How to Evaluate a Fulfillment Centre to Help Your E-Commerce Store
Now that you understand when the appropriate time is to switch from manual fulfillment to getting a 3rd party to help you, let’s explore what are some of the factors you need to consider when picking one to be your partner.
When finding different fulfillment centres, there are few factors to consider:
Pricing rates, flexibility: What are their storage rates, picking and packing rates? Shipping rates?
Customer service, account management? Do they have someone dedicated to work with you to ensure your inventory is in order and that packing is done properly the way you want it?
Does this fulfillment centre take on large clients mostly? Or small businesses? Can they do both and scale with you?
Here is a breakdown of what you’ll typically see in a fulfillment invoice. Keep in mind that different companies have different pricing models so it’s best to pick the one that suits you needs the most.
1. Storage space cost
- Most fulfillment centres charge for storing inventory in their warehouse. It can 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
- Companies charge for receiving, verifying, and sorting a delivery of your inventory. Some charge per shipment while others charge per pallet, box or per hour.
3. Order Pick & Pack Costs
- Fulfillment centres 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
- Small businesses can always open their own shipping accounts but that would only provide a small discount (i.e. Canada Post provides 5% on shipping and packaging products as well as upgraded services on parcel shipping). Shipping cost with a fulfillment center would be cheaper since they combine their volumes to get lower shipping rates from different couriers.
Do fulfillment centres provide better shipping rates than small business accounts?
Due to the large volumes, fulfillment centres receive cheaper shipping rates from their couriers. By using a fulfillment company’s services, they pass on these low shipping rates to you. They’re also integrated with all or most of the major shipping logistics companies, providing you with easier access to a plethora of shipping options.
Local vs another country or state/province
If you’re just starting out a new brand, we understand that you want to ensure that every touch-point and experience is done exactly the way you want it. The reality is, when you have someone else do the packing for you, there will be a broken telephone. Having a warehouse and fulfillment centre close to you will ensure you can go in person to share the type of experience you want to create for your customers and where extra care needs to happen. Moreover, you can build a strong relationship with the account manager who will be your liaison between you and the fulfillment centre.
If you have a large presence overseas (over 50% of your sales), you may want to consider working with a fulfillment centre locally to ship out your orders from there. For example, if you are based in United States and you have a strong presence in Hong Kong, we’d suggest working with two fulfillment centres: one in USA and one in Hong Kong. Based on how the sales breakdown by each country, you should split the inventory respectively to the different fulfillment centres.
What are some questions I should ask?
Do you integrate with Shopify or the platform that I am using for my store?
How quickly do you pack and ship out orders once they come in?
How often do errors occur within a month? (What is your % error rate?)
If there are refunds and exchanges, how do you handle this for me and what happens on the backend? Where can I see the status of these orders?
What if my customers send me support emails about their orders, how can I work with you to provide answers?
Do you offer boxes and packing material for free?
Can I print custom boxes with you?
What are your shipping rates - fulfillment centres can provide you their current rate card based on weight, dimensions and region.
What are the payment terms? (immediately, billed per week, billed monthly?)