Drop Shipping Versus Fulfillment
If you do a significant portion of business on products that you are able to private brand, or have manufactured to your specifications, you can often turn a better profit. You also have complete control over the shipping options, discounts, and entire order process.
If you currently have your products privately branded, and you are having those products drop shipped by the manufacturer, you should compare the costs you are already paying to those of a fulfillment provider. Fulfillment providers focus on the shipping and order processing side of the business, so they have made the process as efficient as possible, in order to cut down on their own internal expenses. This should translate to a savings to you.
Order fulfillment centers may also be able to provide you with benefits that a drop shipper will not, for example, the ability to provide you with flat-rate shipping options. This can provide you with more expense predictability, and allow you to better project your fees into a cost model.
Is the method by which you own the inventory, and have a third party ship those products on your behalf. This is a cost effective way of offsetting expenses such as maintaining your own warehouse, staff, packaging supplies etc.
Fulfillment services are a benefit to companies that do not want the hassle of managing the entire receiving, packaging, and shipping process. Fulfillment providers typically are able to pass through a substantial shipping discount, because of the volume of packages that they ship on a daily basis. .
Make sure to weigh the expense of using a fulfillment service compared to the expense and logistics of staffing your own warehouse.
With a fulfillment center, you should only pay for services when orders are shipped, or storage fees. With your own warehouse and staff, you have to consider that they will be paid, regardless of the number of orders that are shipped, inventory items received, etc. Also, consider what happens if your business grows rapidly. Will you be able to find additional staff, and train them quickly?
Are you able to negotiate a discount with a shipping carrier that is comparable to the discount that a fulfillment center can provide you with?
This makes a difference. Shipping rates are based on the distance that a package must travel to get to the customer. If you are located on the west coast, and ship orders to the east coast, you will pay more, than a warehouse that is located in the central US. Xpert Fulfillment is headquartered in Michigan.