Are you ready to outsource your business’s shipping fulfillment to a 3PL company but aren’t sure which one to hire? As with any partner in business, it’s critical to choose a reliable, top-notch provider that will seamlessly deliver the same quality of service as you. The right one won’t drop the ball and will free up resources so you can focus on other areas. But where do you find the company that can fit your needs to a “T” when you don’t have any company that you’re currently aware of that can meet your needs? Should you:
- Do a Google Search for Top Fulfillment Companies, looking for online referrals or lists of the best fulfillment centers?
- Investigate the new wave of Airbnb of Warehousing Space online marketplaces for warehousing services?
- Search for a company on your own, contacting company after company until you find the right fit?
- Use a service that can connect you with vetted matches like FulfillmentCompanies.net?
Google Search for the Top Fulfillment Companies?
Searching Google for the “top 5 fulfillment company” or “best e-commerce fulfillment companies” is often the first step business owners take. However, while Google can provide you with many of the answers you need on a wide variety of topics, there are a few things to be wary of with this search.
The first question you should always ask yourself when looking at a source for fulfillment recommendations is “why are they doing this”? In most cases, we’re all businesses so it’s normal to understand that there would be a profit motive. However, is that all there is to it? Is there a desire to truly help people make the best decisions, or is it simply to earn the most money possible? Is the payment received justifiable and does the receipt of payment in any way impact the fairness of the selection? Is the review process legitimate?
Currently, there is a trend where many publishers are curating lists with the “top” 3PL companies and you will find several of these lists when using search engines for research. However, with the extensive amount of companies available, these lists aren’t telling the whole story.
Some reports state that there are upwards of 20,000 fulfillment warehouses in the U.S., 20,000! These warehouses vary greatly from one to the next regarding the types of products and services they offer, the conditions of the warehouse climates, the size of their ideal customer, and much more. While select providers will suit your needs perfectly, others will be too big, too small, or unable to provide the services you want.
What You Should Know About Top Fulfillment Company Lists and Reviews
In theory, a top list would be a helpful resource to narrow down the options. The company creating this list should be very knowledgeable about all of the 3PL companies in the country of interest and they should have researched the pros and cons of the companies. Further, they should identify the different specialties, vet the companies for legitimacy and quality, and create unbiased lists that consider the companies that are best for a variety of needs.
However, that’s not generally how it works.
An Alterior Motive..
In most cases, the top lists show the largest and most expensive companies. It’s not uncommon for companies to pay to be featured or ‘sponsored’ on a top list, or have some sort of compensation deal. So you often find a biased list of companies that are great at selling and can afford to pay, rather than those that are truly best at providing the 3PL services for specific needs.
The Problem for Small Businesses
This is of particular concern for small businesses that need more localized solutions. The smaller 3PL companies can’t always compete with the bigger ones and therefore don’t gain as visible of an online presence. Unfortunately, small businesses can then end up paying for more than they need. For example, a small business doesn’t need a global company that specializes in international shipping but may find those as the #1 company on several lists.
Some Examples of Best Fulfillment Services Lists and Why You Should be Wary
One common “type” of referral site that you will stumble upon in a Google search is the directory listing. It can be a website that you’ve never heard of or even a website that appears to be very trustworthy and professional, like the one at pFind.
But upon further inspection, you can clearly see that there is a spot on the website to “submit your product”, which allows a company to pay a fee to list their site. There isn’t necessarily anything wrong with a listing of sites, but it’s important to know that all of the information is directly from the warehouse, and that these sites really don’t hold any value in actually “vetting” the vendors. The only value that is offered is that it gives you a starting place to begin your search. At the end of the day, it is a “pay for play” resource and is not unbiased and no ‘thorough vetting’ is performed on the warehouses.
Here’s another example of the paid listing at Pandia.
They list only 10 of the thousands of warehouses, and of course, list only cursory information that can be found directly on the individual fulfillment company’s website. This is a great example of a very likely “pay for position” resource, with ShipBob winning the top bid to be placed as the TOP PRODUCT.
E-commerce Platforms is a good example of a site that has a top fulfillment company list. At first glance, they at least seem like the operate in the right wheelhouse – they provide information on e-commerce platforms so it’s at least in the realm of possibility that they could potentially offer some substance to some thoughts around fulfillment companies. But after a small review of their page, you can see that their top list of “international” fulfillment companies includes Red Stag and ShipMonk (two companies without international locations), 2 actual fulfillment companies with international locations, and two shipping software companies that don’t even offer fulfillment services. Not so surprisingly, there is only a small paragraph about each of these supposed Top 6 Fulfillment companies, offering no depth of information. This is a prime example of a potential “pay for play” article. Need we say more?
If you’re looking for a truly unbiased recommendation (we say this completely ‘tongue in cheek’), then Shiphero offers a 3PL marketplace (of a whopping 20 providers). Yes, Shiphero – a company trying to earn money by having companies use their warehouse management system (which can be used by companies but was actually built specifically for 3PL warehouses) is offering a listing of “top 3PL warehouses” that USE THEIR 3PL WAREHOUSE SOFTWARE!! Interesting…to say the least.
Not only does “recommending” companies that use their warehouse management system negate any potential unbiased component to their recommendation, but it also begs the question – are they getting paid on a commission basis for any business that they bring to these warehouses that they’re recommending. This is a recipe for disaster, as the reviews are biasedand will potentially cost you more than choosing a company direct without a middle man.
Some websites may disguise their list of TOP Fulfillment Centers by using informational content to “lure you in”, only to ask for your contact information to view their listing of top fulfillment centers. We found one example of this at Launch Grow Joy, where the author promised to deliver her Top 10 Fulfillment Centers to your email address, including her Personal Favorite, once you provide your contact information. The biggest red flag here is that she’ll be providing you with her personal favorite fulfillment company that she uses (or pays her the most money to be recommended), without knowing anything at all about your company or specific needs. To the website’s credit, the article does provide some useful information about proper selection of a fulfillment center, including the necessity to look for location, credit ratings, years in business, customer testimonials, etc. But the “giant elephant in the room” question remains – how can anyone recommend specifically one company for every company of all different shapes and sizes? We simply don’t know of anyone we would recommend for every case.
Apparently, e-commerce fulfillment has become so popular these days that PC Magazine (yes – the technology product and service review site!) has entered into the mix for recommending their top 10 list. The first red flag is that e-commerce fulfillment is a far different service than most of their recommendations. It’s understandable that they would review and recommend antivirus software, mobile phones, laptops, cameras, and even website hosting…but e-commerce fulfillment services? That is interesting to say the least.
How do they screen? According to PC Magazine, the most important factors when making a decision are:
- Lowest price?
- Is there a trial period?
- Do they have monthly plans?
- Is there a mobile version (we assume this means their warehouse management system and reporting?)
- Do they have minimum order requirements?
- Do they have international warehouses (by the way, there are only a handful of US based fulfillment companies that have international warehouses out of all of the thousands of US based fulfillment companies)?
- Do they have refrigerated facilities?
- Do they have multiple warehouses?
- Do they offer 24/7 support?
- Do they offer chat and phone support?
Furthermore, when you read further into their individual reviews of specific companies, you see that the level and depth of their screening is only surface level at best. The review page for each of the 10 recommendations contains a brief description of their company, a paragraph on their pricing which doesn’t at all describe the full details of their pricing structure, a sentence about where they’re located, a few paragraphs about their inventory and order system, and then a paragraph about why they recommend this company. The most alarming aspect of this review is that it doesn’t contain any information that you wouldn’t be able to get directly from the company’s website.
Our biggest “pet peeve” with these types of lists is that the companies usually have established a bit of “credibility”, meaning that users will typically believe what they say because they view it as a trusted source. Because of this, most people will unknowingly trust the source despite not being very reliable. Unfortunately, this can be very misleading for companies making a huge decision like who to use for warehousing and fulfillment.
One final common type of warehouse listing comes in the format of a listing of warehouses that is associated with a particular product or service company. In the below example from ShipStation (a shipping software company), some product or service providers will list some of the warehouses that use their products and are familiar with them. Common services that offer this type of referral page are shipping companies and web store providers.
For businesses that use the particular product or service, there is some value to potentially speaking with their references, since the 3PL warehouses will likely be familiar with the software or service and thus are competent to help at least on a surface level. However, it is still critical to ask the companies if there is an additional fee for using them rather than going to a company direct, and you’ll still want to perform your own due diligence to ensure that the companies are a “match” on other critical components to your needs.
What You Can Learn From the Top Fulfillment Company Lists
With all this being said, the top lists can provide some useful information. For example, if you don’t know much about what 3PL companies can offer you, the list can help inform you about the range of services available. You can also get ideas on how to handle your growing logistics needs in the future.
However, to get the full picture, including a large number of great companies that don’t make these lists, you need another resource.
Online Marketplaces – The “Airbnb” of Warehousing Space
In the last few years, there have been a new wave of warehouse marketplaces that have popped up as well. These companies claim to be the Airbnb of Warehouse Space. On demand warehousing has become the “cool phrase” to throw around in the logistics industry, making an otherwise boring industry sound sexy. Venture capitalists are throwing millions of dollars at start-ups such as Flexe, Stord, and Flow, and even UPS has recently started their own Ware2Go platform.
Essentially, they’ve created redundant software (we say “redundant” because 3PL warehouses already have this type of software available if you end up using a 3PL warehouse through their service, which in most cases you will) that allows any warehouse to participate in their network, using a single warehouse management and order tracking system. Because they’re a marketplace, they don’t offer warehousing services – they just simply provide a single technology platform that every participating warehouse uses. At first glance this sounds interesting, but it comes with many downfalls.
You’ll Pay More or Receive Less Service
The only way these Airbnb of warehouse marketplace companies work is to charge the warehouse a commission – oftentimes 10-200% of sales (Yes, we’ve seen cases where they’re charging 2 times cost of the 3PL fees!). While they claim that they’ve negotiated better rates with the warehouses and are therefore able to pass enormous savings onto you, the reality is that it’s just not possible in this industry. Warehousing is such a high volume, low margin business that there’s just really not that much room available to layer additional commissions into the equation.
Either one of two things is happening:
- They are forcing the warehouse to earn a very low fee and then marking the cost up significantly to obtain their desired margin
- They’re getting average rates from the fulfillment warehouse and then marking the cost up marginally to obtain their desired margin
If the on demand company is forcing the warehouse to earn less than what they’d normally charge you, it’s important to ask yourself a very important question:
Is it a smart business decision to pay someone less than what they truly feel they need to earn in order to properly service your account? Do you think this will negatively impact your service level? (we’ll help you here – YES it will negatively impact your service level!)
To more clearly understand how negotiated rates in the warehousing world may not warrant rates that are competitive with direct rates from a specific warehouse, let’s further inspect negotiated shipping rates of warehouses and compare that to Air BNB warehouse solutions. In the case of shipping rates (for example, small parcel FedEx rates), a warehouse will go to FedEx with the combined volume of shipping all of their customer’s orders. In some cases, these volumes can be very high, and FedEx will willingly offer them discounted rates in order to win “all” of their business. In the case of an Air BNB solution that works with 500+ warehouses (this is the claim of many of them), each warehouse will only be awarded certain volume from the Air BNB warehouse provider, rather than the entire volume of fulfillment and warehousing across the platform. Therefore, the negotiated rates with each specific warehouse will be far less than if one warehouse was to run all of the volume through their one warehouse.
To further illustrate this concept, let’s take the case of a fulfillment warehouse in Atlanta, GA. Atlanta GA is a decent market for a warehouse in the southeast, but based upon our experience of requests throughout the US, it’s a less commonly requested area for warehousing. Thus, the potential deal flow in Atlanta will only be a fraction of the deal flow of warehousing opportunities throughout the US, and certainly less than either other single markets, such as Los Angeles or Chicago. Therefore, a warehouse in Atlanta will not be given all of the warehouse deals that the Air BNB solution has in its pipeline, and rather will only be given a small fraction of the deals in their pipeline. Ask yourself this simple question – Can the Air BNB solution really convince the Atlanta warehouse to give them bare bones pricing when it’s only giving them a small sample of business in their local market (especially given that 3PL warehouses is such a low margin, high volume business)?
There’s only one way – for whatever space they have available in the corner of their warehouse and with the thought that they probably won’t service the business to the degree that they service their other customers that operate at a better overall margin.
A few tangible examples of how the pricing structure might work out:
- You pay $10-15 per pallet for storage, the local warehouse gets $5, and the on-demand warehouse gets $5-10 (remember – the on-demand warehouses have to provide a return to all of those shareholders that invested millions of dollars in their idea!)
- You pay $7-12 per pallet for in and out handling, when the average for the industry is typically around $3-5
- The on-demand warehouse prices fulfillment at $1.85 per order plus $.85 per item (which is lower than the fulfillment pricing industry averages we uncovered during our last survey), forcing the local warehouse to operate well below their normal operating margin, which makes one wonder are shipping prices used as a cover for lower fulfillment fees (see below…)
- Promising a very non-detail-oriented “shipment fee per shipment”, which is most likely marked up to a degree to offset the lower fulfillment fees
Bottom line, you’ll be paying higher rates than if you do a good job of negotiating direct with a warehouse yourself OR you’ll compromise service!
Furthermore, each warehouse already has their own warehouse management system, their own processes, and their own procedures – so using the warehouse marketplace software is secondary to their core business. Add to this fact that they’re more than likely earning less money on your account than another account they acquired through their own marketing, and you have a recipe for disaster – they don’t have as much incentive to provide you as good of service as a customer they got on their own. Margins are even smaller for any companies they acquire through online warehouse space marketplaces, so your service will suffer in the end.
Can a Company that isn’t a 3PL be a Quality 3PL?
We haven’t even touched on the topic of non-3PL warehouses that opt into the Air BNB warehouse network. These companies have an entirely different business (for example, they may sell clothing). By opting into the Air BNB warehouse network, they figure that they can use some of their excess space and make a few extra bucks. Do you really want someone that isn’t necessarily well versed in 3PL warehousing to handle your goods? Also, do you really want someone taking care of one of the most critical aspects of your business that is really only offering it to make extra money on the side? In cases where the warehousing is very simple and non-critical, this might work, but we have yet to come across many e-commerce businesses that would consider their business simple or non-critical. In other words, there’s a significant different between someone letting a house guest stay in their home for a weekend and a company using it’s spare time to run fulfillment operations.
Hybrid On-Demand Warehousing and Fulfillment Services
There are other companies that offer a fulfillment software that you can use along with one or more of their fulfillment warehouses in their network. An example of this is Whiplash – a company that provides the software and access to fulfillment warehouses and operates in a very similar fashion to on-demand warehousing. All of the same problems come into play, from pricing challenges to service level issues. It’s important to understand the potential challenges of using this type of service before signing on the dotted line. In our network of vetted fulfillment providers, we have some that have had some experience with companies such as Whiplash. When we spoke with them about it, they indicated that we were “spot on” with our assessment of pricing and service challenges. In fact, we found out that companies of this nature will charge a fairly low rate for fulfillment, giving the fulfillment company about two-thirds of the revenue – forcing them to provide service at a lower price than they would normally even charge their standard customers. It should come as no surprise that they choose to provide a higher quality service to their direct customers.
And to boot – invariably the customer “finds out” that the service is being provided by a local fulfillment center, looks up their contact information online, and then contacts them direct for any service issues and questions because the time lag for answered questions is too long (e.g. they have to contact the on-demand fulfillment service, who in turn has to contact the warehouse, who in turn has to answer the on-demand company’s questions, which can finally be conveyed back to the customer). But the local warehouse can’t afford to provide additional service at such a low margin pricing structure and so everything falls apart.
When Does On-Demand Warehousing Work?
In our opinion, on-demand warehousing works for one scenario – temporary or seasonal overflow scenarios where it’s simple pallet in/pallet out without any sophisticated needs or when you simply can’t find any viable options in a local market. In this case, it’s very difficult to make a mistake. The on-demand warehousing provider does offer some value by serving as the connection between you and a network of potential warehouses with excess space. But when things get any trickier than this, there are far too many challenges that can ruin performance. Even still, temporary or seasonal warehouse space will cost you more almost 100% of the time using the on-demand platform than if you were simply able to find the warehouse space on your own.
Comparing Fulfillment Centers by Contacting Each Warehouse – One at a Time
Of course, there is the option of contacting fulfillment centers one at a time, trying to vet them yourself. But in order to make sure they’re a good company, you’ll have to contact current and prior customers, view their online reviews and BBB reports, investigate their financial information to see if they’re an ongoing concern, speak with them in-depth to determine if they have the right experience for your needs, demo their software and technology, and on and on….
FulfillmentCompanies.net – The Most Comprehensive List of Fulfillment Companies
FulfillmentCompanies.net saw the gaping need for an unbiased, comprehensive curation of 3PL fulfillment companies. From small to large; global to local. It is a colossal task for one person to wade through thousands of companies and identify the right ones for them, so we have dedicated our business to doing that work for you.
An Unbiased Extensive Source of Fulfillment Providers
We have performed exhaustive research to create a list of top fulfillment services companies. An important part of our process is thoroughly researching and analyzing each company according to our 5-point analysis. We ensure that each company meets our standards, checking their financial stability along with reviews from customers. If a company isn’t up to par, they will be rejected. As a result, we have a network that can help many types of businesses with varying needs.
How We Find the Right Fit for Your Business
To find the right fulfillment company for your particular business, you simply fill out one form. After that, we will go to work to match your business with compatible companies and will provide you with quotes. Note that this service is free. We charge all fulfillment providers the same small per lead fee, so there is no bias – and absolutely no way that it will impact the pricing they give you. We will not recommend one over another for any reason except compatibility with your business needs.