Fulfillment Services Guide
Interested in outsourcing your order fulfillment services but wondering what will change?
Good question! You have successfully produced and marketed a product, and established yourself online. Now you want to expand. Or you’ve already experienced growth and are bursting at the seams. You desire to simplify operations but have had control over every aspect of your company from the first idea of your product to your current business operation. The thought of turning over one of the most important aspects of your business…delivery of your product to your customer…is scary. Can you trust a third party fulfillment (3PF) company to accurately represent you?
The decision to outsource could be one of the most important you make for your business.
Handled properly, you can lower overall costs such as order processing, warehousing, number of employees, and shipping while spending more time with marketing and customer service, increasing profit margins, and expanding into the future.
Handled poorly, you will have unpredictable costs, inventory issues, customer complaints, with hours spent trying to fix a huge mess for your customers …and you.
How do you choose the right fulfillment service partner?
Selection is critical. Interview them as though you are hiring them, because in essence you are. They become an extension of your company…part of the team.
Ask tough questions and evaluate their response. Are they willing to provide answers to your questions or are they confusing and ambiguous? Are they knowledgeable about order fulfillment, packaging, billing, returns?
Can you see at a glance the cost to use their services or do you have to call for that information? Pricing should be prominent so you can determine what your costs will be today, what they will be when order volume increases or decreases – no hidden fees.
If available, provide a detailed shipping record of recent activity so they can determine what you would have paid using their services.
Enquire about shipping options. If only one carrier is used, cost savings could be diminished.
Are there packaging fees? Receiving fees? Are storage fees reasonable?
Do they provide returns processing?
Do they have a simple web-based system that’s user friendly?
In essence, can they save you money.
Similarities between fulfillment providers are evident, such as storing your inventory, shipping your product. It’s the differences that are key to your decision. If they charge more per order and per item, then they should offer bigger shipping discounts. Make your requests for pricing information specific.
The number of carriers a fulfillment company uses might be indicative of your potential shipping savings. Carriers will negotiate better prices based on volume of packages shipped. Therefore, look for someone that uses a primary carrier.
The more detail you can share regarding your shipping history, the more accurate your quote will be…and the lower your rate will be. For instance, if the bulk of your shipments are Next Day Air, tell them. Why? It’s all about the margins, and the margins are greatest for express shipments. Next day shipments are more valuable than First-Class orders because the margins are greater. When negotiating, use this knowledge to help lock in a fair price quote.
Consider the size of the fulfillment provider. Larger operations are less flexible and can’t always accommodate specific needs. They have a system that works allowing you to join in if you are willing to adjust to their “way of doing things.” Smaller companies may have more freedom to respond to your needs, provide personalized service, and be willing to share greater cost savings in order for both entities to succeed.
Where is the fulfillment provider located? Zones are to shipping as ringers are to horseshoes…the closer you get to the center, the better your chances of winning. Zones range in number from 2 – 8 with 2 being the closest to the origin and 8 being the furthest. Carriers charge different rates based on distance traveled. The closer in proximity from point A to point B means lower costs. Finding a fulfillment provider that’s centrally located is strategic. Exact Fulfillment, Inc. ( http://exactfulfillment.com ), which is located in Minnesota, has the ability to ship to over 70% of the US within zone 5 and below, meaning lower shipping costs. Lower shipping costs plus increased margins equals – ringer!