Buyer Guide to Fulfillment
10 Things to Know About Fulfillment Services
1. You "can" outsource everything. Fulfillment services can warehouse your products, manage your inventory, take your orders, process payments, package and mail your products, and even communicate with customers throughout the process. You can choose to outsource everything, keep some tasks internal, or have a virtual assistant handle the process.
2. Shipping. Shipping can be very expensive if it's not optimized. Fulfillment centers ship in large quantities, so they are likely to have pre-negotiated discounts. Find out where fulfillment and shipping centers will be located to see if they are close to your customers. Ask what shipping rates they can get for you and then try to negotiate your own deal. Shipping can be negotiated at high volumes and you never know who can get a better price.
3. Turn around times. Understand the process for fulfilling an order from start to finish. Many companies will charge more for faster turn around times, or will provide the customer an option to pay more for a faster turn around.
4. Communication and customer service. More pro-active communication with customers will typically lead to less time and money spent answering customer questions. Build automated customer communication and order tracking services into your process to keep customers informed. Talk to each company's references to test the quality of their work. Are they on time? How many complaints do they receive each month? How easy are they to communicate with? Set metrics to measure their performance and hold them to those standards.
5. Warehouses. Assume that weather can be very hot or very cold and likely humid. If you have a product that needs climate control, ask for options. Shipping is also important. Will you need a lift gate to lower pallets, do you have oversized products? Make sure to communicate your delivery sizes and walk through the loading and unloading process.
6. Fees. Expect to have a contract with multiple types of fees built in. Set-up fees, processing fees, return fees, storage fees, credit card processing fees, assembly fees, etc. Fulfillment centers will want to be compensated based on their costs, so expect any service that costs them money, to cost you money. Make sure to receive detailed estimates before you start, so everyone's expectations are in line.
7. Contract terms. Most companies will want to lock you into a longer term contract. This is not bad if everything works out, but you may want to include a termination clause if they are not performing up to the standards you agree to.
8. Insurance. Discuss and document who is responsible if something happens to your product while they are managing it. Ideally, you want them to be responsible, AND you probably want your insurance to cover it as well.
9. Cash Flow. You will want to pay your fulfillment company after you get paid, while they will likely want to be paid sooner. If you can't negotiate ideal payment terms in the beginning, it is reasonable to build in a structure with more favorable terms over a period of time, once a credit history has been established.
10. Credit card processing. Ask how long it takes the funds to be put in your account after a credit card is authorized. This can range from 1-30+ days which can have a huge impact on your cash flow. There are different rates depending on your type of business. E.g. A retail business with signatures will have lower rates than a phone order, because there is less risk of a dispute. If you are a newer company or have lower credit, a company may set a maximum monthly charge to reduce their risk of a high dispute rate. You can get past this by placing a bond with the company.