-to-delivery experience. But managing inventory and order fulfillment across multiple channels is a major challenge— especially for online retailers who handle their logistics operations in-house. The Forrester research shows that 41% of ecommerce businesses managing fulfillment in-house struggle to keep the order fulfillment experience consistent across various channels. Similarly, 48% state that these issues can prevent expansion to new channels.
Outsourcing order fulfillment to a 3PL provider can help you standardize and optimize your click-to-delivery performance across sales channels. In fact, according to the Forrester study, 66% of online retailers see a transformational improvement in their ability to deliver a consistent customer experience across channels once they start outsourcing to a 3PL.
Sign #3: You can’t keep up with logistics costs
According to the Forrester research, 43% of ecommerce executives who handle their own order fulfillment state that they haven’t been able to reduce their logistics costs—which includes picking, packing, and shipping—making this the number one issue with in-house fulfillment.
Engaging a 3PL provider can open opportunities for cost reduction across your order fulfillment operations. The Forrester report shows that 77% of surveyed ecommerce leaders who outsource to a 3PL provider have experienced “transformational improvement” in reducing the operating costs associated with ecommerce order fulfillment. Additionally, online retailers who outsource report a 28% reduction in average fulfillment cost per order.
There are several ways a 3PL provider can help you lower logistics costs, including:
- Helping you improve inventory turnover and reduce storage costs by consolidating your stock into a single pool that can be used across all of your sales channels
- Enabling you to leverage their fulfillment network—rather than having to invest in building or buying your own
- Negotiating better shipping rates for you with carriers, so that you can minimize shipping costs
For example, when you engage ASCS as your 3PL, you get access to Amazon’s world-class logistics network, which includes over 2,000 facilities (with more than 200 US fulfillment centers) as well as 100,000 trailers, containers, and aircraft. You can leverage this network to fuel the growth of your ecommerce business around the globe and across various sales channels.
Sign #4: Order fulfillment is taking up too much of your time and energy
Another clear signal that your business should make the shift to outsourcing is that handling your order fulfillment operations is eating up an inordinate amount of your time and energy, preventing you from focusing on other critical areas of your business, such as product development, sales, and marketing.
Many ecommerce businesses struggle with this. In fact, 41% of those with in-house fulfillment say that they spend too much time and energy managing their fulfillment operations, according to the Forrester study. It’s not surprising, as order fulfillment is not a core competency for most online retailers.
By outsourcing the storing, picking, packing, and shipping of your online orders to a 3PL provider (that specializes in these areas), you can dedicate your time and energy to the parts of your business where you can truly excel.
According to the Forrester report, 79% of ecommerce leaders state that using 3PL ecommerce fulfillment has freed up their time to concentrate on other critical areas of their business.
If you are getting bogged down in managing orders and need to refocus on other parts of your business, look at engaging a 3PL to take fulfillment off your plate.
Top benefits of outsourcing ecommerce order fulfillment
If any of these four signs are familiar, it’s probably time to seriously consider engaging a 3PL provider to handle your ecommerce fulfillment. Outsourcing order fulfillment to a 3PL can deliver many benefits, including a 29% improvement in on-time delivery rate and pick-to-ship cycle time, a 28% reduction in cost per order, and a 24% improvement in delivery speeds, according to the Forrester research.
Once you decide that it’s time to work with a 3PL, start by evaluating the various providers— so you can ultimately choose the right 3PL for your business.
