How to Choose an Order-Fulfillment Service
by Keith Shay
If you’re interested in outsourcing order fulfillment, begin by thinking about whether each company you’re considering would help you increase sales and grow your organization.
On the surface, all order-fulfillment services may look similar. But when you take a closer look at methods of delivering services, you will find large differences. Remember that not all warehouses are created equal, and the goal is to choose one that is appropriate for you and your business.
This means developing a list of criteria and focusing on what is important to your customers. The suggestions that follow will help you get started, but it is crucial for you to spend time creating your own list.
Geographic location is one of the most important factors to consider. While order-fulfillment warehouses can be found in every state, it makes sense to select one that is close to your customers, rather than to your business.
This will help you in three ways: your shipping costs will be lower, transit time will be reduced, and you will operate in a more ecofriendly manner.
Did you know that shipping costs are generally almost equal to fulfillment warehouse fees? If you are strictly a West Coast publisher, then your warehouse should be on the West Coast. If your scope is national, then a Midwest location can lead to substantial savings. For example, shipping nationally from the Midwest can save you as much as 7 percent compared to the costs of shipping from the East Coast or the West Coast.
In today’s world, when you’re competing with companies such as Amazon, customers expect quick delivery of their orders (especially Internet orders). So the location of your fulfillment center should allow transit times of one to three business days to most recipients.
Size and Volume
Fulfillment warehouses range from very small, with just a few employees, to very large, with staff in the thousands. Since you probably won’t be the biggest client, you should think about whether bigger clients are likely to take attention away from you.
You’ll also want to talk with fulfillment warehouse people about peak seasons and holidays. Your fulfillment operation must be able to manage peak season needs without any service interruptions. Ask whether standards for service change during these times, whether the fulfillment company hires additional staff during peak seasons, and, if so, how the seasonal people are trained.
It is essential to know what the cutoff times are for rush orders, and what the requirements are for processing orders the same day they’re received.
You need to know the fulfillment company’s hours of operation, too, and whether you will be able to contact a customer service representative during your business hours.
A fulfillment company may specialize in a certain type of projects. Some warehouses handle only full pallets in and out; some will pick down to full cases level; while others will pick individual units, cases lots, and full pallets. Ask about this, and also about what kinds of customers the fulfillment company services. Do they include B2B? Consumers directly? Large chains?
Because one way to increase average selling price is to develop a kit, it can be important to know whether a facility has the equipment to handle complex assembly of multiple products in one single order. Other options can include services such as shrink-wrapping, POP (point of purchase) displays, stickering, marketing inserts, and literature fulfillment, as well as returns management, confirm receipt, inspection, testing, repackaging products, and the disposition of returns.
Shipping options relate to size. Make sure the fulfillment service provider you choose offers the shipping options your customers are currently using or may want in the future. Some smaller facilities may work with only one carrier, such as UPS or FedEx, but most will work with all carriers. A good question to ask is, “Are there are certain carriers you do not work with?”
Management and Staff
Everything that happens in the warehouse is driven by its managers and conveys their business philosophies. Once you identify a fulfillment center whose location and size fit your needs, find out:
• How long have the managers been associated with the company?
• What has their impact been? To get a sense of this, ask questions that allow
managers to tell their story, rather than yes-or-no questions. For example, “What
are some of the accomplishments that you’re proud of?”
• How do they measure success?
• What key business indicators do they use to manage the business?
• How are key indicators measured, and what is done with that information?
Percentage of Error
In most cases, an error is less important than the way the company handles it.
Whenever you have people and equipment, mistakes are bound to occur. Customers may receive the wrong items, or a shipment may go to the billing address instead of the shipping address, for example.
When you speak to the management staff at a fulfillment center, ask if they measure error and how many errors there are. But also ask how mistakes are handled and what they do to prevent errors from recurring.
Every warehouse has its own procedures for handling order processing and its own standards for the amount of time that takes. Find out what time files are accepted and when you can expect orders to be shipped. Then assess these deadline times in terms of shipping times and your customers’ needs.
Three business days is an industry standard for shipping. If your customers can’t live with that, you may want to choose one of the fulfillment warehouses that ship within two business days or one that offers same-day shipping.
In any fulfillment warehouse, technology takes many forms. Ask about:
• integrated business management systems for publishers
• warehouse management systems
• radio frequency technology—is the warehouse paperless? are RF guns used to scan
items, increasing quality and efficiency?
• automated picking systems
• mailing systems
• EDI (Electronic Data Interchange)—does the warehouse use computers to exchange
business documents with other companies?
• secure transfer of data files
• customizable order interface
• push technology for business alerts
• customizable email alerts
• reports and Web-based data reporting
There will always be times when you need to change an address, cancel an order, or check specific stock. The fulfillment company you select must be available by phone, email, and fax. You should never have to wait more than an hour or two for a response to any request.
Your fulfillment company must be financially sound—especially in the current economic environment. Ask how much debt the company is carrying. Try to decide whether it looks and acts like a profitable company. Check its Dunn & Bradstreet rating, and inquire about bank references.
Basically, you will be paying a fulfillment company for two things, space and activity. But comparing proposals from warehousing and fulfillment vendors can be difficult, because they use different methods for computing rates.
Some fulfillment warehouses charge fees to store your books and fees to pick-and-pack and ship the books from the warehouse. Others base their charges on a percentage of sales. Be sure you understand the rates, terms, and conditions in the contract, and remember that one of the best ways to control costs is by controlling your inventory.
These tips can help you deal with some of the challenges of warehousing and fulfillment pricing:
• Make sure the warehousing and fulfillment vendor has listed absolutely all costs.
• Beware of monthly minimum charges.
• Determine all monthly fixed recurring charges.
• Ask if the vendor makes margin on freight charges and UPS discounts.
• Double check move-out charges—some warehouse operations add huge penalties.
• Ask to contact current customers so you can ensure that costs don’t
change after signup.
• Check the company’s Better Business Bureau rating.
• Make sure that everything you agreed upon is clearly documented in a contract.
Always ask for references, and be diligent in checking them.
Try to get an overview of the fulfillment company. Does it have a reputation in the industry for speed, accuracy, and fair pricing, or just the opposite? Is it customer-centered? Find out how long the fulfillment service has been in business. Over time, a company can become increasingly credible, but don’t dismiss any company just because it’s new.
And always remember that order-fulfillment services are an integral part of your business. So if the fulfillment company you select does not perform well, you may be out of business.
Keith Shay is president and CEO of Ware-Pak. To reach him, call 708/532-2600 or email firstname.lastname@example.org. To learn more, visit ware-pak.com.