Small Businesses: Understand Warehousing Fulfillment Before You Sign That Contract
In a rush to push their product to market or to secure the lowest warehousing cost, many small businesses jump into a contract with a warehousing and fulfillment company without fully understanding what they are signing up for. Unfortunately, many times, the small business will realize their mistake after large amounts of money are already spent or they are trapped in a long-term contract. With a little knowledge on how fulfillment companies work, a small business can be much more prepared to choose a provider that will not only do the job, but also make the business run efficiently.
There’s More to Finding a Fulfillment Company than Low Pricing
In many small business owners’ minds, cost is a number one concern when choosing a warehouse provider. Oftentimes, they’ll simply choose the provider with the lowest costs, believing this is the best course of action for their business. While cost is important, a provider that offers a low cost may also offer poor service, fewer shipping options or more fees than higher priced competitors.
Some of the lower priced fulfillment companies intentionally deceive potential clients by luring them in with low pricing. These introductory offers often change to a much higher price after a specified amount of time, or unexpected fees are added to the price later. Some examples of added fees are packaging fees, start up fees for small business fulfillment, customer service fees, hidden shipping fees or other service fees.
Some companies offer lower costs with the signing of a multi-year contract. While you may be saving money, in the long run you may find yourself trapped in an agreement with a company your business quickly outgrows.
When trying to find the best price, it is important to remember there is no standard pricing in the warehousing industry. So, it is imperative that you ask each potential warehouse for a list of all their fees. This list should include storage fees, palette fees and minimum fees. Before you sign, also ask the company to mock up some projected shipping charges so you get an idea of what you may be spending.
Other Important Traits to Look for In a Fulfillment Warehouse
In order to successfully outsource fulfillment, small businesses must understand the warehousing process so that they can adequately manage and hold the fulfillment firm accountable. There are a few particular points that you should consider:
- Many companies specialize in storing and shipping certain types of products. Others specialize in dealing with ecommerce orders while or do better working with business to business orders. Look for warehouses that deal with your kind of product and business type for the best service.
- Check out the company’s technology capabilities. If your business is run online, it is important that the warehouse have 3PL software, real time inventory reports and can provide customer’s shipping tracking information. Ask your potential fulfillment provider to give you a demonstration of their technology services.
- Some warehousing companies own their own shipping fleet, while others do not. This can make a difference in your shipping costs, so be sure to find out this crucial detail before signing your contract.
- A high-quality shipping company will take responsibility when shipping errors occur. Check with your prospects to learn their policies on shipping mistakes.
- Reputation is a key factor when deciding if a company is high-quality. Ask for customer referrals and talk with as many employees as possible.
- The best third party fulfillment centers will have credentials, awards and certifications. Look for these on the company’s website or ask them for a list of their credentials.
- Proper insurance coverage is important if your product is particularly expensive. Find a company that has adequate insurance coverage and then ask if the company would be willing to add your business as an additional insured party under their policy.
- Ask for a copy of the company’s processes and procedures document. If the company does not have processes and procedures guidelines for their company, this is a sign that the company is not a professional, high-quality operation.
Understanding Fulfillment Aids in Effectively Managing a Provider
Most importantly, make sure that you understand how the fulfillment process works before jumping into any outsourced relationship. Many providers would like you to think that by outsourcing, you simply won’t have to worry at all about fulfillment. This couldn’t be further from the truth. In fact, the only way to effectively manage and hold your outsourced provider accountable is to fully understand how fulfillment and warehousing work. Furthermore, understanding all of the intricacies of logistics will give you a greater appreciation for how much it truly costs in order to find a high quality partner. With these cost and operation facts in mind, a small business will be much more prepared to choose a warehousing fulfillment company that meets their needs without any regrets later on.