What are Fulfillment Services?

According to a recent survey by MultiChannel Merchant, a fulfillment service provider, just over half (51%) of businesses surveyed reported making a profit on shipping and handling costs.  How do these businesses manage to turn a common expense into a profit center?  The answer is simple: outsourcing fulfillment services.  Fulfillment services are commonly thought to be processes like warehousing, storage, packing, and shipping, but can also involve order processing, returns, and product assembly.  Fulfillment services are a valuable tool for web- or home-based businesses without the storage space or employee capability to store, package, and ship goods themselves.

How does it work?
Most fulfillment companies will accept merchandise on your behalf directly from your suppliers, store it at their facility, and package and ship orders to customers as they are placed.  Typically, you’ll sign a contract with a fulfillment service provider that specifies the services required (inbound calls, order receipts, expedited shipping, storage timelines, and other options) ship it for you upon demand.  Most fulfillment services calculate costs per service: you’ll pay a storage fee, a per-unit fee, and often an account maintenance fee or “management fee” of up to several hundred dollars a month.  While management or account costs are fixed, storage and per unit costs will vary depending on your sales volume.  Storage costs are assessed “per pallet” or per month based on the amount of warehouse space you require. Unit or “SKU” costs are charged for each different product type- usually a few dollars per item.  Shipment costs are also variable, and will depend on whether you offer standard shipment, expedited, or premium options, such as next-day delivery. 

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