Blog Posts What’s Driving Increase in Ecommerce Fulfillment Outsourcing?

What’s Driving Increase in Ecommerce Fulfillment Outsourcing?

Fulfillment outsourcing is one of the key areas impacting ecommerce and direct-to-customer operations. Merchants of all sizes are looking to outsource fulfillment, according to the new “MCM Outlook Special Report” from MultiChannel Merchant.

In the report, Perry Bel­castro, vice president, fulfillment at Saddle Creek Logistics Services, shares his insights on what’s driving the heightened level of activity and interest from merchants.

Increasing online order volume, the need to move products closer to the customer and merchants’ desire to focus on their core competency are key reasons for outsourcing. Another critical factor is the difficulty that many merchants have in securing warehouse space.

Following is an excerpt from the report…

Reaching Out for Fulfillment Help

In its Q4 2017 U.S. Industrial and Logistics executive summary, real estate services firm CBRE noted that the overall U.S. commercial space vacancy rate (includ­ing warehouses) is extremely low at 4.5%. The report further noted that four out of the five lowest availability rates are in California: San Francisco (3.5%), Oakland (3.6%), Los Angeles (4.5%) and Orange County (4.6%). Conversely, three of the five regions with the highest availability rates were in Texas: San Antonio (12.6%) Austin (11%) and El Paso (10.8%).

But even in markets where the available warehouse stock is abundant, the numbers may be deceiving, Bel­castro said. While a merchant may only need 100,000 square feet of distribution space, most real estate firms aren’t willing to subdivide a vacant 500,000 or 1 million-square-foot facility to make it happen. That’s when a merchant may want to turn to a 3PL instead.

Belcastro adds that 3PLs typically already have capac­ity, warehouse space, networks and resources avail­able, and can share staff across multiple accounts. 3PLs can also deploy technology that may be too expensive for a merchant to handle on their own.

The use of a 3PL also allows flexible labor to accom­modate for spikes in growth and volume peaks, as oth­er merchants using the same 3PL may have different demand periods in their business.

Read the full article (registration required).