Our dedicated team has expanded to review and certify fulfillment centers. Our team analyzes pricing, logistics, and CRM integration to determine the fulfillment center that best suits your business’s needs. Outsourcing to the right fulfillment center can save you both time and money. Supplement Analyst strongly suggests only working with fulfillment centers that have been certified.
Fulfillment Center – Definition
A fulfillment center, also known as a fulfillment warehouse or fulfillment house is a facility whose primary purpose is packaging and otherwise preparing products for distribution. Fulfillment centers generally receive and store bulk orders of inventory until individual orders are placed, in which they collect and package a unit from bulk for individual delivery.
Costs vary greatly by Fulfillment Center. It is not uncommon for hidden or additional charges to appear, as charges can be extremely granular, or a company may aggregate charges together. Depending on the fulfillment warehouse, there may be charges for inserts, boxes, envelopes, receiving, storage, postage, fuel, multiple units, order bundling, API configuration, address validation, and even monthly minimums. It is absolutely essential to thoroughly evaluate all charges before signing any fulfillment agreement.
Fulfillment companies are becoming increasingly sophisticated as technology advances. A large number of fulfillment centers today run on comprehensive software packages for tracking inventory, orders, address correction and delivery times. Fulfillment centers almost always have an online interface in which you will receive an individualized log in for your business where you will be able to monitor real time inventory levels and track historical orders. You will want to make sure you connect your ecommerce customer relationship management (CRM) system directly to your fulfillment center via API connection. Depending on which ecommerce CRM you use, some fulfillment centers will be more compatible than others. We do not recommend working with a fulfillment center that does not or has minimal experience working with your CRM, even if they advise otherwise.
Contrary to popular belief, fulfillment centers do not actually deliver packages to the end user. Once an individual order is prepared and labelled with for the end user, the parcel is deposited into either a courier service, such as Fed Ex, Purolator or UPS for delivery to an end user or deposited directly into a federal postage service. Depending on where your end user resides (especially on international orders), it may be more economical to use a shipping consolidator such as TNT or RRD who will bulk ship products into the end country and then distribute the parcels into the local mail system. Fulfillment houses will typically pay for postage upfront and pass these costs on to your business as part of regular invoicing. In certain instances, postage costs can be marked up because each individual fulfillment center is able to negotiate their own postage deal with a respective carrier. It is highly advisable you work with someone who has knowledge of regular postage rates prior to prevent paying anything other than cost for postage.
When Should I Outsource Fulfillment?
Deciding when to outsource is an important decision, but thankfully it’s fairly straight forward. Our team at Supplement Analyst has worked with companies that have collectively shipped over 2 million individual packages. We almost always recommend outsourcing fulfillment for the following reasons:
- Sales and Shipments Don’t Always Meet Projections – and that means you’re either going to have to hire more staff, or thin out the work force – whichever way you slice it you’ve got a staffing issue, and that takes time – which could be better spent running your business.5
- Outsourcing Fulfillment Scales Well – as you make more sales, generally you can negotiate better prices. If you’re a small business, the fixed costs alone for infrastructure vastly outweigh the monthly minimums of a fulfillment center.
- New Procedures – there are dozens of full time fulfillment warehouses who are great at what they do. We generally recommend to focus on your business and leave fulfillment in the hands of professionals.
- It’s Economical – fulfillment services and warehousing is not that uneconomical. The fulfillment space is relatively crowded, and coupled with a number of postage providers, costs have been driven down.
- Good Quality – control is the number one thing business owns want in outsourcing, fortunately, thanks to easily navigable online interfaces, most of the data you would want is just a few clicks away. Most fulfillment houses available also prepare orders for distribution in a respectable time frame.