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Shipping companies

A beginners guide to optimizing order fulfillment.

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Types of shipping companies

As a small business owner, you can choose between direct shipment — picking, packing and shipping orders yourself — or hiring a company to do this for you.

Direct shipment

When the product owner or manufacturer ships merchandise directly to the consumer, it’s considered direct shipment. Even if the order is placed with a third-party marketplace like Amazon, the product owner — you as the small business owner — is in charge of the shipping.

This is where software comes in handy, because your team needs to manage all shipping operations, from tracking inventory to printing labels and sealing each box — as opposed to outsourcing this to an external fulfillment center.

Cargo and freight shipping

Freight, or cargo shipping, includes transporting merchandise and other cargo across land, sea or air. In general, freight shipping moves products from the supplier or manufacturer to a warehouse, then on to the customer.

If you decided to sign up with a shipping fulfillment center, then you’d use freight shipping to transport inventory to the provider’s warehouse.

Case study: Direct shipment vs. freight shipping

Lisa’s Lotion sells through Amazon using the direct shipping model. If a customer, Sheila, places an order through Amazon, it sends Sheila’s address to Lisa’s Lotion, where it packages and ships Sheila’s order in-house.

With the freight shipping model, Lisa’s Lotion would have already sent a bulk selection of its inventory to Amazon’s warehouse. So when Sheila places her order, Amazon’s staff would package and ship it from its warehouse to her home.

Using direct shipping service providers

If you adopt a direct shipping model for your business, you’ll partner with a provider like USPS, UPS, Fedex or UPS to deliver your goods. Sign up for their business accounts to create and print labels and track orders online.

Pros and Cons

Shipping to customers directly is especially common for startups and businesses that are new to the e-commerce space, because there is little upfront investment — all you need is packaging materials, a label printer and a post office. But, unless you invest in order-management software, the chances of human error increases substantially as the complexity of your orders increases.

Weigh the benefits and drawbacks of choosing direct shipping for your business, including:

  • Save money on third-party warehouses. Storing your goods in a fulfillment center will cost you. Amazon charges between $0.69 to $2.40 per cubic foot to store merch in its warehouse — plus a monthly fulfilment fee from $2.41 to more than $100, depending on the size of your products.
  • More control over brand image. Since you’re closer to the customer, you can customize the packaging. For example, Winter Water Factory gives customers the option of including a hand-written note with every order.
  • Store and ship perishable or hazardous products. Many third-party fulfilment centers won’t ship high-risk items like flowers, lithium batteries or cannabis products. Direct shipping allows for greater flexibility when it comes to the variety of products you can sell.
  • Can be a significant investment of resources. Packing and sending your orders in-house requires people and time, which may mean diverting resources away from growing your business.
  • Requires storage space. Even if you don’t work with a third-party warehouse, you’ll need to figure out how to keep goods on-hand for when an order comes through — which may mean upgrading to a bigger office, or renting more property to serve as an internal warehouse.
  • Liability for all damages during transit. Sending goods yourself leaves you responsible for damage during shipping. On the other hand, using a third-party order fulfillment service leaves the shipper financially responsible for any damage or loss.

Compare direct shipping options

We crunched the numbers — here’s how much it costs to ship a 10-pound 11” x 8” x 4” box with top direct shipping providers:













Using full-service shipping fulfillment centers

A full-service shipping fulfillment center is a third-party provider that stores your goods in its warehouse then picks, packages and ships orders for you. While shipping fulfillment centers require a financial investment, they can be a good option for businesses that have outgrown their internal warehouse.

There are regional shipping fulfillment centers and large nationwide options too. Many e-commerce companies, like Shopify and Amazon, offer their own fulfillment centers.

Shipping fulfillment providers usually charge by the warehouse space you use, and by the time required for its team to pick and pack your company’s orders. They may also apply transaction fees.

Pros and Cons

While a shipping fulfillment provider can save you time and energy, taking the stress of order management off your shoulders, it won’t be the best choice for every company.

  • More time and space to devote to other in-house operations. It frees you up to focus on innovation and business growth, rather than order fulfillment.
  • Improve shipping efficiency. Fulfillment centers will have processes and modes of operation in place, calculated for optimal operating costs.
  • Best for scalability. Avoid late nights at the office, trying to keep up with an influx of orders.
  • Less control over customer experience. You’ll need to play by the fulfillment provider’s rules, which means you may need to sacrifice unique packaging and personalized details like handwritten notes.
  • Potentially pricier. Even though you’ll be saving money in some areas, such as warehouse personnel, using a fulfillment center can get costly since you need to transport goods to the warehouse and pay for the space your merch takes up until it ships.

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Compare shipping software companies

If you decide not to use a full-service fulfillment center, and would rather take care of shipping in-house, then you'll want to consider a shipping software company such as ShipStation, ShippingEasy or Shippo. These provide a web-based dashboard where you can manage orders from around the web, and can help you:

  • Print labels at a discount
  • Automatically calculate shipping costs
  • Provide customers with branded tracking info
  • Track inventory
    • See low stock alerts
    • Set up purchase orders
  • Generate sales reports

Pros and cons

Shipping software can be beneficial to any e-commerce business that ships orders regularly. Even if you don’t have the budget for it, many shipping software companies, such as ShippingEasy, offer a free version.

Here’s a round-up of the pros and cons:

  • Discounts on labels and supplies. Get special low prices on labels, shipping insurance and USPS services like Express Mail, Priority Mail and more.
  • Automated workflow. It integrates with your e-commerce platforms and shopping carts to streamline every step of the process, including printing labels and tracking orders.
  • Requires time and money to manage. The learning curve with shipping software can be steep. You’ll need manpower to set up your account and take advantage of all its features.

How to choose a shipping company for your e-commerce store

Before committing to a shipping company, you’ll want to make sure that the pricing lines up with your budget, and that the features and services included match your needs. Here’s what to consider:

  • Monthly costs and other fees. Make sure the membership cost won’t exceed your budget. Keep in mind that some fulfillment centers have a minimum monthly service fee, regardless of how many orders it picks and packs. Don’t sign the dotted line before confirming the total price.
  • Minimum order volume. Some shipping fulfillment centers require that you process a minimum number of orders.
  • Your anticipated growth. The shipping company you choose should align with your business plan and expected future sales.
  • Partnering with a provider you already work with. Check the e-commerce software you’ve already invested in to see whether it offers shipping software or order fulfillment. For example, Shopify offers its own fulfillment network for vendors.

Bottom line

Signing up with a shipping fulfillment center means putting your order processes in the hands of an expert, which can be beneficial to busy small businesses — though software can help you stay on top of shipping if you decide to keep it in-house.

Browse our e-commerce resource round-up for more information about optimizing your digital operations.

Frequently asked questions

What is a 3PL?

3PL stands for third party logistics, and refers to an organization’s use of external businesses — such as shipping fulfillment centers — to outsource its distribution, inventory and fulfillment services.

Do I need shipping software if I use a shipping fulfillment center?

Typically, no. Most fulfillment centers will provide you with an online dashboard to keep an eye on inventory and orders from afar. Purchasing your own shipping software membership would be redundant.

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