23 Factors to Consider When Deciding to Outsource Order Fulfillment
The decision to outsource order fulfillment is a critical one for many growing e-commerce operations. Businesses have many order fulfillment service provider (SP) options. Each SP has a unique service offering and ways of conducting business. The steps below will help guide your decision-making process so your ecommerce company can outsource order fulfillment profitably and in line with customer needs and expectations.
1. Using an online search, identify at least 6 SP’s that meet your needs and requirements. That may be a single facility for nationwide coverage or an SP that has multiple regional facilities that serve 90% of US in 2-days via ground delivery.
2. Gather up your product characteristics such as box sizes, weight, number of SKU’s, etc. and be prepared to quickly advance the information to the prospect SP.
3. Contact the SP’s online and track their response time. SP’s that do not respond quickly are not good candidates for a partnership.
4. Quickly share your projected volume and shipment characteristics with the SP to determine fit.
5. Gauge the interest of SP in your business. Do not press an SP that is too busy to accept new clients. Work with an SP that is truly interested in, and hungry for your business.
6. Once there is mutual interest in proceeding with the evaluative process and negotiations, set a timetable for the advancement of the negotiation process and only select an SP that facilitates your negotiation timetable.
7. Bigger Does Not Mean Better: There is nothing wrong with using a small SP that demonstrates their commitment to service quality.
8. Robotics: Only a small number of fulfillment centers are fully automated; a manual, hand-picked product is still the norm.
9. Technology: The SP must demonstrate they possess the technology experience to support platform integrations on their end, and report data back to you, the client, via the required data format.
10. Transportation Pricing Options: The SP should be willing to allow clients to use their own carrier pricing programs and offer the option of reselling their highly discounted rate programs to the client.
11. SLA: Establish a measurable, service level agreement with SP.
12. Dashboard Reporting Capabilities: Realtime, dashboard style reporting functionality that reports performance is critically important for measuring SP service levels and compliance. This should include real time inventory status.
13. Order Cut-Off Times: SP should be able to support late order cut-off times.
14. Carrier Pick-Up Windows: SP needs to accommodate late carrier pick-up windows and client must be prepared to tender shipments to the carrier at any time during the scheduled pick-up window.
15. Carrier Relationships: SP should have close relationships with all primary carriers.
Critical Contract Elements
16. Price: This will be your primary consideration for selecting a SP.
17. Short Termed Early Termination Options: Stay away from these types of terms as it gives the SP to much pricing power over the client.
18. Payment Terms: Ask for 30 days although the SP may require 15 days payment terms. Whatever the payment terms are, pay the SP on-time, which will help to maintain a solid relationship.
19. Deposit Requirement: This is becoming more commonplace to protect SP against non-payment.
20. Service level quality vs. price: There should be a balance between service prices and quality of service offered. Cheapest is not best, Expensive is not always better.
21. Communication: There is nothing more important than selecting a fulfillment partner that has demonstrated a focus on the importance of communication throughout the negotiation process.
22. Teamwork: Fulfillment is about the client’s employees and SP personnel working together to solve problems because bad things will happen. The importance of teamwork must be a priority for the SP and necessary in resolving complex problems and issues.
23. Trust: As in any business relationship, trust between the client and SP is critical to establishing an outstanding service experience for your customer. Stay away from a SP that you believe is misrepresenting capabilities.
Dean Maciuba is the Co-founding partner of Crossroads Parcel Consulting and contributing editor to the Newegg Logistics blog. This content has been republished with the permission of the author and Newegg Logistics, where the article originally appeared.