Thinking Of Outsourcing Fulfillment?
By Augustin Kennady, Media Relations Director at ShipMonk.
You’ve done it. You’ve turned the corner with your business, and you are now shipping 100 units per month or more. Your customers love your product, your team is prepared for exponential growth, and you’ve decided to finally outsource fulfillment so that you and your team can focus on growth as opposed to inventory management, logistics, and fulfillment operations.
There’s only one problem: this is a brave new world you’re facing, and you’re not entirely sure which direction to go. A cursory search on Google reveals dozens of fulfillment facilities, and it can be overwhelming to know which one to choose.
The truth is, there is no “one size fits all” option out there. You should always consider multiple fulfillment centers so that you can optimize based on the factors most important to you and to the fulfillment center.
Here are some considerations to make before you choose a fulfillment center.
How Many Locations Does A Fulfillment Center Have?
Where do your customers live? If you ship products across the country or internationally, you might want to consider a fulfillment center with multiple locations. This is an especially important consideration if you are trying to be competitive with larger fulfillment operations. Companies like Amazon have set a short-turnaround expectation for customers. Today’s customers are engrained in the belief that once they order, they should receive their product as quickly as possible.
If you believe that your operations will be hampered by slow shipping times, you might want to consider a facility with multiple locations. This way you can ensure greater shipping coverage in a short time window even without the added cost associated with higher-level shipping methods. Alternatively, if your customers are purchasing a product which is not time-sensitive this might not be a consideration for you.
What Level of Support Does The Fulfillment Center Provide?
Fulfillment is a B2B (business-to-business) operation, but you focus on B2C (business-to-customer). Some ecommerce sellers require a fulfillment center that can effectively take over all aspects of customer-side operations. Other sellers prefer that their fulfillment center serves as an invisible intermediary – this way, they can work directly with their customers and approach engagement as though fulfillment was handled in-house.
Even if you choose the latter option, it is still important to remember that logistics is a field in which strange and unexpected developments frequently arise.
- The manufacturer sends the wrong freight shipment.
- The intricately-designed receiving documentation fell off in transit.
- A customer’s address is obscured, and their package never got delivered as a result.
- Your customer returned four mint-condition units of your product.
These are all situations that will likely happen at some point or another.
If having a support network is important to you, you might consider working with a fulfillment center that can provide you with your own account manager – someone who can be there to assist you without being beholden to fifty other clients. Smaller fulfillment centers can often offer this level of support – for larger fulfillment centers, it is extremely difficult to match this level of support at scale.
What Pricing Model Does The Fulfillment Center Utilize?
A single fee structure may seem appealing, but fulfillment centers provide many services and may muddle or misrepresent charges to make a single fee structure work.
Sure, a fulfillment center may offer an option like free picking and packing. However, in order to stay afloat, they must almost by necessity charge for inbound receiving, charge for inventory storage, and charge for shipping. Conversely, a fulfillment center that charges for picking and packing and inventory storage may be able to offer you better shipping terms or even free receiving.
Which is most advantageous pricing structure for you? An ecommerce seller that sells only one product, whose supplier works to a lightning-fast turnaround and can work to draconian receiving guidelines might benefit from the first option, whereas a seller that deals with multiple products, has difficulty communicating ASN/receiving specifications to a manufacturer, and needs to keep inventory on hand might benefit significantly more from the second option.
Some fulfillment centers offer free picking and packing. But is that the right pricing option for you?
What Software Does The Fulfillment Center Provide?
It may very well occur that the fulfillment center that’s the best match for you may not operate in your city, state, or even country! As a result, you will need to stay abreast of any inventory and logistics issues – product shortages, low inventory levels, invalid addresses, tracking numbers, etc. You want to partner with a fulfillment center that offers a top-flight inventory management system so that you can track your orders not only across facilities but also across channels.
Selling on various channels will help you broaden your customer base, but it will also add challenges when it comes to reconciling inventory. If you are selling only one product or a few products on one channel and you have direct access to your fulfillment center, the quality of the software may not be the most important consideration. But you would still want the peace of mind that you can check inventory levels while drinking your morning coffee.
Do They Provide An SLA?
Fulfillment centers will generally want your business. Like most companies eager for business, they are often ready to say “yes” to all tasks – even those that would require a herculean effort to accomplish. Find a fulfillment center that will go beyond the initial handshake and offer you an SLA (service level agreement) that dictates precisely what the expectations should be.
There are two key points of any SLA that you will want to pay close attention to. First, turnaround time. How late will you be able to take an order and still ship it out that day? If an order comes in at noon, is it reasonable to expect that your fulfillment center will send out the order that same day? Make sure to get this in writing. Of equal import, in the event an error occurs, what types of client-focused resolutions will the fulfillment center be able to provide? You’ll want to consider this before choosing a fulfillment center.
Can They Customize?
Many of the biggest names in fulfillment, fall victim to their size. Scaling operations to accommodate thousands of clients makes it much more challenging to account for brand-specific touches.
Do you want to use your own packaging? Do you like to include a small note with your product? Are you interested in offering coupons or other promotional cards to your customers in each box? If you want to have any say over your branding, be sure to make sure that your fulfillment center can accommodate that request. Some of the larger fulfillment centers will not be willing to make exceptions to their standard procedures, and if they do, the cost is likely to be astronomical. Be sure to ask this up front during your search!
Making the decision to outsource fulfillment is a big step. Use this information as a guide, and consider any product-specific questions as well. And making the right choice of fulfillment center partner should set your product up for years of success.