Outsourcing Your Fulfillment: What You Need to Know
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Suzi Nimz, the CEO of Turnaround, a New Hampshire-based fulfillment house, likes to ask prospective customers what they do after one o'clock each day. The reason, says Nimz, is that if they are properly focused on growing their business, "they'll find that after one o'clock they can't get anything done because they have a shipping deadline. So the business owner who thinks it's economical not to pay for a warehouse, and not to pay for pick, pack, and ship services, is the one that generally doesn't have the right focus."
That's why whether you are selling the next Beanie Baby, your band's new CD, custom flooring, or computer monitors, if you want to grow your business, outsourcing your fulfillment can make good business sense.
Supplementing Your Company's Growth
Outsourcing his company's fulfillment definitely made sense to Brad Chase, the president of Progressive Health Nutraceuticals. Chase started his supplement company in 1997, incorporating the business several years later. From the beginning, he knew he wanted to outsource as much as possible.
"The marketing materials I had read [said] that the more time you have to focus on the actual business, the faster and better it will grow," he explains.
Initially, Chase handled his own shipping. But when orders started pouring in and he was spending two or three hours a day on packing and shipping, he knew it was time to outsource. He quickly settled on Ohio-based iFulfill.
"They had a nice-looking Web site and were very responsive," says Chase, who says some of the other fulfillment houses he checked out were slow to call him back. "I've never seen their facility, but I liked what I heard. They gave me a tour of their back-end and how to use the tools, [which were] easy. They worked well with my programmer. And I liked the pricing plan."
Chase has his manufacturer (he outsources that, too) ship product directly to iFulfill's warehouse, complete with labels and barcodes. iFulfill then checks the inventory into its system and picks, packs, and ships it as necessary. iFulfill also handles Progressive Health's customer service and returns.
"I've got a customer service rep over there who takes care of all of my emails and support," says Chase. "They've got access to all of the shipping information, so they can see what happened. It's all under one [roof, which] makes great sense to me."
While you might think that all this outsourcing could financially hamper a SOHO like Progressive Health, Chase happily disagrees.
"They definitely charge a premium, but you have to realize that I'm not paying storage costs. I'm not paying for a warehouse. I'm not paying employee costs or for manufacturing. I don't have to worry about insurance. I don't have to worry about all the headaches that come with employees. I don't have any of that. I've got a couple of good friends who have done it the other way. And you don't realize how much that actually adds up. You think you're paying a premium for the service you're getting, but in reality you're probably getting it cheaper, because all of the little things that you don't really factor in add up on you," says Chase.
When You Need to Focus 100% on Growing Your Business
"Anybody who is shipping product should consider outsourcing the fulfillment, because then they can focus one-hundred percent on marketing and getting more sales," states Paul Purdue, the president of iFulfill. Granted, Purdue has a personal stake in whether you outsource your fulfillment or not, but after spending some time on the iFulfill Web site and speaking with Purdue, you genuinely get the feeling that he knows of what he speaks and truly wants to help you make your e-commerce business a success.
So does Turnaround, which has the catchy URL www.weship4you.com. An outsourced fulfillment evangelist, Nimz explains, "We make it really easy from the pick, pack, and ship standpoint, but you have to be realistic about what your sales volume is going to be and have a really good business and marketing plan. There is an expectation when you outsource fulfillment that you're truly willing to do the work on the front end and market and grow your business. If you're doing this as a flash in the pan, it doesn't do either of us any good."
Remember, It's Still Your Business - So Do Your Homework
Even if you think you have a product that will fly off the shelves, and a business and marketing plan to back it up, before you sign up with a fulfillment house, you need to do some homework-and know what questions to ask.
JupiterResearch retail analyst Patti Freeman Evans suggests that business owners "walk through the facility, sit with the customer service reps, listen to them on the phone, and listen to them deal with multiple businesses within one session.
"You're not going to be the only one that they're helping," she points out. "So you need to feel confident that they're going to support you and your brand and your business to the level that is reasonable to expect."
iFulfill's Purdue is so serious about business owners getting it right that he created "19 Questions You Absolutely Must Ask Before You Pick a Fulfillment House," a PDF you can download for free.
Topics prospective fulfillment customers should absolutely discuss include:
- Finding out if the fulfillment house is accepting new clients
- What kinds of items the facility will or will not warehouse and ship*
- Minimum order quantities, as well as maximum volume capabilities
- What the fulfillment house's error rate is
- What are the fees-all of them**
- Customer service; and
- How the fulfillment house handles inventory and information reporting.
Above all, he says, get references.
(*Both iFulfill and Turnaround will not handle pornographic or hazardous materials. iFulfill does not stock or ship oversized items. Turnaround does handle oversized items but does not stock or ship food-grade items, such as freshly baked goods or chocolates.)
(**Some facilities just charge for shipping. Others charge for shelf space and shipping. Some charge a small additional administrative fee.)
How It Works
Put simply, companies like iFulfill and Turnaround put a link on your Web site, so when someone purchases items and their credit card has been accepted, the order is automatically transmitted (typically via XML) to the fulfillment house. From there, it's entered into their system and alerts the facility what needs to be picked, packed, and shipped, and when.
The process is invisible to the end user and seamless for the merchant.
Customer Service - For You and Your Customers
A full-service fulfillment house should not only have the ability to provide dedicated representatives for your customers but provide excellent support to you.
Turnaround's Nimz likes to tell prospective customers, "We offer everything behind the 'buy' button for e-commerce or dot-com companies. We take small-to-mid-size businesses and startup businesses and allow them to look as big as Barnes & Noble on a startup budget."
Whether its developing a Web site; picking, packing, and shipping; or customer service, "We do as much or as little as the businesses want us to do for them," says Nimz. They do it equally well for smaller startup customers as for larger more established ones.
iFulfill also makes customer care a priority. The company has a dedicated production team just to answer merchant questions. And, for a fee, they will provide your business with a dedicated rep who knows the ins and outs or how-tos of your particular product.
Your Responsibilities as the Business Owner
Just because you have outsourced your fulfillment does not mean you have outsourced your responsibilities as owner.
"It's still the business owner's responsibility to buy the merchandise, make sure it's in stock, present the information on the Web site, market the Web site, market to consumers, and maintain that relationship with the consumers," says Freeman Evans.
Additionally, most fulfillment houses ask or require merchants to have their products labeled and bar-coded before arriving at the fulfillment house, to minimize errors (though most fulfillment houses offer assembly and labeling services, for a price). They also strongly recommend that merchants fully insure their merchandise.
"Just like you wouldn't own a home without homeowner's insurance, you shouldn't own inventory without insuring it," says Nimz.
This doesn't mean fulfillment houses aren't safe and secure. They are more so than most businesses, typically. But when your product is your livelihood, it pays to protect it.
Keeping the lines of communication open is also critical.
"I think it's very important for anyone who's considering a fulfillment house to do everything they can to facilitate the relationship," says Purdue. "In other words, if the fulfillment house needs things labeled and bar-coded, make sure that they're labeled and bar-coded properly. Nobody knows your products like you. So it's important to do, from the very beginning, whatever you can to make sure the relationship runs smoothly. It's a two-way street."
While iFulfill and Turnaround are two of the more established fulfillment houses that specialize in small and mid-sized e-commerce businesses, there are others located around the country. Two of the better-looking ones I came across were Express Fulfillment and Zeetech Shipping. Of course, there is always UPS, which now offers warehousing services in certain markets. To find out which fulfillment house is right for you, visit their Web sites, call, and remember to ask the right questions.
Jennifer Lonoff Schiff writes about business and technology and is a contributor for ECommerce-Guide.com.
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