What is a Fulfillment Centre?
What is a fulfillment centre?
A fulfillment centre is a 3rd party company that helps store, pack and ship out the orders made on your eCommerce store. Many of these fulfillment centres now integrate with stores on Shopify, Big Commerce, Squarespace etc. and much of it is fully automated. The fulfillment centre can connect to the backend of your store to see the orders coming in. Once an order is placed by the customer, the order shows up at the fulfillment centre. The company will locate your product in the warehouse (based on SKU), pack it in your custom packaging or generic packaging and then help you ship it at a preferred rate.
When do I need it?
Now the biggest question is, when should I make the jump from packing and shipping orders myself to paying someone to do it for me?
Time is money! Growing your store should be your #1 priority. So the moment when packing orders is taking up time from you focusing on growing your store, that’s when you should really consider having a fulfilment centre to help take care of your orders.
WHERE CAN YOU FIND A FULFILLMENT CENTRE?
Deciding that you need to outsource fulfillment is just one of the steps to growing your business. Finding the right fulfillment centre is another step. Here’s some things you should consider:
It is always good to research if there is a fulfillment center near you so your inventory is accessible if you need it
If the fulfillment centre is nearby, you should schedule a time to check out the warehouse to understand the spacing and ensure your goods are taken care of
Do some research to see if the fulfillment company cater to your needs (i.e. custom packaging, kitting, fragile goods, etc)
WHO DOES FULFILLMENT BENEFIT?
Your business - You will have more time to focus on growing your business rather than worrying about orders being fulfilled correctly and on time.
Customers - More time to interact with the customer and get feedback that will benefit your brand and company.
How can a fulfillment centre help grow your business?
There are many benefits of a fulfillment centre beyond just storage, packing and shipping. By having a company accountable for these 3 parts of your business you can:
Focus on growing your business
Enhance the packaging experience
Have your space back!
Returns and exchanges will be handled for you in a timely manner
Receive preferred shipping rates that you won’t be able to receive unless otherwise
How are the costs broken down?
1. Inventory Storage Costs
Most fulfillment centers charge for storing inventory in their warehouse. Charges range from palletized bulk storage to cubic square foot, individual bins, or shelf spaces for per-SKU storage. The price varies from $15-20 for a pallet/month, $3-5/bin, or $0.5-$2.5/ cubic feet.
2. Inventory Receiving Costs
Most fulfillment companies charge for accepting and verifying a delivery of your inventory. Some charge per shipment while others charge per pallet, box or per hour.
3. Order Pick & Pack Costs
Most of the fulfillment centers charge a order processing fee (per-order pick & pack) based on the number of items being picked from storage and packed into each box. Others include this cost together with shipping into one order fulfillment fee. Pick & pack costs ranges from $2-$3.
4. Shipping Costs
Fulfillment companies pass shipping costs on to you, but these costs can be far lower than what you’d pay handling fulfillment in-house. Due to their volume, fulfillment centers get deep shipping discounts, both inbound (inventory coming into the warehouse) and outbound (orders to your customers).
What do warehouses need from me to give me a rate?
Typical fulfillment centers generally provide specific quotes to each prospective client. The rates of fulfillment generally depend on volume of orders and the complexity in packaging specific items. Additionally, there are different rates for packaging depending on if it is subscription service or a regular eCommerce company. These quotes can be quite complicated and extremely difficult to wrap your head around. Extra costs such as inventory intake, storage fees, return costs, shipping can add up quickly and give you a headache trying to understand where these costs are coming from.
Some fulfilment centres today have started to simplify their rates and offer rates that are more friendly to small business. See how Ship Ninja is doing this by contacting one of our happiness ninja.