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When and why does it make
sense for distributors to use
a fulfillment house instead of
shipping orders themselves?
Consider a fulfillment house
when you near your capacity
for growth with your current
resources. We spent time in the
early days of MBG in trial and
error, figuring out if a fulfillment
house was right for us as a
business. Wemaxed out our
1,500-square-foot building quickly,
and if we had hopes of growing
any further, we needed space.
Using a fulfillment house gave
us the ability to concentrate on
what we do best, which is selling
products and programs. Our
fulfillment house not only saved
us time but money when it came
to shipping costs. We were finally
able to stretch our legs and really
see what we were capable of,
which paid for all of our fulfillment
house costs and then some.
How do I send orders
to a fulfillment
house? Can I integrate
through e-commerce?
Many fulfillment houses use
cloud-based technology to make
the flow of information extremely
easy and accessible. The most
well-run fulfillment houses will
have software and an internal
IT department that syncs with
most of the popular online
ordering systems. This is crucial to
creating an efficient and seamless
connection between you and the
fulfillment house.
Do fulfillment houses
usually require a minimum
level of business?
A fulfillment house will ask
you for the EAU (estimated
annual usage) for products being
inventoried and the potential for
account growth. Based on these
facts, they will plan best practices
and pricing for your program.
If you are thinking of using a
fulfillment house, you should
collect this information from your
current business data and analyze
your volume. If the volume
exceeds your own capabilities,
has the potential for growth and
can counterbalance the costs
of implementing the program
(including both time and hard
costs), then this should be an easy
business decision.
What fees should I expect?
Will using a fulfillment
house still allow me to be
competitive on my prices?
When getting involved with a
fulfillment house, expect a setup
charge, inventory receiving fee
(product inbound) and then a
pick, pack and ship fee (product
outbound). If you are bringing
a sizable account with a high
inventory turnover rate, you could
negotiate with the fulfillment
house to waive the setup fee. As
for the inventory receiving fees
and pick, pack and ship fees, you
should plan for five to10 cents per
piece. Any additional requests,
such as polybag, hang tags, etc.,
will also result in additional fees.
If you have ever participated
in order fulfillment, you will
quickly understand the hassle
and costs of setting up software,
managing inventory and
physically picking and packing
orders. Even though a fulfillment
house might cut into your profits,
the benefits are far reaching.
With lower shipping rates, space
to chase larger accounts and
your valuable time being saved
overall, you will be able to sell
more, break into newmarkets and
ultimately increase revenues.
What are the most common
errors when starting to work
with a fulfillment house?
What best practices should
I follow to avoid problems or
miscommunications?
The most common obstacle
we see from our clients and
partnering distributors is the
lack of understanding—not of
the fulfillment house process
but of their own customers’
program. Do not rush into
using a third-party fulfillment
center without analyzing the
scope of the requirements and,
most importantly, the expected
volumes. After you collect all
critical information, you can
confidently determine whether
your program will be successful
and profitable.
Should I be concerned
handing off my client list
to a fulfillment house?
What steps should be
taken to protect myself?
This was one of my major
concerns when I had to use a
third-party fulfillment house.
You have worked very hard to
nurture and grow your client
base and the last thing you want
is to hand over the ‘holy grail’ of
your company. Most fulfillment
houses will refrain from signing
contractual documents such as a
non-disclosure or non-compete
agreement, but it’s up to you
to establish and communicate
expectations up front with your
fulfillment house to protect
any confidential information
or procedures of interaction
that might occur between
your fulfillment house and
your customer.
The precautions you take with a
fulfillment house are no different
than the precautions you would
Even thougha
fulfillment house
might cut into
yourprofits, the
benefits are far
reaching.With
lower shipping
rates, space to
chase larger
accounts and
your valuable
timebeing saved
overall, youwill
beable to sell
more, break into
newmarkets
andultimately
increaserevenues.