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Fulfillment Expert Insight: Avoiding the Pitfalls of Order Fulfillment Price

by Mike DeFabis on 2017-05-23 10:31:46

One of the biggest pitfalls to companies who are looking to outsource their fulfillment is they will choose their provider solely on price.  Sure saving a few pennies on knock off tooth paste or breakfast cereal can be beneficial, but not when it comes to choosing a fulfillment provider.  Think of your fulfillment choice like toilet paper, you never want to buy low quality toilet paper because you will certainly be regretting it later.  This blog will give you some ways to find the perfect fulfillment center for your business within a competitive budget.

Ask Questions:

When vetting a fulfillment company, make sure to ask a lot of questions.  You want to get an understanding of their knowledge on fulfillment as it relates to your business, IT, operational processes and culture.  A fulfillment company is a good fit when they not only understand your business, but have experience in your industry.  Often, they can help you address challenges before they occur because they have the necessary experience from past complications. 

Get a good understanding of the culture as well.  You will be interacting with your fulfillment company on a daily basis, and ensuring that the cultures align will certainly make those interactions more pleasant.

preparing shipments in fulfillment warehouse.jpgUnderstand the Quote:

Trying to figure out a fulfillment quote can often be like trying to solve the crossword puzzle in the Sunday NY times.  It seems like every company structures their pricing a little differently, so make sure that you understand all the charges.  If the fulfillment company says “oh well that is included,” but it is not written in the quote have them put it in writing.

While looking straight at the pricing page is always the first thing we do, make sure to read through the assumptions page.  As a fulfillment company we base our pricing on the data and assumptions that you give us about your program.  If those assumptions are not correct then the pricing could change. It is better to have the pricing change prior to you signing the agreement rather than after your product is already in the distribution center.

After you have an understanding of the pricing and the assumptions, have the company put together an estimated monthly budget.  Tell them to put it in Excel with the variables so that you can changes those variables to see how your pricing will change as your company grows. 

Pay them a Visit:

One of the best ways to determine if a fulfillment company is a good fit is to see them in action.  There are many fulfillment companies out there that do an amazing job of marketing themselves, but when you see it in action it is a different story.  Don’t get distracted by the fancy marketing and low price. 

On your visit make sure you to ask them where your products would be stored. This will help you to visualize your operations and know if the fulfillment company has made plans for your onboarding.  Also, meet the people that will actually be handling the day to day activity and ask them questions. 

Price is a Big Piece, but it isn’t Everything:

The two biggest factors that go into pricing for a fulfillment company are time and labor.  Generally,  if a fulfillment company is too high or too low on their price it means they don’t fully understand your program.  Unless they have extremely low labor rates, some sort of automation that your program will fit into or they are extremely fast at what they are doing then they are missing something.  Be aware that sometimes the lowest price isn’t always the best price.  Inaccurate and missed shipments can be detrimental to a fast growing company.

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