Why Do Publishers Outsource Fulfillment Services?
In recent blog articles, we have gone over a number of different reasons why publishing professionals may choose to outsource fulfillment, from organizational and improvement-driven reasons to financial-driven reasons. Some important questions that we’ve yet to consider are, “how does outsourcing reduce costs?”, and “how will this affect my employees?” In this post, we are going to discuss cost driven reasons and employee driven reasons why publishers outsource fulfillment services.
Cost Driven Reasons
When publishers outsource, they experience the ability to reduce costs due to a superior provider’s performance and lower cost structure. Typically, a publisher who performs their own warehousing function is paying a premium of 20% to 30% for this service. This does not even take into account the savings that a third party warehouse can achieve by combining the shipping activity of 50 or 100 different publishers in order to reduce overall shipping charges.
Turn Fixed Costs Into Variable Costs. One of the most difficult areas in business is the change fixed costs into variable costs. Let’s look at an example:
If you own your own warehouse, and orders for the day are down, can your labor costs be reduced? Probably not. Most publishers cannot simply tell their employees to go home. They still expect to be paid for 40 hours each week. In this case, what typically happens, is that someone will find some type of make shift work for them to do. The employee stays busy, but the publisher’s cost per order just increased.
If you reduce inventory levels, will your rent on the warehouse decrease? No, because it is also a fixed cost. Inventory is not managed as aggressively as it should be because there are no real benefits to the organization.
Employee Driven Reasons
Give your employees a stronger career path. You should consider whether or not most of your warehouse employees are promotable to the publishing side of the business. If there is no possibility of promotion, what types of employee can you attract for the warehouse operation?
Increase commitment and energy to non-core areas. As a warehousing company, Ware-Pak focuses solely on warehousing. Each day, our job is to figure out how to provide publishers with the highest levels of service at the most economical cost.
What are your thoughts on this series? Are there any important factors that you think should be considered that we missed? Let us know in the comments below!
If you run a publishing business and this series made you wonder whether you should be outsourcing fulfillment, or if you are with the right fulfillment provider currently, please reach out to Ware-Pak today!