As subscription boxes increase in popularity, the businesses behind them are growing rapidly. With that growth comes the challenge of keeping up with orders.
Not only can the increasing demands of order fulfillment distract from core business functions like marketing, customer retention, and product development, but without a proper system in place, essential aspects of the fulfillment process can suffer.
Enter third-party logistics companies (3PLs). 3PLs are no stranger to the demands of efficient order fulfilment, making them the perfect ally for companies looking to fill and ship subscription boxes in an orderly and timely manner.
Partnering with a 3PL can help to streamline inventory management, stay on schedule to meet firm deadlines, and save subscription companies money in the process.
Streamlining Subscription Box Inventory Management
Subscription box inventory management involves some unique considerations compared to typical eCommerce fulfillment.
Due to the nature of subscription boxes, inventory generally contains a mix of items from different suppliers that vary each month or quarter. Unlike standard e-commerce, this inventory isn’t replenished according to real-time daily demand but rather on monthly forecasted demand, based on subscriber numbers.
Stock levels can drop drastically without warning, due to mass shipments. Therefore, inventory must be pre-planned and procured in bulk, often weeks or months in advance.
These large shifts in inventory make keeping track of levels more difficult, especially when companies are doing so manually. As inbound and outbound quantities fluctuate, manual inventory management becomes more susceptible to errors, potentially leading to delays, missed fulfillment windows, and ultimately, dissatisfied customers.
Partnering with a third-party logistics provider helps subscription box companies to move from reactive to proactive inventory management, thanks to the use of warehouse management systems (WMS).
A large advantage to partnering with a 3PL is that they will already have the use of their WMS built into their base cost. Because 3PLs serve a variety of clients, the cost of having a WMS is spread between multiple accounts. This saves subscription companies from having to absorb the entire cost of the system like they would if they chose to store in-house.
WMS can help to streamline the fulfillment process, not just by tracking inventory, but also setting up alerts for low inventory levels. Some warehouse management systems can even be programmed to automatically order items that are low in stock.
But a WMS isn’t the only benefit to working with 3PLs for inventory management. 3PLs have experienced teams that allow for quick adaption to stock level changes.
Not only are they equipped to receive bulk shipments of products and organize them into inventory for assembly and fulfillment efficiently, but thanks to their knowledge and familiarity with ecommerce fulfillment in general, they can quickly acclimate to fluctuations in order volume, like seasonal spikes or subscription growth.
During those fluctuations, the amount of warehouse space needed to store goods is also going to change. Using a 3PL is particularly advantageous for inventory fluxes because they can scale the amount of storage space that companies use and pay for to match their needs.
This avoids overcommitting warehouse space or staff during low-volume months while still being able to meet high demand when it comes.
By properly tracking incoming and outgoing inventory, leveraging order fulfillment experience, and reducing wasted storage space, 3PLs can help subscription companies to streamline their inventory management operations.
Expediting Subscription Fulfillment Timelines
Timelines for subscription boxes are tight, as the boxes are usually sent out at the same time every month or quarter, leaving little to no room for hiccups.
3PLs can help navigate the operational challenges and opportunities that subscription companies encounter during the fulfillment process.
Location
Small subscription companies are less likely to have multiple locations, meaning they are shipping orders from one location, which can extend transit time for subscription boxes being sent to further away locations.
By partnering with 3PLs, companies can assemble, store, and ship subscription boxes from warehouses in multiple locations, cutting down on delivery time.
Space
While in-house fulfillment might work for small or early-stage subscription box companies, growth will eventually lead to the need for additional space, labor, and organization to keep up with shipment deadlines.
In-house fulfillment usually has limited dedicated assembly space. This can lead to slower turnaround times as well as increased chances of errors.
In contrast, 3PLs are built to scale, meaning they can seamlessly adapt to order influxes, reducing bottlenecks that could delay shipments.
Their locations are designed for assembly, so they have the room to spread out and create workable areas.
Kitting and Pick-and-Pack
Whether for subscription boxes or simple e-commerce fulfillment, third-party logistics companies are well-versed in both kitting and pick-and-pack. They handle thousands of orders per day and optimize their picking, packing, and shipping workflows accordingly.
Particularly when looking at subscription box assembly, 3PLs understand not only the difference between the two but also the instances in which one method should be used over the other.
To the untrained eye, pick-and-pack and kitting may seem almost identical, but there are some distinct differences that makes one ideal for standard subscription box assembly and the other essential for customization.
Kitting
Kitting is the assembly process that is most often used for subscription box fulfillment. It is when specific items are paired, bundled together, and then marked with a single SKU in advance of shipping.
For example, a box may include a certain book, bookmark, mug, and candle. It’s not until all of these items are put together and packaged that the box is marked as a single product and given a SKU.
All subscription boxes that are created using kitting will be uniform, containing the same contents in the same volume and identified with the same SKU.
Kitting allows for the subscription boxes to be filled in advance, rather than right before shipping. So when the time comes to fulfill that month’s subscription orders, the boxes are ready to be scanned and shipped out immediately.
Pick-and-Pack
Companies offering customizable subscription boxes can benefit the most from the fulfillment method known as pick-and-pack. Pick-and-pack differs from the kitting process on a few levels.
Unlike how kitting creates multiple identical boxes, customizable subscription boxes are unique to each order, meaning that every item within a box is chosen and added individually.
For example, cosmetic subscription boxes are often tailored to each customer based on preferred shades, skin types, styles, etc.
Because each article that will be included within a box needs to be picked on a per-order basis, every item is going to have its own SKU that must be scanned before being added to ensure that the correct combinations go into each box.
3PLs have better overall core competency in order fulfillment because this is where their expertise lies, which ensures that issues like slow assembly and time-consuming mistakes are less likely to derail shipping timelines.
Lowering Costs with 3PLs
Subscription box services typically have tight profit margins, making partnerships with the right 3PLs essential to maximizing ROI.
Using a 3PL improves cost efficiency by turning what would be fixed warehousing costs into variable ones, streamlining the assembly process, reducing shipping and labor expenses, and preventing waste through better systems.
Warehousing
While it is possible for subscription companies to run their own warehouses, it does include an additional layer of complexity.
For these companies, running their own warehouse means paying for space, labor, equipment, and software, regardless of order volume. These fixed costs can quickly deplete revenue during leaner months.
By using in-house storage, costs stay high even during slow periods or seasonal dips, hurting cash flow and profitability.
With 3PLs, subscription companies pay only for the space and services they use. By using flexible 3PL warehousing, companies can avoid overpaying during slow months. This is especially valuable for subscription boxes, where demand can fluctuate seasonally or during promotions.
Additionally, there’s no need for subscription box companies to rent or maintain their own warehouse, buy equipment, or pay for utilities and insurance.
Opting for a 3PL saves companies from the fixed costs of in-house storage, converting them into variable costs that scale with inventory volume.
Assembly
3PLs provide labor as part of their service, often at a lower per-order cost. This avoids the need for subscription companies to hire, train, and manage their own warehouse staff.
3PLs that are experienced in multi-SKU kitting and packing can do it faster and more accurately, which means lower cost per box and fewer rework expenses.
Companies aren’t paying to train employees on fulfillment but, rather, are benefiting from the training that 3PL workers already possess.
Logistics
When it comes to logistics, 3PLs typically have access to better shipping rates and faster delivery than the average small business.
Because third-party logistics providers handle daily inbound and outbound shipments for multiple clients, they maintain established, high-volume relationships with a wide range of carriers. These relationships give them a significant advantage in securing reliable, cost-effective shipping and logistics solutions.
By using 3PLs, companies get access to discounted rates that would be difficult or impossible for most subscription companies to secure on their own, cutting down on one of the biggest subscription box expenses.
Without 3PL partnerships, companies may pay more and deliver slower, which can reduce competitiveness with other subscription companies.
Partnering with a 3PL allows the focus of a subscription company to go into growing the business and increasing sales without losing manpower or requiring additional hires.
By outsourcing order fulfillment, companies can focus their energy on other areas, such as marketing, product development, and customer retention. These areas often provide a higher ROI than logistics management, especially in a competitive subscription market.
Conclusion
As subscription box companies grow, the challenges of inventory management, adhering to strict timelines, and navigating operational costs grow with them.
With access to advanced warehouse systems, flexible storage space, experienced fulfillment teams, and discounted shipping rates, 3PLs enable subscription companies to focus on what they do best: creating great products, building their brand, and delighting their subscribers month after month.
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