Posts Tagged ‘fulfillment centers’
Fulfillment Centers: A Business Lifesaver
Thursday, February 21st, 2008
A fulfillment center is a service that is provided by a company that stores, receives orders, packages and then ships orders to the end consumer. First of all, it should be pointed out that a fulfillment center is different than drop shipping, where the retailer purchases inventory from a distributor or manufacturer as customers place orders, and those orders are shipped out to the customer directly from the distributor. Fulfillment centers simply help with the processing of orders by packaging and sending those orders along to the customers.
Why should an organization use a fulfillment center? Is it cost effective? What size should an organization be before using one? The question of whether to use a fulfillment center or not will be specific to your business.
Factor in the cost of your time and/or your employees’ time to process the orders and ship the products, and deal with the shipping companies. Compare these costs to the cost of the fulfillment center - how do the two compare? How much time will you save using a fulfillment center? How much is that time worth to your business?
Let the data make the decision for you. If you move forward with a fulfillment center, make sure to track all costs and do an after the fact comparison to the other options you’re considering. Make sure the decision you make is the best one for your business and bottom line.
What other considerations should be made prior to contracting with a fulfillment center?
First, consider the location of the fulfillment center. They are located all over the country, but it is important that the center you select is close to where your customers are located, not where your organization is located. This will require you to determine where most of your customers are located before you select a center. Your shipping costs will be much lower if the fulfillment center is located closer to where most of your customers are rather than closer to your operation.
Next, determine the size of the fulfillment center, as they are as small as a few employees to organizations the size of UPS. The one you select should be able to handle your order fulfillment needs, including if you have peaks and valleys with your orders, and if the center can handle the peaks when they occur.
When determining if you will use a fulfillment center, look at the different shipping options available and what their turnaround time is for shipping your orders. The shipping options available should be at least what you currently offer. In terms of turnaround time, know the policy of the fulfillment center and if it corresponds with your business’s own policy.
Find out the most effective communication method in case of cancelled orders or a change in a customer’s address. If the center is not available by phone or unable to respond immediately by email, then that could mean lost customers, and lost money for you. Also make sure that you find out the center’s error rate and what they do to rectify any errors. Specifically, will they pay to replace the item or ship at a faster rate the replacement item?
Another consideration would be their order entry methods. For instance, would you be required to forward each invoice to the warehouse, enter the information into their web-based system, or email a spreadsheet with all the orders of the day? Whatever the order entry requirement is will have a direct impact on your business. For instance, while it may save time and money entering the orders directly into a web-based program, that procedure may become less convenient as your business grows.
On the other hand, if you use an email system to forward each individual invoice, this could effect how quickly the orders get shipped out, giving you a competitive advantage. Once again, depending on the volume of your sales, sending spreadsheets at the end of the day with all the orders at once will save time and money, provided you do not mind that the next day shipping will actually be a two-day shipping for your customer. Whatever you choose, ensure that the order entry method meets your business needs and your budget.
Lastly, when choosing a fulfillment center, interview both references and a warehouse staff. Finding the right center for your organization at the price you can afford is imperative for the future success of your organization.
Tags: fulfillment centers, larry Slusser, management, processing orders, shipments, shipping
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