Whether you are starting out online or your business has outgrown your current storage location, using a fulfilment services provider (also known as a 3rd party fulfilment house) can be a beneficial step in growing your business.
There are many types of organisations that can help out there. However there are differences between each business and many things to consider in order that you pick one that best fits your needs.
What is a fulfilment services provider?
A fulfilment services provider is an organisation that operates on your behalf to receive and store your inventory and to fulfil your customer orders. It will also do associated things such as receiving and processing your customer returns. Some may even offer a call centre function to support your customers.
Outsourcing your order fulfilment processes to a 3rd party can help you to save money in a number of ways such as:
- Reducing the overall cost to fulfil your customer orders
- Reduce cost of inventory storage and warehousing
- Enable access to cheaper carrier rates that you may not get on your own.
If you are a small business, one of the major benefits of outsourcing fulfilment is that you will free up your time to focus on developing sales and marketing your business.
What do you need to look for in a fulfilment services provider?
Choosing a fulfilment services provider is a bit like buying a car. The essential requirement is that you want the car to work without breaking down and then there may be specific options: 4 doors, a large boot, heated seats, ability to go from 0-60 in less than 3 seconds, and so on. And purchasing the cheapest car is often not the most cost effective in the long run.
Same with fulfilment, finding the cheapest cost per unit is not the only factor in considering a fulfilment services provider.
Your needs will vary according to the type of product that you are shipping, order volumes, the channels you sell through and the type of delivery services that you need.
Product type, delivery requirements and order volumes are the key drivers of what you need from a fulfilment services provider. Also, how well they perform in looking after your inventory, picking and packing customer orders accurately, shipping on time and keeping your ecommerce platform up to date.
Finding out as much as possible about how each potential fulfiller operates before you sign-up is critical to a smooth start-up.
First impressions are key. Are the company’s representatives open and happy to answer your questions? Do they understand show your business works and what value you customers get from it?
Other considerations include:
- Does your business fit into their customer profile?
- What set-up costs are there how long will it take to complete set-up?
- Physical location of the business
- What types of products do their processes can best handle?
- Warehousing: Number and range of products that can be stored: do your products have any special requirements? Overall storage capacity
- Product set-up: what is the process for setting up products? How do they want to be informed of any new products?
- Stock management: How can you find out about current stock levels? How is inventory accuracy maintained?
- Stock discrepancies: How are stock damages or stock loss identified and communicated to you?
Order fulfilment and delivery management
- Picking and packing processes: how quickly will the process an order once they receive it?
- Packaging: what do they use? Will they allow you to supply your own packaging? And despatch note stationery?
- Delivery services: What carriers do they use and what delivery services do they have? Is there a pre-negotiated or discounted rate that your business can access?
- Order / delivery exceptions: how are these identified and notified to you?
- Customer communication: what automated messages are sent back to your ecommerce platform(s)? E.g. despatch information? Order tracking information?
- Customer service centre: how do they respond to your customers enquiries?
Returns Business Management
- System access: can you access to a system to view your information and is there a license fee to pay?
- Reports: what reports do you have access to or get sent?
- Operating performance: what do they measure and how do they rate?
What do they charge for?
The overall charge may vary according to your product and forecast order volumes, your delivery services and any other management requirements.
Find out how the fulfilment centre calculates their charge and what is included. Costs may be either a ‘per item’ or ‘per order charge’. If there is no separate charge, make sure that you agree how each of the elements will be taken care of, including:
– Setting-up your account and products on their system.
– Storage cost and insurance charges for your stock
– Receiving and inventory check in of your stock from your suppliers
– Checking stock or quality assurance (QA) on receipt
– Picking and packing
– Packaging costs
– Returns handling and processing
– Carrier and delivery service charges
– Access to an online system to view warehouse information and reporting
Find out about what might affect any of these charges, for example if you supply your own packaging, your own carriers, or despatch speed, i.e. same day vs. Next day.
Also find out what happens with losses (stock goes missing or is damaged, or a parcel becomes lost in transit) or a process failures (delayed despatch, delayed delivery) are refunded.
And will the charge change, if your business circumstances change, i.e. Your order volumes increase? Or decrease?
How do I know that this is the right one for me
As the adage says, you get what you pay for. But it is not necessarily that straightforward.
Think about the key KPIs that matter to your business and also think about the cost of doing business. The most important point is whether by using a fulfilment services provider whether the business is going to save your money?
And finally, a good fulfilment services provider will support you in your business and make suggestion for how you can do things more efficiently, save you money and how you can grow your business.
Preparing to get a quote from your fulfilment services provider
The business will advise what you need, however by preparing the following, you will be able to help the organisation to more effectively estimate how much the total cost might be, thereby avoiding any ‘surprises’:
– Forecasts of your orders and shipments for the next 6 – 12 months
– Bring previous six months of orders and shipments
– Your product list, including any special requirements for packaging, handling and product value (e.g. if selling tablets or other high value electronic gear).
– Prepare an overview of your business plan, including what websites and marketplaces you get orders through and also what delivery services you require, for example next day, tracked or insured.