There's a certain point in every successful eCommerce business where order fulfillment reaches a tipping point. Once you are selling a certain number of units you have to make the decision to either 1) rent a large warehouse space and hire a team internally to fulfill orders, or 2) make the decision to outsource that part of your business and partner with a 3PL for fulfillment services. When deciding whether to hire a team or outsource fulfillment entirely, one of the biggest questions an eCommerce entrepreneur has is about the costs associated with fulfillment. For business owners that don't have experience working with 3PLs or fulfillment centers, it can be intimidating thinking about the cost of fulfillment services and what kind of things they charge you for. Although every fulfillment center/3PL has different pricing structures, most companies charge for the same basic services - let's take a look at some!
Pretty much every fulfillment center or 3PL you talk to will charge customers on a per-item picked basis. You will usually see a charge for the first item picked for shipment, and then a charge for each additional pick per order. For example, if a customer orders three items in one order, and your fulfillment house charges you $2.50 for the first pick and $.75 for each additional pick, then your total pick charge for this three-item order is $4.00.
Most 3PLs or fulfillment center's storage fees will consist of a monthly charge based on the number of pallets you store, the number of pickable bins where the individual SKUs are stored, and/or based on shelf space. There are all different ways fulfillment centers structure storage fees - some won't charge for bins and will for pallets, or might charge you solely on the space you occupy. It's not uncommon for some fulfillment houses to charge based on the amount of cubic feet your products occupy in the warehouse.
When working with a 3PL, you will usually get charged some receiving fees when you ship your freight to your fulfillment partners' warehouse. The exact way that your are charged for receiving, of course, will be different at every fulfillment center. But normally you will see a charge per pallet received, a charge per loose carton or box, and/or a fee for unloading a full container truck that is delivered. Some fulfillment centers offer way more friendly receiving related fees than others, so be sure to ask plenty of questions about receiving costs when interviewing your potential new fulfillment center.
Unfortunately, the fulfillment center you're going to work with won't cover your shipping bills out of the goodness of their heart (shucks, I know), so you will still have costs for your shipping labels, tape, boxes, and/or polymailers. The nice part about working with a fulfillment center is that you are able to use their shipping rates, which are better than standard shipping rates, saving you money in the long run. Additionally, if you are lucky enough to work with a 3PL that provides tape, labels, and dunnage at no extra cost (ahem, PackYak), then you are about a million miles ahead of the game. But at a minimum, you will probably be able to save on shipping related costs like boxes and tape through your 3PL partner and access their better pricing on such necessary materials. Your actual shipping label costs are calculated based on the carrier you're using, the weight of your product, the dimensions of the package, and where in the world the item is being shipped.
Fulfillment centers ship a lot of packages - because of that they can get you faster, cheaper shipping solutions than you previously had access to.
Not all companies handle returns for eCommerce customers, but if they do, you will usually see some fees associated with this service. Handling returns can be a time consuming process for 3PLs, so if they handle them, there's a good chance there will be healthy charges for handling this process for you. On the plus side, it is much more convenient in a lot of cases for your 3PL to handle your returns since they are warehousing all of your products.
A 'special project' sounds vague and mysterious right!? It's alright, it's not as concerning as it sounds - it's just a task requested of your 3PL that is outside of the typical scope of work for your account. For instance, if you normally just have your 3PL pack your eCom Widget and ship it out, but you have new tags that you need attached to all of your already inventoried product, then the process of putting on the new tags would be charged as a (you guessed it) special project. Some examples of special projects could be dealing with inventory shipped in incorrectly, Fulfillment by Amazon prep work (if needed), inventory counts, or re-barcoding your products. More often than not, companies will charge for special projects on an hourly basis. Also be wary - not all fulfillment centers are willing to perform special projects or custom tasks like the ones described. So if you run a business that requires some special attention you'll want to make sure you find a fulfillment center that can accommodate you. PackYak is proud to field custom solutions and special projects - talk to one of our super knowledgeable fulfillment Yaks today and get a free quote for services.
When comparing the cost of doing order fulfillment in-house versus partnering with a fulfillment center, always take a second look and be sure to consider the amount of time you spend fulfilling orders into that equation. The idea of utilizing a 3PL can seem intimidating or too costly, but in a lot of cases you end up saving time and money in many aspects of your eCommerce business that you hadn't even thought of. When considering your options for what fulfillment center may be the right fit for your company, it's important to get a comprehensive breakdown of costs and to have a detailed conversation with the 3PL rep about what the partnership looks like. And always ask and be aware of hidden costs as well! There are some horror stories out there about some fulfillment centers that blindside your business with hidden fees and charges that could put you in a tough spot. You want to make sure you have a very clear picture of what the costs will be so that you can make the right decision for your business. Partnering with a fulfillment center isn't right for every business - but if you want to explore that option and see if it's a good fit for your eCommerce store, you can always contact PackYak and ask all the questions your heart desires. Fill out a quick form and we'll give you a call! For more information, you can use our pricing calculator to give you a good idea of what your fulfillment costs would be in a PackYak Partnership.
That's all for this week's edition of The New Yak Times, tune in next week and subscribe below!