The following guest post is from Fulfillrite, an order fulfillment company based in New Jersey.
Nothing spells freedom like an eCommerce store that’s making good sales. On the good days, it feels like the store runs on autopilot. People find your store, make purchases, the money rolls in, and the orders roll out.
That is unless you’re shipping your own orders.
Shipping your own orders isn’t so bad when you have two or three per day. But when you start seeing hundreds per month, it quickly becomes overwhelming. Time spent packing boxes is time not spent growing your business.
This is why a lot of eCommerce store owners outsource shipping to an order fulfillment center. Still, handing over your precious inventory is a little scary because it means giving someone else responsibility over your customers’ experiences.
With a little research, though, you can find the right fulfillment center to take care of your burdens, ease your worries, and please your customers. Here are seven steps you can follow to choose the right fulfillment center for your business.
1. Consider your business needs before outsourcing fulfillment.
Turning over your inventory to a third party is a big commitment. It can be unnerving to give up that part of your business, and nothing can make you feel like an entrepreneur quite like seeing your physical products, in bulk, in person.
But there are lots of reasons you might want to outsource fulfillment. Shipping orders takes a lot of time, and it’s a lot of work. The costs, particularly of postage, supplies, and labor, can become overwhelming really quickly. Not to mention that once you cross a certain threshold, it’s just really hard to ship orders out on time while running other functions of the business.
As a general rule, it makes financial sense to outsource fulfillment once you cross 100 orders per month. This is the point where you are likely to incur no additional expenses by outsourcing. At less than 100 orders per month, and account and storage fees can drive up the cost of the bill relative to how much is being shipped. At more than 100 orders per month, you’re probably sick of shipping your own orders!
2. Decide if you need one warehouse or a network of warehouses.
Once you decide it makes sense to outsource fulfillment, there are two main ways you can go about it.
- Keep all your inventory in one place.
- Spread your inventory throughout the country, or even the world.
If you stick with a single warehouse, there are a few benefits. You only have to send freight shipments to one place, making that aspect of supply chain management easier and cheaper. If something goes wrong, you can contact one company, or even a single account rep, to have it fixed. Plus, you’ll only be seeing account and storage fees from one place, instead of multiple.
On the flipside, though, if you have just one warehouse, it will take longer to ship to people far away from that warehouse. This can not only slow down shipping, but drive up cost. This is not a huge problem if you, for example, have a warehouse in Kansas and most of your customers are in the continental US. It is a huge problem if you have a warehouse in Kansas and you’re shipping half your stock to Europe, Asia, and Australia.
Some companies choose to work with multiple warehouses. This can be done by finding a large fulfillment company like ShipBob with multiple warehouses in their network or by coordinating between many smaller warehousing companies with inventory management software like Skubana or ChannelApe.
Multi-warehouse fulfillment is strong where single warehouse fulfillment is weak. You can usually ship to your customers faster and cheaper, and this is a big plus. However, if something goes wrong, there are a lot of people you might need to contact. When it’s time to replenish inventory, you may find yourself booking a lot of freight shipments to a lot of different places.
Both approaches can work well. The key deciding factors will be these two questions:
- Do I have enough order volume to justify multiple warehouses?
- Are my customers spread out enough to justify multiple warehouses?
3. Find out where your customers live and choose warehouses accordingly.
Whether you’re working with a single warehouse or multiple, location matters. Customers expect two-day shipping by default these days, and if you choose warehouse locations close to your customers, this will not be difficult or expensive to provide.
If you’re working with a single warehouse, simply make sure that you choose a warehouse in the same country or region that most of your customers live in. If you’re working with multiple warehouses, try to make it where most of your warehouses are close enough to customers to get price breaks on postage.
For example, in the US - there is usually a big price difference between Zone 4 and Zone 5 shipping when sending via USPS. You will want most of your US customers to fall in Zone 1-4 from at least one of your warehouses.
4. Decide if you need value-added services.
Fulfillment centers don’t just ship. They also provide additional value-added services, some of which could be very useful to your business. For example:
- Kitting - bundling multiple SKUs to send out as a single unit
- Assembly - putting together component parts before shipping them
- Amazon FBA prep - getting packages ready for Amazon to ship
- Crowdfunding fulfillment - for Kickstarter and Indiegogo campaigns
- Sorting and inspection - for quality control
- Labelling and barcoding - in case you forget to include a label or barcode on your original packaging
- Repackaging and refurbishment - for making minor repairs to returned items so they can be resold
Every company provides different services, so make sure you know which of these, and other value-added services, you may need in advance. The last thing you want to do is commit to working with a fulfillment center that cannot provide these services if you need them!
5. Research fulfillment center reviews online before reaching out.
At this point, you should have a clear enough understanding of your business needs to create a list of potential fulfillment partners. From here, it’s tempting to request quotes, but given the amount of options, I recommend researching online for reviews first.
Check out neutral third-party websites such as Trustpilot, Google Reviews, Shopify, and G2. The average score you see is important, but take the time to read some of the negative reviews as well. Look out for issues around poor communication, delays, damage, and surprise costs.
This is especially important with large companies. Large companies have no trouble getting recommendations and good reviews, so it’s the unvarnished, long write-ups – the 1-, 2-, and 3-star reviews - that tell you the most. It’s all about finding red flags before you even waste time requesting a quote!
Check out company websites as well. Oftentimes, there will be case studies and testimonials. Sometimes, you can reach out to those customers directly and ask them how their experience was. You may or may not receive a response, but it’s a good way to find information about the experience that would otherwise not be publicly available.
6. Ask for a quote and review the costs.
Just about every fulfillment center requires you to request a quote before seeing the prices. In fact, even with the ones that display their prices on their websites, it’s still a good idea to request a quote because often certain fees are emphasized in the marketing materials while others are not.
Fulfillment pricing is a little complicated, so here’s what you can expect. Total cost is based on the sum of the following types of fees:
- Pick-and-pack fees: the cost of retrieving items from storage and packing them into boxes.
- Postage fees: the cost of sending out an item via USPS, UPS, FedEx, etc.
- Account fees: the monthly minimum cost of doing business.
- Storage fees: the cost to store items in the warehouse.
Some companies will bundle all these fees into a single price, but ultimately, they’re just adding up these four fees into a single total. Value-added services such as kitting, refurbishment, inspection, sorting, and labelling will cost extra.
No matter how the prices come to you, though, you’ll need to cross-reference the quotes with your expected sales volume. This will help you to draw an accurate picture of what order fulfillment will cost for you.
7. Watch out for red flags before you commit.
Requesting quotes also serves another purpose. The sales process will tell you a lot about the company that you’re looking to work with. If you see any of the following, it’s time to turn and run:
- Slow, vague, or generally low-quality communication
- Long-term contracts of any kind
- Pricing that is more complicated than what I outlined in the previous section
- Overcomplicated or buggy software
- Poor returns processes
Be picky! Getting order fulfillment off your plate will make life much easier, but only with the right partner. Working with the wrong fulfillment company can be a massive headache.
But don’t spend too much time worrying - you have lots of good options!
Hiring an order fulfillment company to take care of shipping for you can be a real relief. You don’t have to do the grunt work of shipping your own orders.
Be diligent in your research process, and you’ll likely find a great fulfillment center to partner with. Then you can spend more time growing your business!
Overwhelmed by all the work that goes into setting up an eCommerce store? Check out our free eCommerce/Shopify checklist. It lists everything you need to know to get your store up and running.
Need help fulfilling your orders? Click here to request a quote from Fulfillrite.