February 22, 2023
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Considering outsourcing your fulfilment? There are a few things you'll have to ponder, which we've highlighted here for you. And if you choose to go down this route, you'll also need integration with your store's back-end: we can help.
Fulfilment houses are third-party firms that handle the product side of your business for you. It's generally an all-inclusive service, meaning that the company will take your products from the supplier, stock the inventory on their own premises, then package and ship off the products whenever an order is received. Some fulfilment houses will also handle the post-order tasks such as processing customer payments, providing ongoing customer service, as well as processing returns and complaints.
Bear in mind that if your orders tend to consist of lots of items, especially those that are cheap, fulfilment houses won’t be suitable as costs will be too high. They give you a quote based on how many orders you receive a month and how many items are in each order on average.
Also, if your business uses very small margins to make a profit, then a fulfilment company would definitely not be suitable for you.
If you are considering outsourcing the fulfilment aspect of your business, you may be thinking of opting for a popular company such as Shipwire. However, if you're interested in exploring the various options that are out there then read on to discover the top 5 things you should look for in a fulfilment house.
Outsourcing your fulfilment to an external house can come with a lot of hidden fees. You should research the ins and outs of a company’s fees when selecting one to give responsibility of maintaining the customer-side of your business to.
Some of the fees, both explicit and implicit, that you should watch out for are:
Most fulfilment houses charge set-up fees to receive your business and prepare their system to take your products, because the process can be costly, both in labour and time. This is common practice, and a fair fee, but do make sure that these costs are reasonable, as some companies may try to make a bit of extra money by bumping it up.
The order processing fee typically comes as a standard cost for each order, plus a charge for each additional item that the company has to package. When you’re getting a quote from companies, they will typically ask you for an average number of how many orders your business processes a month. If you ship out a high volume of low value packages, the fulfilment charges are going to eat into your margins, so outsourcing is not the best solution.
For obvious reasons, these aren’t advertised in big bold letters on the fulfilment companies’ websites, but most of them insist upon a minimum fee. This is for the company to ensure that taking on your fulfilment responsibilities will make enough of a profit for them and they won’t be running at a loss. Smaller businesses may find it hard to meet the minimums, so ensure your average number of orders will easily exceed their minimum fees otherwise you’ll be paying fees for orders you’re not receiving.
Because fulfilment houses handle everything on the customer-side of your business, most of them will handle returns and refunds. You will be charged for this service. Make sure you find out what each company charges when a customer returns your products. This is a very subtle cost that people often forget about, but if your returns policy is particularly liberal it can easily build up.
If your products are big in size, you could suffer here. Storage fees are typically charged in how much room your stock takes up in the fulfilment house’s warehouse, charged either per pallet used or per cubic feet. These costs vary from company to company, so do look out for these and ensure that you’re not stocking more than necessary in their warehouse at any given time.
Those who don’t use fulfilment companies often buy their packaging supplies, such as labels, packaging paper, envelopes, bubble wrap, tape and boxes, from high street stationers. Remember that fulfilment companies use a lot more of these materials than you would, so they can afford to buy them from wholesalers and benefit from substantial discounts. Some fulfilment houses will pass on the savings they obtain to you.
By paying very low prices for the shipping materials, some fulfilment houses will allow you to lower your shipping costs. However, not all will. That’s why it’s essential to research the company beforehand – something like this should really affect your decision when choosing.
If a fulfilment house is offering a brilliant service, it’s likely to have some gleaming reviews from its satisfied customers. Look for these on their website. (And if some aren't showing any, drop them an email and see if they can share any testimonials from past or existing customers.)
These reviews will give you a great insight into what it would be like to outsource your fulfilment to this company. However, do bear in mind that a company will always try to highlight the best reviews. If there are any other places online where you can see what people have to say about them, do look into that too.
This may seem an obvious one, but sometimes people can be so dazzled and overwhelmed by fulfilment companies’ websites that they can forget to inquire about what lies behind that. The facilities available at a company’s warehouse should have a massive influence on which company you decide to partner with.
If you can visit the site, that’s brilliant. If not, ask for a range of good quality photos of the warehouse. There are a few things you should be looking out for, the first being how clean and orderly the building is.
Another thing you should be looking out for is the security procedure that is implemented by the company. Any good fulfilment house will commit themselves to extremely high security, ensuring that there are never any issues with theft or misplaced stock – both from external thieves and internal employees.
Speaking of employees, you should query the company about the training that its staff has received, if any. Putting a large part of your business into the hands of another company is a big move, so you’ll naturally want to use a company whose workers will be extremely careful when dealing with your items.
As mentioned in the previous point, if you can visit the fulfilment house in person then this would be extremely helpful when making your decision. Because of this, the location of the warehouse is something that you should keep in mind when choosing a company. While it is perhaps not the most important consideration in this article, using a company that is geographically local to you will be beneficial for a variety of reasons, such as being able to assess the site and meet with people at the company to discuss changes in your requirements.
Another locational factor, from the point of view of your business’s logistics, is how close it is situated to major transport links. This could mean the difference between your products arriving at your customers’ doors in one day or two. Obviously you’ll want to provide your customers with the best shopping experience possible to ensure they come back in the future, so choosing a locationally suitable company is more important than it seems.
If you run an online business on Shopify, and need to integrate your store with an in-house or third-party warehouse, CRM or POS system, this is something we have a solution for. Our platform can import and export Shopify product and order data into other systems that use CSV, XML and other formats.
