Interested in outsourcing your order fulfillment services, but wondering what will change?
It's understandable. You should be concerned. You have created a product, a website, marketed your product, and now you want to grow, or you have grown to the point that you want to simplify your operations. However, you have controlled every aspect of your company from startup, so you have legitimate concerns that it can all go wrong. How can you trust a third party logistics provider to take care of the most important part of your business, actually putting your products in the hands of your customers.

This could be one of the most important decisions you will make in your business.

Handled correctly, you can reduce order processing and warehousing costs, get bigger shipping discounts, cut back on employees, and spend more of your time marketing your products, growing more profitable with each sale, and you will be better prepared for the future.

Incorrectly, and you will have complaints from your customers, no idea how much inventory you have, and you will spend your time trying to sort out a huge, very complicated mess.

How do you choose the right fulfillment service partner?

The selection process is critical. Be sure to qualify the fulfillment companies.
Are they responsive to your questions?
If you are willing, provide them with a file of recent shipping activity. They should be able to provide you with detail of what they would've charged you to ship those same packages.
How up front are they about their pricing? You want to know what you will pay today, but, what happens when your volume increases? What happens if your volume should drop? They should be able to give you this information.
What shipping options do you have? Some fulfillment providers will limit you to only one carrier.
Be sure to ask for a few references.

How knowledgeable are the sales staff?
How much do they know about what happens during package processing? Ask them some hard questions. Ask the sales staff about the order fulfillment / management system, billing, etc.
Are there packaging fees?
Are there receiving fees?
Are storage fees reasonable?
What happens when a fulfillment company incorrectly ships one of your orders?
Do you need returns processing?
How user friendly is the order management software?

The big question, is how much money can a fulfillment house save you?

All fulfillment service providers will warehouse your inventory, and ship your goods. However, all of them will handle and process your orders differently. It's how they differ that makes your decision so important. Don't always be scared away by the basic per order and per item numbers... If a company charges more for these fees, then they should be willing to provide you with a larger shipping discount to offset the expense.

If a fulfillment company says that they use every carrier, then chances are that they have not negotiated great rates with all of them. More often than not, the carriers will negotiate with fulfillment service centers based on the percentage of business that the fulfillment company will give them. Therefore, chances are that a fulfilment center with a primary carrier, will be able to give you a better discount, because they have a large enough shipping margin to pass one on to you.

Be honest with the fulfillment companies that you are dealing with. The more detail you provide about your shipping habits, then the more accurately they will be able to quote your rates. Some key points of interest to fulfillment companies, are the percentage of orders that you ship express.. For example, next day orders are more valuable to a fulfillment house, than First Class orders. Why? To a fulfillment company, it's all about the margins. They may lead with a low per order and per item fee. They may say that you will not be charged receiving fees etc.. The reason is simple, they are interested in the shipping margin. For express orders, there is more of a margin, than on ground. There is more of a margin on ground, than there is with First Class. Use this knowledge to your advantage while negotiating. However, make sure you can backup your claims. If you ship a large percentage of your orders via Next Day air, let them know. Or, if you are interested in establishing a Next Day Air program.. tell them. This will not only help you to get the best rates on the per order and per item fees, but it will also open up the possibility for you to make a margin for your orders that are shipped via Next Day Air.

When trying to decide what fulfillment house is right for you, it's also important to consider flexibility. You will find that a smaller fulfillment service provider may be able to work much better with you than a larger, corporate giant. The smaller companies want to establish themselves, and are looking for security. Larger companies, are mostly concerned with the profit that they can turn. You might find that a smaller company can provide you with much better service, and that they are much more responsive to your needs. Where as you could hear things like "that's not how we do it," from the larger companies.

Ask things like " who are your competitors?" This can be surprisingly revealing. Then ask, "why should I choose you over your competition?" Do they have a good response? If nothing else, this will help you to identify the sales representative that stands out in your mind. Are they appalled that you asked this question? Or, are they confident that they can serve you better than the competition?

Another factor to carefully consider when selecting your order fulfillment company, is the physical location of their facility. In the world of shipping and logistics, there are zones. Zones are basically an index of distance between the point of origin ( fulfillment provider) and the destination ( your customer. ) Domestically the zones number 2-8 with 2 being close to the orgin, and 8 being the furthest. The further the distance, the greater the zone number. Carriers will charge different shipping rates depending on the zone, as it costs them more to deliver a package 1,000 miles, than it does to deliver it 500 miles. The point, is to find a fulfillment house that is centrally located. For example, Xpert Fulfillment Inc. (http://xpertfulfillment.com) is located in central Michigan, which allows them to provide shipping to 72% of the US, within zone 5 and below.

How creative are the fulfillment companies that you are having quote on your business? Do they care about your business goals, and desire to help you get to that point? Keep in mind, that they can only be successful, if you are. If they gouge you on fees, and over charge you on shipping, it will limit you. Remember that fulfillment companies are a great resource of information in the worlds of marketing, and business development. Typically, they have seen business models for a variety of companies. A good fulfillment company will make suggestions for helping you cut costs, and they will try to find ways help you grow.

Inventory Check in.. This is commonly called “dock to shelf time” and it’s the amount of time that goes by between when your goods arrive on the fulfillment company’s dock, and when they are “checked in”, on the shelf, and ready to ship. Times can range from a few hours to days, so be sure to check what the average is at the companies you’re considering. Also a great question to ask references.

Information reporting. What information do they provide to you after an order as shipped? Does it satisfy your needs? Can you get information on the internet, or do you have to call. Can you search for an order by name or order number? Can you track packages to see if they’ve been delivered? The more information you have at your fingertips, the easier it will be for you to deal with inquiries.
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General shipping tips and suggestions.

Whether you ship products yourself, or have a third party fulfillment operation ship orders for you, here are some suggestions to help you maximize your profits and shipping margins.

There are only a few ways that you will charge your customers for the shipping and handling aspects associated with putting your products in their hands.

• Shipping is included in the purchase price of the product you are selling. This is often the simplest way to make sure you charge your customer for shipping. The issue, is that you have to consider the weight of the items you are sending, and how multiple items will effect the shipping weight of the package. Also, you need to consider that other variables exist, such as how the destination zone will effect the price of the transportation.
• Real time calculated shipping rates. This is by far the most accurate way to charge your customers correctly for shipping expense. However, it is nearly impossible to accurately predict the packaging. Especially with express packages, where there are concerns with "dimensional weights." However, if you can have your website report retail shipping rates, and you have negotiated a discount, you should have some room to play. Hopefully, you have enough margin to offset the occassional scenario where you could not predict the packaging.
• Flat-Rate shipping, is another way that merchants will often charge to cover the expense for transportation. If this is done methodically, and you estimate high, you can cover your shipping expenses. The downside is that you could potentially undercharge some customers, and, overcharge others.
• Shipping as a percentage of the sales value.. Generally, the higher the sales value, the less you would chare for shipping.

Whether you ship products yourself, or have a third party fulfillment house ship orders for you, here are some suggestions to help you maximize your profits and shipping margins.

• Whenever possible, try to negotiate "flat-rate shipping," with either your shipping partners, or the fulfillment center. The way this works, is that you would agree on a per pound rate, which would allow you to avoid the complexities of zone, residential fees, changing fuel surcharges, delivery area surcharges etc. Most importantly, it will provide you with total flexibility. For a hypothetical, assume that you can negoitate a rate of $9 for ground delivery, up to 2 pounds, anywhere in the contiguous United States. This does a lot of things for you. First, you know that your cost will almost always be the same.. ( assuming the vast majority of your orders are less than 2 pounds.) Second, it allows you to make sure that you will charge your customers appropriately. You can elect to charge them the same amount, or you could mark it up to make a small profit on shipping. If negotiating for flat rates, be sure to ask how they person you are negiating with, arrived at the number they are proposing. If the answer is based on retail rates, rather than your actual shipping history, you should be sure to have the number quoted is based on a zone that is closer, rather than farther from the origin.
• Don't be afraid to advertise Next Day delivery for your products. Especially if you have a product that is in high demand. Just make sure that you negotiated for a discount on this service. Often customers will be willing to pay a few dollars more, to make sure that they have their order more quickly. If you have negotiated a "Flat-Rate" on next day air, you can make a fairly large margin here.
• If your merchant is flexible, and does not require tracking or signatures, and your typical package is light weight, consider using USPS First Class / Priority Mail with delivery confirmation. This is the most inexpensive method available for getting your product to your customers.
• If the actual size of your product is relatively small, then you can consider using the USPS flat-rate prioirty mail packaging. Not only will this help you keep transportation costs down, but it will also allow you to ship anything that will fit inside the packages, for a lower cost. Also, consider that it is "free packaging."
• General rules of thumb for determining shipping methods (domestically).
  If the package weight is less than 14 oz, use first class.
  If the package is 15 oz to 2 pounds, use priority mail.
  If the package weight exceeds 2 pounds, use a ground service, such as UPS, DHL, or FedEx.
  Keep in mind that the USPS is a letter carrier, so they will charge you more to ship larger packages than the other carriers.
• Be mindful of packaging. If you use too much, it can push you into the next weight bracket.
• UPS,DHL, and Fedex all offer $100 of free insurance. However, the claims process can be painful, so make sure that if there is damage to the package, you request the customer tae pictures of the packaging, or returns it to you. In general, if the tracking shows the package was delivered on time, and if there is a signature on file, odds are against claims of "it was never delivered." Which can be a common fraud attempt by customers to receive free products.
• Understand your market, as best you can. But, don't be afraid to try to reach out to new customers in new ways. Traditional mail solicitation is becoming a thing of the past. But, imho it still works much better than spam. Webbies hate spam. Consider a direct marketing campaign.. do you have something you can send the customer as a "freebie?" You know they will anticipate getting the item, and this is a great chance to put the promotional material in their hands. Consider pay-per-click. It will take some time to setup an effective ppc campaign, however, once you have locked in on the terms that have the highest conversion rates, it can be money well spent. Try to stay away from "guaranteed hits" programs.. I have seen a ton of these, and they don't really seem that productive. Do your homework when selecting terms. It's better to spend $1 on a term that converts clients, than $0.25 on 4 terms that don't.
• There are times, when it makes sense to deal with a single fulfillment house, that is centrally located in the US. There are other times that it makes more sense to have multiple warehouses, east, west, north, and south, that can ship within their portion of the US. However this is a MAJOR undertaking... it requires the ability to smart sort orders, split inventory, and coordinate with 4 different locations. This typically does not become a viable option unless you are shipping a LOT of heavy orders every day.
• Carriers and fulfillment companies want to ship "bricks." Small, heavy items, that travel express. If your items are heavy and time critical, you have great leverage for negotiating.

I know there is a lot of information here, and it's hard to process it all.
That's why is so important to choose a qualified Fulfillment House.

At the end of the day, it's important to consider what your business goals are. Do you want complete control over your operations, or would you prefer to give up some control, so you can focus on business development?

If you found this guide informational, you may also be interested in our
guide to the difference between drop shipping and fulfillment services..
and
our guide to the additional cash benefits of outsourcing fulfillment services.

Visit our fulfillment services terminology page.
Or, if you are ready view our fulfillment rates

We hope that this guide helps you to better understand the potential opportunities that can be provided by working with a qualified and informed Fulfillment Services Provider.

If you have any questions about our rates, or how we can save you money, please contact us today:
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