Fulfillment Services FAQ
By
VendorSeek
Definition: The process of receiving, packaging and shipping orders for goods
Any company that sells products directly to consumers via phone sales, their website or even through mail order must provide fulfillment to process these orders. Some companies choose to perform these services in-house with a staff of employees that receive the orders, process them and mail them to their customers while other companies outsource this function to a third party full service fulfillment house.
Full-service fulfillment companies offer up an end-to-end solution: They take your products from warehouse shelves, pack them, hand them to shippers and then send an automated e-mail response to your customers to let them know their packages are in transit. They can also handle your credit-card processing, supply current inventory levels to your website, reorder products, offer call-center services, send notices of shipping and handle returns. There are literally thousands of these companies to choose from, but finding the right fulfillment company to meet your needs can be time consuming. Utilizing VendorSeek.com's fulfillment price quoting service will place you in touch with up to 5 pre-screened vendors from our vast network of approved vendors.
If you're using your hosting company for shopping cart and credit-card functions or doing this in-house, you can just use some of the ' options--such as pick-and-pack, returns processing and customer service support. If you're shipping a small number of orders, you may want to fill your orders yourself.
To do this, you'll want to use the major package delivery companies--Federal Express, UPS or the U.S. Postal Service, since they're considered the most reliable. All these carriers offer downloadable software on their websites that allow you to track customer orders and also begin shipping immediately. However, the downside is that you'll either have to go to your local post office to ship the packages or schedule pickups with whichever delivery company that you eventually choose.
What Services Do Fulfillment Houses Provide
Order Processing Services: Whether the orders are received via phone, mail or web based the fulfillment house would process the order and ship it. The service is the key element to the utilization of a third party fulfillment service.
Return Processing: Fulfillment houses also provide the service of accepting and processing returned or damaged items.
Storage: Fulfillment houses will store your merchandise and provide security/insurance for the items that are located in their locations.
Credit Card Processing: Many Fulfillment houses will offer the service of credit card processing as part of their services with payments being deposited directly in to your bank account.
Product Assembly: Fulfillment houses will provide the service of assembling or kitting products for their customers. Typically, fees are associated with this service and will be dependant upon the complexity of the assembly/kitting that is required.
Inbound Call Center Services: Fulfillment houses provide inbound call center services to handle phone inquiries. Some fulfillment houses provide this service as part of their own in-house offerings or they outsource this aspect to an additional third party service.
CD/DVD Replication Services: As part of their array of services, many Fulfillment houses will offer the service of CD/DVD replication.
Contract Packaging: Often times, Fulfillment houses will package products in specialized or customized wrapping as per your specifications.
Rebate/Sweepstakes Services: Fulfillment houses will provide these services to their client to process rebates or sweepstakes.
What are the Benefits of Fulfillment Outsourcing While there are many benefits to outsourcing your fulfillment process to a third party fulfillment house, some of the most important reasons include:
1. The ability to concentrate on your core business. Not being involved in the day to day process of fulfilling orders enables your company to focus on marketing your products, improving sales and increasing revenue.
2. Staffing concerns are shifted from your company and placed on to the fulfillment service. During peak seasons rather than spending large amounts of time hiring new employees or utilizing temporary personnel, your fulfillment provider will manage all of these concerns for you. Often times, fulfillment houses are equipped to handle peak seasons well in advance.
3. Controlled costs. Since your company will only be paying the fulfillment house for the work they actually perform for your company (fulfillment of orders, assembly of products, storage etc), you are able to project costs and maintain the specific margins needed to insure profitability.
4. Warehouse space is no longer a concern since this will be passed on to the fulfillment house. Many companies that outsource their fulfillment services to a third party firm decided to outsource because much of the year they were paying rent on very large facilities that had little or no inventory in them, but they needed the space to accommodate their busy seasons.
5. Many of today's successful companies (including General Electric, Pepsi, Merck, Home Depot, Wal-Mart, McDonalds, Microsoft, Morgan Stanley, Terex, and Amway) have discovered that outsourcing gives them a competitive advantage.
How To Select The Right Fulfillment House When choosing what fulfillment service to partner with, keep the following criteria in mind:
1. Make certain you have a clear cut understanding of exactly what services you require and make absolute certain you and the vendor you choose are on the same page. Often time companies find that their level of expectation was far different that what the fulfillment company has agreed to perform. To avoid this unfortunate scenario, make sure everything is spelled out in great detail in your contract.
2. Be certain to ask for references, preferably from other clients that sell similar product lines to yours. All reputable fulfillment houses will be able to provide references from customers who utilize their services. When speaking with these references, be certain to inquire as to any negative experiences they have had along the way with fulfillment service. In some cases, these scenarios may have been corrected but it is always better to address this ahead of time.
3. Evaluate the geographic location of the fulfillment house. While many companies prefer to work with a fulfillment service that is in relative proximity to their physical location, others prefer to work with a centralized location to maximize their shipping costs. Furthermore, if you receive shipments directly from manufacturers, choosing a location that is close to your manufacturers maybe a wiser financial decision.
4. Discuss manpower concerns with potential fulfillment vendors. Fulfillment houses often times employ a core group of permanent employees and supplement staff with temporary workers during peak periods. Discuss with the fulfillment house how times like these are handled.
What Fees Do Fulfillment Companies Charge
Set-Up Fees: Fulfillment houses charge set-up fees to help cover their costs of acquiring your business and preparing their system to take your products. These fees can range from a very low dollar figure or a very high dollar figure based upon the complexity of your particular account.
Order Processing Fees: This may include a flat amount for each order, plus a charge for each additional item in the package. Rates vary with the number of orders processed per month. Make certain to inquire if boxes and packing materials included in the order processing fees or if they are in addition.
Order Processing Minimums: Make sure your average number of orders is likely to easily exceed their order processing minimums or else you'll be paying fulfillment fees even if you aren't getting orders. Some fulfillment companies cater exclusively to start-up companies while others chose to work only with established, high volume firms.
Return Processing Fees: Find out what you are charged when a customer returns the merchandise and how this process will be handled. Return processing can be a major issue for many companies especially those that sell clothing. Keep in mind, the quality that your customers receive in the return process will likely determine whether or not that choose to order from your company again.
Storage Fee: This is a monthly fee that reflects the amount of storage space your products take in the fulfillment house warehouse. You may be charged per pallet, or per cubic foot, or in some other manner.
Credit Card Transaction Fees: Many fulfillment houses will handle credit card transactions for merchants who don't have merchant accounts. They typically charge a percentage of the total transaction amount. This feature can be essential in choosing a vendor due to the process which is involved to receive payment from customers.
Fees to receive merchandise: Look for charges to check in shipments, verify the box count, and look for visible damage.
E-Commerce/Shopping Cart Related Services: You can run your own shopping cart and transmit orders to the fulfillment house via their preferred methods: FTP, secure download, e-mail, EDI, XML, etc. But it may be cost-effective to use the fulfillment house's own shopping cart program order buttons in conjunction with your own website. That way they get your orders directly and painlessly. Some fulfillment houses also offer accounting and banking for foreign clients. Ask what services they offer. You'd be surprised what they can do for you.
Order Transmission Method: Make sure that the method by which you are required to transmit orders is technically within your company's grasp. Is it simple or sophisticated enough to meet your needs?
Product Assembly: A fulfillment house can often assemble your product or kit for you, charging you on an hourly basis or a time-costed per-piece basis. They can also order products or components for you so that you're never out of stock. Ask the hourly rate on which these services are based.
Inbound Call Center Services: Many fulfillment houses also provide in-house call center services to answer phone orders etc while other fulfillment providers outsource this aspect of their process. Make certain to discuss whether this service is provided in-house or outsourced. Fulfillment houses will typically charge on a per minute cost for call center based services while others will charge on a per call basis.
Growth Capacity: Can the fulfillment house that serves your 100 to 500 orders per month ramp up to 100,000 orders per month if you get a tremendous response? Inquire about their growth capacity.
Minimum Contract Period: Be careful of companies that lock you into a six-month or one-year contract. What will you do if they don't meet your needs, or you don't meet their minimums? You need an escape hatch if your product line doesn't take off.
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