5 Questions Every Business Should Ask Before Seeking Fulfillment Services
We hear, “How big should I be before I start thinking about fulfillment services?” quite often in the fulfillment industry. With the help of websites like Pinterest, Etsy, and WordPress, there are now fewer barriers to owning an eCommerce company than ever before. According to the U.S. Census, E-commerce sales have seen a steady increase since 2006, and are projected to continue growing into the future.
So at what point should a business begin to consider partnering with a fulfillment company? Unfortunately there is no magic answer to that question. Instead, there are multiple considerations that should go into that answer. This article addresses some of the key questions every business should ask itself before making the commitment to partner with a fulfillment house. The questions this article addresses include company size, product demand, customer location, span of control, break-even point, and special product requirements.
Question 1: What is our current size and demand?
Current and projected market share, and demand weigh heavily on the decision to join forces with a fulfillment company. Are you expecting your sales to grow, decline, or remain consistent? The ability to accurately project sales allows businesses to determine if a fulfillment partnership will be beneficial. Additionally, companies need to understand how using a fulfillment company affects their workforce. You may need to make some changes to account for the work done by the fulfillment company.
Question 2: Where are my customers located?
You need to know where your customers reside, especially when it comes to eCommerce sales. Standard fulfillment services include warehousing your inventory, processing your orders, and handling all of the shipping to your clients. The location of your customers impacts whether you need to look for a multi-location fulfillment house. When choosing fulfillment services, look for companies with a ground-map that improves your delivery speed and distribution capabilities.
Question 3: How much control do you need over the distribution process?
The level of customization and control required in the shipping and distribution process affects the decision to utilize outside fulfillment services. If your product is highly customizable, or consists of multiple pieces, you may want to exercise more control over these activities. Whilst fulfillment companies pride themselves on order-accuracy, the chance for mistakes increases with order complexity.
Question 4: What is my break-even point?
It’s imperative to know your break-even point when working with an order fulfillment company. Some of the common monthly expenses for using fulfillment services include storage fees, minimum order fees, and account maintenance charges. Before signing up with a fulfillment house, you need to know what recurring fees to expect as well as how many orders you need to make the partnership profitable.
Question 5: Does my product have any special requirements?
As discussed in a previous article Possibilities With Perishable Shipping, drastic industry improvements have created a wealth of opportunities for businesses with frozen, perishable, and temperature sensitive goods. You’ll want to ensure that your product is treated with the same care by your fulfillment company as you would provide.
To summarize, a concrete answer to when you should be partnering with a fulfillment company does not exist. Rather, you should consider all of the questions listed above (and more) to determine if joining forces is mutually beneficial. The vast majority of fulfillment house contracts feature service agreements for at least a year’s time. With that being said, you will want to ensure you ask the right questions to establish a beneficial partnership between your business and fulfillment company.