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+++ S P E C I A L R E P O R T +++
"Picking the Right Fulfillment House"
A guide to researching, interviewing and selecting
the right fulfillment house to meet your specific needs

Paul Purdue, President, iFulfill.com
sales@iFulfill.com
http://www.iFulfill.com
21 January 200
3

Introduction

If you’re selling (or planning on selling) a product, then sooner or later, you’re going to need to figure out how to get that product into the hands of the purchaser. There are two main options:

  1. You can ship it yourself

  2. You can outsource

This eBook was written to help you understand the options, infrastructures, costs, and logistics involved with outsourcing your fulfillment to a third party. Some of what’s covered can be beneficial even if you plan to start out shipping the product yourself. All of it will help you in your quest to investigate and recruit a fulfillment house.

Who is Paul Purdue?

I’m Paul Purdue and I’m the President of iFulfill.com, a full service fulfillment company based in Maumee, Ohio. While I sincerely hope you’ll consider our company as you search for a fulfillment solution, I’ve made every effort to make this eBook objective. My goal here is to tell you what you need to know to research and pick the right fulfillment company to meet your specific needs.

I’ve been in the fulfillment business for almost four years, all of them in my current capacity as President of iFulfill.com. Before that, I was involved in establishing infrastructures for a variety of different businesses, most recently an internet service provider, and just prior, a national software distributor. That brings us to our first keyword: infrastructures.

What’s the key here?

The heart of any business is the “infrastructure”. It’s how you do things, the day to day nuts and bolts methods by which you conduct business. If you are involved with a business that sells a product, then the infrastructure that you setup to conduct that business is going to be a key element in your success. When you outsource your product fulfillment, a major element of the success of that endeavor is that the two infrastructures (yours and the fulfillment house’s) work together to get the job done.

The main key to success in such a “marriage” is clearly identifying how these two infrastructures are going to fit together, identifying any problem areas, and finding solutions, all before the relationship is finalized and the first order is placed. That’s what this eBook is all about.

Where to look

The first logical step is to tell you where to look to find potential fulfillment partners. Perhaps one of the most comprehensive lists is Yahoo’s Fulfillment Services Category. You’ll find about 100 fulfillment houses listed. You can also search at any of your favorite search engines or directory sites. My favorites include Google, Overture, and AltaVista. Search for “Fulfillment”, “Order Fulfillment”, or “Product Fulfillment”.

There have been many articles written about fulfillment like "Selecting Your Fulfillment House" at Workz.com.

You’ll find many more as you utilize search engines to look for a fulfillment solution.

Fulfillment Specific Sites:

There are a few sites devoted to fulfillment that are worth a look:

Operations and Fulfillment – a website devoted to presenting articles from the popular publication of the same name

NCOF – The National Conference on Operations and Fulfillment – a 12-year track record of delivering high quality, use-it-now information and know-how; a must-attend event that consumer and business-to-business operations and fulfillment professionals participate in each year.

eLogistics 101 – A site devoted to warehouse logistics, layout and design, it has some interesting information on fulfillment also.

There are also several websites that deal specifically with marketing that offer some insight into fulfillment:

Wilson Internet – Produced by Ralph Wilson, and home of two hugely popular eZines: Web Commerce Today and Dr. E-Biz.

Sell It On the Web – Produced by Paul Lange – An interesting collection of information on running an eBusiness.

How it all works – a broad view

In the simplest term: a fulfillment relationship is one where you put your product in someone else’s warehouse. When a customer orders your products, they ship them out.

Some fulfillment houses can provide an ordering mechanism (shopping cart, order page, etc.), and some can let you use their merchant account to process credit card orders, while others can do both, in addition to fulfilling the orders. You need to define what your needs are before approaching a potential fulfillment partner.

How you answer these question will be a determining factor in which companies you can work with so be sure to give these issues some thought before you proceed.

The ordering mechanism is what we commonly think of as a “shopping cart” although it can be as simple as a one page order form to order a single product, and as complicated as a full featured shopping cart that’s capable of advanced features like discounts, gift cards, coupons, online shipping charge calculation. How you take your orders is a big part of the “customer experience”, and should not be taken lightly. It also is a big part of your interaction with the fulfillment house.

An order mechanism that’s working fine for you now, may be a disaster when it comes to integrating with a fulfillment house. Let me give you an example.

You’re currently taking orders and shipping them out yourself. Everything works just fine, and you have the whole situation under control. But you’re currently shipping 50 to 70 orders a day, and getting your orders out the door is taking more and more of your time, and you’re spending less and less time doing the things that sell: promoting your site, calling potential wholesale customers, search engine positioning, advertising, etc.

That, of course, is why you’ve started to think about using a fulfillment house. They can free you of the day to day work of getting orders out the door, and allow you to spend more time promoting your products and establishing business relationships.

Now lets look at the order infrastructure you currently use and some potential “gotcha’s” that may cause problems when you go to integrate your systems with the new fulfillment house’s.

Bottom line is: when you’re doing it all yourself, you had time to review every order and you knew what your order mechanism (shopping cart, order page, whatever) would “let through” so you knew what to look for. It’s not going to be quite that way with a fulfillment house; they’ll need the order to come in right the first time, and in a format they can deal with. There will only be one correct way to say US, only one correct abbreviation for Ohio (it’s OH), and the data will have to be complete and correct when the orders taken.

While a somewhat sloppy order mechanism may suit your needs just fine right now, with no noticeable side effects, it will have to be cleaned up before you can effectively deal with a fulfillment house.

Call Center
While you may find yourself looking for a call center at the same time that you are looking for a fulfillment house, don’t be surprised to find that most fulfillment houses do not offer call center services. While some do, most prefer to work with or recommend a third party.

Of the fulfillment houses that do offer call center type services, many only offer limited hours for these services.

My recommendation has always been to utilize a third party call center, where you’ll find trained operators, a call center oriented infrastructure, 24/7 availability, and competitive pricing. These are all things that typically aren’t found in call center services offered by fulfillment houses, as these are all areas that are outside their regular area of expertise.

One thing to look for: be sure that the call center is one that has the internet available at the operator’s desktop. If you are taking orders on the internet, you want the operators to be able to do the same. They’ll have access to your site, where they’re likely to find answers that they may need. In addition, if they’re taking orders directly into your online infrastructure, and if you’re integrated with the fulfillment house in “real time”, then a next day order that’s placed on Thursday afternoon has a significantly better chance of shipping that day and arriving the next day.

In addition, if there’s a problem with the credit card charge (the card is declined, or the wrong number is given to the operator), the problem will be discovered while the customer is still on the phone; the problem can be solved right then and there. If this sort of an issue isn’t discovered until after the customer has hung up, then there’s a 50% chance that this order will never be recovered.

The reason it’s significant to be certain that the operators have the internet on their desktops is that to this day, many still do not! Call Centers and Answering Services were, by nature, one of the first businesses to be computerized. Because of this, many still operate on mainframe or mini computer based systems, where the internet at the desktop is often not an option.

We have quite a few clients who utilize the services of a company called Torcom, and have been quite pleased with them.

The Pick Pack Process

Once your order hits the fulfillment house, it will go through several steps before it is deposited with the carrier (UPS, FedEx, The Postal Service, etc.). It will be:

There are several “issues” that may come up depending on your needs. You should make sure the company you choose can handle them.

Kits

Kits are multiple item products. Let’s say, for instance, that you sell three videos on dog grooming (one on bathing, one on clipping, and one on combing). They each sell for $20, but you offer all three for $45. When your shopping cart takes an order for all three, it doesn’t list them separately, it merely lists the set of three videos as one “product”.

Some fulfillment houses will be able to deal with the single listing and their system will be able to be programmed in such a way that when someone orders the “set” (or “kit”, as we call it), it shows up as three separate videos on the packing slip. Others will require that you submit the order to them as three separate videos, which might be complicated to do on your end. Others might simply accept the order as a “set”, show it on the packing slip as a “set”, and let the people in the warehouse figure it out, which can tend to lead to errors.

If you have a “kit” type product, be sure that the fulfillment house can handle it in such a way that will be easiest for you to accommodate and result in the least number of errors.

Other examples of “kits” include:

 

Inserts

Inserts are like kits, only kits are product specific and inserts are typically order specific. A good example of an “insert” is a catalog. You only want one to go into the order, regardless of how many products were ordered or what those products were. With inserts, it’s always one per order, no matter what’s been ordered. If the need is there, be sure your potential fulfillment partners can handle inserts.

Packing Slip

The packing slip typically will show what has been ordered in such a fashion as to facilitate accurate picking by the warehouse staff. If you have special needs, they should be addressed up front.

A packing slip usually has your company name, the address of the fulfillment house, the name and address of the customer, an order number, and a list of the items in the order.

Label

A label usually has your company name, the address of the fulfillment house, the name and address of the customer, an order number, and any other details specific to the carrier.

Cutoff Times

It’s important that you understand what to expect with regard to the time it takes to fulfill an order, in part so that you can convey that information to your clients. Some fulfillment houses will give a specific cutoff time for orders. For instance, “all orders received by noon will ship that day, and all air orders received by 4:00 PM will also ship that day.” When this is the case, be sure everything is clearly defined, and don’t forget to take into account the time zone of the fulfillment house.

Other companies simply give a timeframe. For instance “all orders ship within 24 hours.” In my opinion, this is less desirable, because it fails to specifically define the situation. It gives the fulfillment house more “wiggle room”, and makes it harder for you to be specific with your customers.

Fees you might pay

Merchants are sometimes surprised by the costs involved in outsourcing fulfillment. That’s usually because they haven’t taken the time to sit down and figure out exactly what it’s costing for them to do these same tasks themselves. It’s important to analyze and understand what it’s currently costing you to prepare and ship your own orders before looking at what it will cost to outsource. Otherwise, you won’t be able to accurately and fairly compare the two alternatives.

I’ve listed many (hopefully all) of the fees that you might encounter as you start to make inquiries at various fulfillment companies. Fees vary from one company to the next. Some will charge some fees and not others, and there may be other fees that I’ve not encountered yet, so always be certain you understand the complete pricing picture before making a decision.

Fulfillment Fee

This is the bread and butter of most fulfillment operations. Typically it’s a “first item” fee and an “additional item” fee. For example, it might be $1.75 for the first item in an order and $0.30 for each additional item in an order. In this example, an order going to one person that contained three items would cost $2.35 to fulfill.

Shipping Charge

This charge is usually simply passed on at cost. Be certain you understand the basis for this charge so that you have a good idea what to expect going into the relationship.

Setup Fee

Some fulfillment houses charge a fee to setup an account. Sometimes this fee covers adding products to their system, sometimes it doesn’t.

“Programming” fee (product maintenance)

Many times the merchant pays to setup their product line in the fulfillment companies computer system. This is usually charged by the hour or by the product.

Storage Fee

This fee covers the storage of the product in the warehouse. Some companies charge just for the pallets that they store, while others also charge for the shelf space in the pick/pack area.

Monthly Service Charge

Sometimes this fee takes the form of a monthly (or weekly) minimum, other times it’s simply a flat fee.

Receiving Fee

This fee covers the costs involved in receiving merchandise from suppliers. It can be charged a number of ways, but the most common is either by the pallet or by the product (SKU).

Kitting

This is a generic “catch all” phrase that covers all sorts of manual labor. Kitting is usually billed by the hour, plus costs. Examples of kitting include:

Website Development

Some fulfillment companies are able to provide technical assistance in setting up order infrastructures (shopping carts and order forms), processing credit cards online, and integrating with their infrastructure. These charges are usually billed on an hourly basis.

Returns Processing

This is a fee for receiving and processing a return. It’s usually billed on a per return basis.

Packaging materials

Some fulfillment companies charge extra for packaging materials, while others will include it in the fulfillment fee. Be sure to check.

Order Entry

Depending on the volume, some fulfillment companies will hand enter orders into their system. This is usually billed on a per order basis.

Customer Service

Some companies will charge to answer customer inquiries, others don’t. Be sure to check.

Sales Reporting

Many fulfillment houses offer reporting that will satisfy most merchants needs as a part of their service. Others will charge for it. Be sure to check that your reporting needs are met and that you understand the fees associated with getting the information you require.

Insurance

Sometimes your goods are insured under a blanket policy carried by the fulfillment house, other companies require that you carry your own insurance on your goods while they are in their warehouse.

Questions to Ask

Finally, some questions to ask that just didn’t fit into any other section.

How big is the warehouse

Size can mean many things to many people. You don’t want a company that’s got a warehouse that’s too small to accommodate the product you intend to put in it, however, at the other end of the scale, you don’t want one that’s so big that you’ll get lost in the shuffle, unable to get the attention and service that you require.

Flexibility is a key here. Virtually every potential client I’ve come in contact with has been concerned with whether or not we’ll be able to handle the sudden huge influx of orders that are going to ensue when (not if; when) their product becomes the next pet rock. That’s understandable, and actually, it’s part of the entrepreneurial process. If you don’t believe in your product, who will?? However, from the fulfillment companies’ viewpoint, it’s their job to keep everything in perspective.

They know that “when my product becomes the next pet rock” should be interpreted as “if my product becomes the next pet rock”. Flexibility is the key here: Do they have the “capability” to have enough warehouse space to handle the million orders you’re going to ship each day.

If I secured extra warehouse space for every client that claimed they were going to need it, we would be bankrupt. Instead, it’s my job to make sure that the extra space will be available should the need actually arise. The fulfillment house you pick should have a similar strategy.

How many Employees

See “How big is the warehouse”, as the situation is identical.

How long in Business

While largely irrelevant, I wouldn’t recommend going with a company that’s been around for less than 1 year. This gives them enough time to have worked out the kinks, developed their infrastructure, and assembled a competent staff.

References

This is a key item: can they provide you with references of satisfied customers. Any company should be able to provide you with names of at least 2 or 3 customers who, when you contact them, will simply rave about their service. Even companies that have clients that have been dissatisfied will be able to scrape together a couple that will rave. The more they can provide, the better, but here’s the important part: contact the references!!

Minimum Order Quantities

Many fulfillment houses have minimum volumes that you must be shipping before they will even talk to you. One of the first questions you should ask is “do you have a minimum volume that you require”, because, if they do, you want to make sure you satisfy it before you waste your time asking all the other questions you should ask.

Are they accepting new clients

Some fulfillment houses are not accepting new clients, yet, oddly enough, I can’t tell you how many times I’ve had someone tell me lately that they spent an hour one the phone with this company or that company and THEN they were told that the company wasn’t accepting new clients at that time: incredible. Ask before you waste your time!

Maximums

Some fulfillment houses have a maximum volume that they can deal with. This is a good thing to know up front; be sure to check it out.

Error Rate

Everyone makes mistakes. This is the question you ask and then listen just as carefully for “how” they answer as “what” they say. Also a very good question to ask of references.

Wholesale Distribution

If you intend to ship case quantities to wholesale customers, you want to make sure that the company you choose is capable of doing it and charging appropriately. If a case is 24, and you submit an order for 3 cases, you want to make sure you get billed for 3 “picks”, not 72. Most fulfillment houses will have a way that you can submit such an order and be billed appropriately, but some don’t so be sure to check it out.

Date Tracking

Do you sell a product that expires at some point? If so, do you need the fulfillment house to track it? Be sure they can, most don’t, but some do. It’s much easier if they’re taking care of tracking product expiration dates than it is for you to manage from afar.

Branded Packaging

If you want to ship your products in packaging that has your companies name or logo on it, be sure to check. Some will, some won’t.

How long to check in?

This is commonly called “dock to shelf time” and it’s the amount of time that goes by between when your goods arrive on the fulfillment company’s dock, and when they are “checked in”, on the shelf, and ready to ship. Times can range from a few hours to days, so be sure to check what the average is at the companies you’re considering. Also a great question to ask references.

How long to setup?

How long does it take to get setup and ready to start. With some companies, it’s literally how long it takes you to ship your products to them, with others, it can be weeks or months.

How do you pay?

Some companies give terms, others require that you prepay for their services or provide bank account info so that they can deduct their fees from your account.

Customer Service

Do they provide customer service for shipping or order fulfillment related problems or questions? If so, is it via email, telephone, or both. Make sure you understand what level of service they will provide and what is expected of you.

Information Reporting

What information do they provide to you after an order as shipped? Does it satisfy your needs? Can you get information on the internet, or do you have to call. Can you search for an order by name or order number? Can you track packages to see if they’ve been delivered? The more information you have at your fingertips, the easier it will be for you to deal with inquiries.

Inventory

How is inventory tracked? Is it real time, and, if so, do you have access to the numbers 24 hours a day, 7 days a week? Some companies have sophisticated inventory management systems, and they make the information available to you on the internet in real time. Others have less sophisticated systems that are only available to their staff, or, worse yet, some have nothing at all, and the only way to get inventory figures is to request a count.

Re-Order Alerts

How do you know when inventory needs to be re-ordered? Some companies will send email when your inventory reaches a certain level. Some will even let you set the level on a product by product basis. Others will simply assume that you can monitor real time inventory and keep track of it yourself. Be sure to ask how you will be informed of inventory that’s nearing zero.

Summary

I truly love this business, but then I love challenges. The fulfillment business is a challenging, yet rewarding business to be in. I know that there are quite a few companies out there that share our enthusiasm and dedication to doing things right, but I also get to hear quite a few horror stories each week from people who are coming to us from other fulfillment houses.

But if you study your options, and ask the right questions, I’m confident that you’ll find a company that can do a great job for you, and when you do, you’ll find outsourcing your product fulfillment to be one of the best and most liberating decisions you’ve ever made.

While I’ve tried to cover everything, I’m certain that things will pop up that I failed to mention. When you find one, please let me know!! Send me a quick email at feedback@iFulfill.com.

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