As with shopping for most business services, the stakes for selecting an outsourced fulfillment services vendor are extremely high. The selected fulfillment company will store all of your product, pick and pack shipments to customers, and generally serve as the entire back end of your company. This is an enormous responsibility, not to mention that if things end up going wrong, changing providers is beyond difficult. So choosing the best fulfillment firm for your specific needs that will perform high quality work is critical to not only the success of your business but also the minimization of any potential disasters or headaches with logistics. So with such an important decision on your hands, what are the most important things to look for in a provider? Take your time selecting a provider and put them through the below tests in order to find the best company.
Ask For Customers and Referrals
This is one of the most frequently used tactics for selecting a service provider, so you should definitely include it on the list. However, be careful not to give it too much weight in the decision. Providers can give you references for their happy customers, which may or may not be a good indication of your company’s success with their service. Ask the references if they’ve experienced any challenges with the provider and attempt to get insights into how the vendor performs when faced with challenge.
Ask For Credentials and Certifications
There are numerous credentials, awards, and certifications for third party fulfillment companies. Some credentials and certifications are relevant for certain types of commodities, such as food grade commodities. Other awards are given to fulfillment companies for exemplary service in the industry. Ask the potential provider if they have any awards or certifications. While absence of these indicators isn’t the end of the world, understanding each company’s accomplishments will help you with your decision.
Even though warehousing and shipping seems like a relatively simple operation, there are so many factors that make it quite complex for many businesses. For example, companies with unique requirements, kitting projects, and a high number of SKUs are just a few of the examples that can make this seemingly easy function difficult.
It should be of no surprise that many of the companies out there have trouble when it comes to routinely and accurately shipping products for customers. So, take a critical look at anyone that you consider, because you don’t want to be caught behind the eight ball with shipping errors.
How much experience a company has is a critical factor for success. After years of experience and seeing a multitude of scenarios, fulfillment companies are better able to handle new challenges and operate more efficiently – which leads to lower costs of service. And don’t forget to ask for customer references!
Pricing in the Form that can be Compared
Fulfillment houses are notorious for offering complicated pricing structures that are especially difficult to compare among competing proposals. First and foremost, ask each company to provide ALL pricing information, so that there are no surprises. Furthermore, make sure that you get some mock shipping charges so that you fully understand the price of shipping that would be passed on to your company. Finally, with regard to pricing, ask as many questions as necessary with each provider so that you fully understand their pricing enough to compare them with other companies.
Of course, many would argue that the company with the lowest prices would be the best way to go. Sometimes, however, you get what you pay for. Use your common sense — when a company comes in much lower than others, you might want to consider why. If something seems too good to be true, it probably is. Furthermore, quality is extremely important. For a company to provide high quality services, they won’t necessarily be the cheapest company out there. Some of the fees may include a minimum fee, storage fees, and pallet fees. Ask questions and compare fee structures.
Tour of the Facilities
There’s no better way to get a feel for a company than to physically meet with them and tour their facility. This may not be possible in some instances, but it is preferred. By visiting with the company, you’ll be able to meet staff, see with your own eyes just if the warehouse space is organized, and get a feel for the company. If you’re considering using companies out of your area and can’t visit them, try to replace a site visit with phone conversations and a video tour of their facility if relevant. Nonetheless, you’ll no doubt be able to gauge whether or not the facility is clean and well organized just by getting a quick walk through.
One way or another, also be sure to get a good feel for the people that you would work with. These will be the individuals that you interface with for day to day operations and when problems arise – so it’s important to have similar values.
Size of Facilities/Number of Employees
Check into the size of the facility and number of employees to get a feel for the potential vendors’ ongoing viability and experience. Again, this isn’t a complete deal breaker if the company is smaller than other options, however, you should be aware if the company’s owner is picking and shipping orders, as the vendor may either be more of a start up company. This will be a risk factor for you to consider amongst other alternatives. Newer businesses might offer more flexible pricing and terms, but may not necessarily have the experience required for more complicated projects. On the other hand, some of the more established firms may be overly expensive and geared more towards businesses that ship in high volume.
Ensure employees care about the quality of their work. This facility will be an extension of your business and are a link to your clients. Do the employees handle your merchandise with care? Are they well trained to avoid errors?
Location of the Facility
Location is a critical factor when making a selection for fulfilment provider. It’s usually a function of where your product is manufactured or procured and where your customers are located. Many companies unknowingly believe that it has to be located close to them – which may be helpful if you are more “hands on” and would prefer to keep tabs on your partner while building a closer relationship. But keeping an open mind will open up avenues that could lead to increased performance, lower costs, and less headaches.
Insurance/Free Trade Zone
Especially if your commodities are expensive, you’ll want to make sure that the fulfillment company has adequate insurance to cover the contents of its customers. In order to protect yourself, you can ask to be added as an additional insured under their policy. Furthermore, some companies prefer to bring their product in from overseas into a free trade zone facility. Only a select number of companies have this status, so it’s something you’ll have to dig into in order to find out the specifics.
Types of Commodities Stored and Shipped and Specialization
Many fulfillment houses specialize in processing orders for certain commodity types. Because they’re specialized, they can, in theory, produce better results for their clients. For example, companies that specialize in apparel warehousing may have unique equipment to be able to store and ship these unique products better than a general warehousing facility. Depending upon your product type, look into the types of commodities that each prospective vendor targets and factor this into your overall decision.
Length of Contract
Historically, warehousing companies have used multi-year agreements in order to hedge some of their risk of investment, and add price discounts as an incentive. Of course, these agreements add risk to you, since you’ll be locked into using their services or pay penalties if the agreement is broken. On the other hand, some companies don’t require any term to their agreement whatsoever. Be sure to check into the length of each potential contract so that you understand all of the ramifications of your decision.
Who Pays for Errors
It’s not a matter of “if” the chosen provider will make an error shipping, but rather “when” the company will make an error. The high quality companies just don’t make many of them! So do yourself a favor and find out who will pay for errors when they take place. Highly credible companies will take ownership of any errors that take place and will have a methodology for correcting errors.
Shipping Services Offered?
For some companies, it’s important to secure the best freight rates possible in order to pass on the lowest shipping totals to customers. And for companies that ship LTL (less than truckload) and full truckload shipments, costs can be significant. So learning whether or not the company has it’s own fleet for shipping, has contracted rates for small package and LTL shipping, and what discounts will be available are crucial to making the best decision.
Demo of any Technology Needed
Many online merchants and ecommerce sales companies have a great need for a high tech oriented fulfillment provider. In this case, they may need to integrate their shopping cart with the 3PL’s warehouse software, receiving real time inventory and reporting information, and get customer’s shipping tracking information each day. Some fulfillment firms are more equipped to handle these specific needs, so finding out if the potential provider offers e-commerce fulfillment services will be a make or break decision.
Try and get as much information as possible about the systems in place that ensure efficiency and customer service needs. When was their computer system last updated? Do they perform updates and maintenance on their systems frequently? Can they integrate with your shopping cart if applicable? What types of reporting is offered?
Processes and Procedures and Performance Metrics
Most high performing organizations have standard processes and procedures in order to ensure limited errors and successful operations. Nowhere is this more important than in logistics. If a potential provider doesn’t have a documented listed of procedures, it should serve as a relatively large red flag. Furthermore, the best companies will have processes in place to measure their performance and a schedule for reviewing their performance with you, at least on a quarterly basis. You can ask each provider for historical accuracy rates. This will give you some idea of how well the company performs in terms of on time shipping and accuracy of shipments to customers.
Just as in any other industry, businesses come and go in the fulfillment and shipping industry. One good way to make sure that your fulfillment partner will be here to stay is to conduct some sort of financial viability analysis on the company. For example, you can either run a credit check on the company or ask the firm for some financial information. Your main objective is to make sure that they’re a going concern, with a solid financial foundation for the future.
The level of service you get from a fulfillment company will be a function of the size of your deal and the type of provider you choose. In other words, if you have a high volume of storage or orders, you’ll probably command a great deal of service and attention. However, if you’re a smaller company, then you may have to search more strategically for a public warehouse that will give you the best mix of service and pricing.
Volume of Orders and Storage
One of the things you will have to consider when you are choosing a fulfillment company is the size of your business and whether it truly makes sense for you to work with one of these companies, at least yet. Some of the fulfillment companies out there have volume restrictions in place. This essentially means that if you are not selling a lot of products, they might not want to work with you at all because they do not see it as financially viable for them.
However, there are also plenty of fulfillment companies out there who are more than willing to work with startup companies who are still growing.
Size of the Products
Another factor when choosing your fulfillment company is the size of the products you are selling. Some of the companies, for example, are only capable of handling smaller items. They might not want to handle larger products. Others might only want to deal with larger products. Make sure the company you are considering has the capability and desire to work with with the items you sell whether large or small.
What types of sales channels are offered through the fulfillment company? Are they providing direct to consumer fulfilment? Do they provide fulfillment to businesses, or to employees through a store? Understand the sales channels your company needs and then find a company that can handle them for you.
Flexibility and Additional Services
You should also think about the types of services you might need. Is everything you do rather straightforward and simple, or do you often need to have kits or bundles put together? What about your company and your products might make it more difficult for the average fulfillment company to handle? Understand what additional services you might need and how flexible you need the fulfillment company to be. This will help to ensure you are working with the right company that “gets you” from the start.