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Analyzing the Cost of Outsourcing eCommerce Fulfillment

Most eCommerce and subscription box companies start by fulfilling orders in-house.  Outsourcing this important aspect of an eCommerce business is not a decision that should be made lightly.

Running a fulfillment operation can be expensive. Labor costs, rent, software, utilities, insurance, supplies, and shipping costs quickly add up.

Labor costs often account for the largest portion of a fulfillment operation.  According to ZIP Recruiter, the 2020 national average salary for warehouse workers is $27,735.  A breakdown by state is listed below.

State Annual Salary Monthly Pay Weekly Pay Hourly Wage
Washington $30,876 $2,573 $594 $14.84
Maryland $30,483 $2,540 $586 $14.66
Nebraska $29,848 $2,487 $574 $14.35
Virginia $29,456 $2,455 $566 $14.16
New York $29,421 $2,452 $566 $14.14
Delaware $28,537 $2,378 $549 $13.72
New Hampshire $28,463 $2,372 $547 $13.68
Oklahoma $27,741 $2,312 $533 $13.34
California $27,639 $2,303 $532 $13.29
Massachusetts $27,265 $2,272 $524 $13.11

Finding qualified labor can be a challenge, especially when retailers such as Target and eCommerce giants such as Amazon offer a starting wage of $15.00 per hour.

One of the most overlooked costs is the opportunity cost. When economists refer to the “opportunity cost” of a resource, they mean the value of the next-highest-valued alternative use of that resource.

Time and money go hand in hand as the two most valuable resources for growing eCommerce and subscription box companies.  Business owners are often faced with tough choices for investing these resources.

Some of the common decisions to be made are:

  • Invest in product expansion or warehouse equipment?
  • Hire a marketing manager or a warehouse manager?
  • Rebuild their website or invest in order management software?

The answers to these questions often become clear by performing a basic financial analysis on the cost of outsourcing your fulfillment versus keeping it in-house.

Most fulfillment companies offer straightforward pricing that will allow you to compare the costs of continuing to fulfill orders in-house or outsourcing the work.  You can see an example of our straightforward, transparent pricing here.

We’ve created a short financial analysis worksheet to help you perform a cost analysis of fulfilling orders in-house or outsourcing.  You can download the worksheet here.

Selecting the right fulfillment company for your business requires more than a basic financial analysis.  The characteristics of your eCommerce business are an important consideration in selecting a fulfillment partner.

Some eCommerce businesses have a large number of SKUs, require extensive storage capacity, and same day shipping.  At the other end of the spectrum, a boutique subscription box company will require hand assembly so that the consumer has an exceptional experience when opening the box.

Regardless of the type of eCommerce business, there is a fulfillment company that can meet their needs.  Fulfillment companies are cropping up all around the world but selecting the right one for your business requires a bit of homework.  If possible, you should conduct a site visit before selecting your fulfillment partner.

When choosing a fulfillment be sure to ask the following questions

  • How do they charge – by item picked or by order?
  • What platforms do they integrate with?
  • How can you access information regarding your orders and inventory?
  • How quickly can they ship?
  • Do they process returns?
  • How quickly will they process your inventory after receipt?
  • Where are their warehouses?
  • How secure is their facility?
  • How many shipping carriers do they use?
  • What are their shipping rates for orders like yours?

ShipLogx is uniquely suited to quickly and efficiently process and ship order for eCommerce businesses of all types.  Contact our sales team today to learn how we can help you.

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