Warehousing, fulfilment and when to outsource

At some point a growing store outgrows packing orders in a back room. The options are to build proper fulfilment capacity or to hand it to someone whose business it is — increasingly a courier, since several Malaysian carriers now offer warehousing and fulfilment alongside delivery — see courier diversification beyond parcels.

The decision is usually framed as cost. The more useful framing is which parts of it you want to control.

What outsourced fulfilment actually is

Your stock is held at the provider's facility. Orders flow to them, they pick, pack and ship, and they handle returns back into stock. You are charged for storage, for each order picked, per item, for packaging, and for delivery.

Three consequences follow immediately.

Fixed cost becomes variable. No warehouse lease, no permanent packing staff. You pay for what you use, which is a considerable advantage for a business with seasonal or growing volume.

Capacity stops being your problem. A peak that would overwhelm your own operation is absorbed by a facility built for many customers' peaks — see delivery during a sales peak.

Control moves. How the parcel is packed, what goes in it, how quickly a problem order is fixed. All of it is now governed by an agreement rather than by walking over and sorting it out.

The cost comparison people get wrong

Both sides tend to be understated in the same direction.

In-house is cheaper than it looks on paper and more expensive than it looks in practice. The visible costs are space and packaging. The invisible ones are staff time, which is often absorbed by people doing other jobs, management attention, capacity that sits idle between peaks, and the shop or office space fulfilment occupies — see fulfilling online orders from your shop.

Outsourced looks expensive per order and includes things you were not costing. The per-order fee covers labour, space, systems and management that you were paying for without itemising.

The honest comparison needs your full in-house cost including staff time and space, against the provider's full charges including storage, per-order and per-item fees, packaging and any minimums. Most stores have never calculated the first figure, which makes the comparison meaningless until they do.

The threshold is usually volume plus variability. Steady, modest volume suits in-house. High or sharply variable volume suits outsourcing, because the fixed cost of capacity you use twice a year is the expensive part.

What moves out of your hands

Four things, and the second is the one that causes the most regret.

Packing quality and presentation. For a brand where unboxing matters, generic packing is a real loss. Providers will follow instructions and it is not the same as caring.

Speed of exception handling. A wrong item, an urgent order, a customer needing something changed after dispatch. In-house that is a conversation; outsourced it is a request in a queue.

Physical access to your stock. Checking a batch, pulling stock for a shop or an event, or inspecting a return becomes a request rather than an action.

Direct visibility. You know what the provider's system tells you, which makes the accuracy of that system central rather than incidental.

Keeping the accounting honest

Outsourcing changes what your records have to do, and this is where problems appear months later.

The stock is still yours. It is on your balance sheet regardless of whose building it is in, valued at your landed cost — see inventory valuation across online and offline.

You need your own stock records. Not solely the provider's. Two independent records that can be reconciled is the control; relying on theirs alone means a discrepancy is undetectable.

Reconcile stock periodically, and treat differences as shrinkage to be investigated rather than adjusted away.

Separate the charge components. Storage is a period cost driven by how much you hold; pick and pack is per order; delivery attaches to consignments; value-added services are their own items. One invoice line loses all of it, and storage and shipping respond to entirely different levers — see courier invoices and how to reconcile them.

Watch storage cost as a signal. Rising storage charges on flat sales means slow-moving stock accumulating, which is a buying problem surfacing as a logistics cost — see dead stock: what to do with products that will not sell.

What to settle before signing

Six questions, and the last two are the ones most often left until they matter.

How are charges structured, including minimums and any peak-period rates.

What are the accuracy and dispatch commitments, and what happens when they are missed.

How is stock reported, at what frequency, and can you reconcile it independently.

How are returns handled — inspected, graded, restocked or quarantined, and on whose judgement.

What happens at peak. Capacity commitments during campaign periods, in writing, agreed before the season rather than during it.

What happens on exit. How you retrieve your stock, on what notice, at what cost, and whether you can take your data. The same discipline as leaving any provider holding something of yours — see leaving Shopify and taking your data.

Common questions

When should a store outsource fulfilment?

When volume is high or sharply variable, because the expensive part of in-house fulfilment is capacity that sits idle between peaks. Steady, modest volume usually suits keeping it in-house. The comparison needs your full internal cost including staff time and space against the provider's storage, per-order, per-item and packaging charges.

What do you lose by outsourcing fulfilment?

Packing quality and presentation, which matters for brands where unboxing is part of the product; speed of handling exceptions, since a wrong item or urgent change becomes a request in a queue rather than a conversation; physical access to your own stock; and direct visibility, because you know what the provider's system reports.

Whose stock is it once it sits with a fulfilment provider?

Yours. It stays on your balance sheet at your landed cost regardless of whose building holds it, which means you need your own stock records rather than relying solely on the provider's. Two independent records that can be reconciled is the control; a single record makes any discrepancy undetectable.

What should be agreed before signing a fulfilment contract?

Charge structure including minimums and peak rates, accuracy and dispatch commitments with consequences for missing them, how stock is reported and whether you can reconcile it independently, how returns are inspected and graded, capacity commitments for campaign periods in writing, and how you retrieve stock and data on exit.

Related: courier diversification beyond parcels · inventory valuation across online and offline · fulfilling online orders from your shop