3 Warning Signs That In-House Fulfillment Could Be Getting in the Way of Growth
The only constant in most high-growth companies is change. And for the lucky ones, part of that constant change is a steady uptick in orders coming in. Orders that need to be fulfilled — and fast. While the struggle to get more product into the hands of eager customers seems like a wonderful problem to have, fulfillment actually presents a major business problem for many companies as they grow from an early-stage startup packaging orders out of a garage to well-oiled machines poised for hockey stick growth.
This is because many companies opt to take a do-it-yourself approach to fulfillment in the early days. That makes sense when the business is getting off the ground, but it's not a strategy that can scale. With sights set on the next major milestone in sales, managing fulfillment can become a major hurdle that even the most driven business leaders struggle to not only solve on their own, but also even fail to realize is an issue that needs to be addressed. Based on our work with many companies at this stage, there are several common warning signs that keeping fulfillment in-house is doing more harm than good.
Warning Sign No. 1: A Desire for Control is Creating Bottlenecks
In the early days, it makes sense that entrepreneurs have a hand in every aspect of the business, from overseeing manufacturing, to managing the inventory coming in and putting it into stock, to shipping products to customers. But as the business expands, there comes a point at which that model is not only unsustainable, but downright damaging.
The No. 1 challenge to growing a business is contending with bottlenecks. While well-intentioned business leaders may actively try to anticipate and surpass each and every barrier to their business, the supply chain is often not their core area of expertise, creating risky blind spots and slowing down not only process, but also progress. Letting go is often the first step — even if that means outsourcing fulfillment to those who may not know the ins-and-outs of the business as well, but are adept at navigating the complex nuances of warehousing, inventory management and other factors that contribute to fast fulfillment.
Warning Sign No. 2: Short-Term Cost Cutting is Prioritized Over Scale
Companies in hypergrowth mode are always looking for ways to make the most out of resources. In fact, according to the 2017 Geodis Supply Chain Worldwide Survey, the top concern of businesses is the containment of their costs to stay competitive. The more roles and services are kept in-house, the fewer expenses will be added to the operating budget, thus keeping other costs down. With that in mind, the idea of outsourcing a seemingly simple task such as fulfillment may seem like an extraneous and expensive step.
However, it’s important to remember that while managing the supply chain in-house — and at a lower cost — is easy, fulfillment only becomes more complex as the organization grows, making it harder to maintain high standards throughout the process. While keeping fulfillment in-house may seem to conserve costs now, it may still come at a price to the business over the long term. Outsourcing partners have the advantage of being able to deploy the most efficient techniques to select, purchase and move the best-fit materials based on inventory levels, to use their network of warehouses to strategically place inventory closest to its demand, and to tap their established relationships (and negotiation power) with the most prominent carriers to secure the most competitive freight costs. Better yet, according to the Logistics Bureau, businesses with optimal supply chains have 15 percent lower supply chain costs, less than 50 percent of the inventory holdings, and cash-to-cash cycles at least three times faster than those not focused on supply chain optimization.
The most prudent business leaders not only consider those statistics, but also weigh the value in investing in scalable resources. That way, when it’s time for the next phase of growth (e.g., adding a major new product line), there's seamless transition without any surprises. Supply chain partners offer a breadth of resources that fit a variety of company profiles, allowing businesses to pay for the services they need today — and can afford — but with the opportunity to tap a next-level solution when the business is ready.
Warning Sign No. 3: Customer Service is Suffering
Today’s consumers expect near immediate fulfillment — 78 percent of consumers expect purchases to arrive in three days to five days or less — and have a minimal tolerance for late or incorrect deliveries. Yet when a growing business is faced with a rapid increase in demand, the capacity to fulfill it can leave it scrambling to deliver. All it takes is one sudden surge of orders that can’t get out the door in a timely fashion to cause customer satisfaction and loyalty to suffer.
Outsourcing fulfillment to a partner allows organizations to deliver a consistent and satisfying customer experience. In turn, the company can focus on continuing to sell to customers without the fear of product shortages and in a more timely and reliable manner, helping to build brand loyalty and repeat business.
If these warning signs feel familiar, it’s likely time to consider transitioning the fulfillment process to seasoned experts. It's the surefire way to deliver greater value to operations and end customers in the near term, while at the same time setting up the company for continued growth and success in the long term.
Richard Sheubrooks is the vice president of marketing and sales operations at ModusLink Corporation, an integrated provider of supply chain and logistics solutions.
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