Fulfillment: Outsourcing Vs. In-House

Packing your monthly boxes, and shipping, is a fundamental element of your subscription business. Should you outsource fulfillment or keep it in-house?

The process of receiving products, packing your monthly boxes, and shipping, is a fundamental element of your subscription business. It requires a considerable amount of effort and coordination and it’s mastery is essential to providing an excellent customer experience. So should you outsource packing and shipping, or keep it in-house?

It can be incredibly tempting to keep fulfillment under your roof. You can keep a watchful eye on your product, and after building your business up to a few hundred customers, you may feel confident with your ability to pack and ship boxes.

But ultimately, this is a distraction that pulls time away from more important elements of your business. You should be focusing on growing your customers base not on trying to be a fulfillment company. Outsourcing offers a professional, affordable and scalable solution for all subscription businesses at any scale and you should consider it as a viable alternative (especially once you get to a couple hundred customers. Here’s why:

NEVER WORRY ABOUT STORAGE/RECEIVING

Outsourcing fulfillment means you no longer have to deal with storing and receiving product. At the early stages, you may only be receiving a few packages of product a month, but as you grow, this becomes something that requires considerable space. Keep in mind, it won’t be long till those small boxes turn into entire pallets of product showing up on your doorstep! In addition, it also means you have to make sure someone is always available at your office or home to receive packages. Ultimately, if you haven’t outsourced your fulfillment it reduces your flexibility as a business owner and the mobility of your business as a whole.

PAY AN EXPENSE, NOT AN EMPLOYEE

Another benefit of outsourcing fulfillment is that an entire operation becomes a single expense – a simple ‘cost per box’ associated to a single vendor. On the other hand, in-house fulfillment means interviewing, hiring and coordinating part-time packers each month and often requires someone dedicated just to coordinating this monthly project. In addition, you’re looking at extra paperwork and liabilities associated with hiring temp workers every month.

KEEP EXPENSES LOW

If you keep your monthly fulfillment in-house, in addition to paying labor costs involved with packing your monthly boxes, you’re also looking at several other associated costs. Packing your monthly boxes and storing product takes up a lot of space. By outsourcing your fulfillment you can potentially save thousands of dollars from not having to lease large commercial spaces. You’re also saving from not having to pay additional utilities, buying tables for packing on, packing tape, anti-fatigue floor mats (standing all day is painful), extra liability insurance and even professional pest control services (required if you’re storing and packing food items).

HIGH QUALITY WORK

Taking the time to vet your fulfillment company is worth it. A good fulfillment company will be run by someone who takes ownership of your product, weeding out broken or less than satisfactory looking products. If they’re not local, they’ll work with you each month to determine an optimal ‘box build’ sending you pictures of a variety of different arrangements for your approval before packing.

MORE TIME TO GROW YOUR BUSINESS

As mentioned, the primary benefit of outsourcing is that it allows you, the business owner, more time to spend on the things that really matter, like growing your business and engaging with customers. In-house fulfillment anchors both you and your business down to a central location and creates an entirely new set of responsibilities and logistical challenges.

At first, packing and shipping your own boxes sounds like a no brainer, but be careful, it can quickly become quite a burden and cause an unnecessary amount of stress–ultimately distracting you from the elements of your business that really deserve your attention. Take the time to compare costs involved with both options and carefully consider the points in this article before taking on the challenge of in-house fulfillment.

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About Jameson Morris

Jameson Morris is an entrepreneur and pioneer of Subscription Commerce. As a self proclaimed 'subscription box serial entrepreneur,’ Jameson has founded multiple successful subscription businesses, such as Conscious Box, Escape Monthly and Yogi Surprise.

15 Responses

  1. Mario

    Jameson–great post!
    Several questions here:
    -How have you seen fulfillment companies handle missing boxes which lead to one-off shipments?
    -Do you ever feel like you get too far away from the customer by using a fulfillment customer?
    -Would you recommend maintaining the ability to still “ship from home” to handle promotional boxes and customized solutions?
    -Did you see a fulfillment company ever messing up orders?

  2. Lindsay

    I find this advice interesting. Every investor and adviser I have come across in the 18 months I have been in business has told me to keep fulfillment in-house. Their reasoning is quality control and the customer experience. No one cares about your business as much as you and your own employees. Yes, you’ll have to train employees and deal with some more paperwork, but isn’t that worth it to have more quality control? I’d love to hear the perspective of someone else who kept their fulfillment in house, why they made the decision, etc. I certainly see the logic in your points above and they are very valid, I would just like to see the viewpoint of someone who decided to keep it in-house. I am at the point where I have outgrown my current space and will be making this very decision in the next few months.

      1. Hi Jameson, I couldn’t find any recommended fulfillment companies in the Southern California area. My product is manufactured here and is quite heavy. Would be great to fulfill locally. Let me know if you have any you recommend!

        Cheers

        Brandon

  3. sadk

    Hi James, Great article!

    At what number of subscribers would you say approx is a good time to consider outsourcing fulfillment.?

    Thanks!

    1. Hi Sylvia – We recommended considering outsourcing around 100-200 subscribers, depending on how your business is set up. Around that point, the cost per touch of a fulfillment company probably rivals that of the cost of a few packers for a day.

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